Problems Faced by Airline Industry - Research Paper Example

Problems Faced by Airline Industry Introduction In the present days, people consider the whole world as a global village. Fast moving transportations has reduced distances and bought the different part of world closed to each other. People travel for trade related matters very often, for tourisms, shopping or many other reasons. Thus pressure on airline industry is growing day by day with increase in number of passenger. This pressure has resulted into many problems related to air craft management. Few of them are security, customer service management and other management related activities. To handle these problems, management has taken many operational projects time to time. There are four factors which affect any project taken by management to overcome current problems related to aircraft management. These factors are “need, technical concept, the promoter and the sponsor”. To identify need, top management has to carry out in-depth analysis of the data which they accumulate from their line managers regarding performance of their business. Through financial analysis, management can find out deviation of business’ perforation as compared to forecasted plan. There are many such methods or techniques. Few of them are traditional like ratio analysis, cash flow analysis, etc. In the present day, management often implements Balance Scorecard technique to analyse the financial indicators as well as non-financial indicators which can be economical, political, cultural or legal. These non-financial indicators are equally important for the Management because business operates in society and are get influenced by all these factors. Thus through such analysis management can find out need to implement a project for solving problem which is acting as hurdle in the path of its smooth functioning. The second ingredient or factor is technological aspect which influences management to take up new project for improving operations. The management fined outs that what is the prevailing technology in market and which one will be compatible with the present operations. Promoters are the management people who identify different problems faced during operation and the solutions which can be best suited to solve prevailing problem. Different financial analyses are to be conducted before taking any managerial decision. Management try to find out the whether the suggest project will be beneficial in the longer term. All these report are presented in front of sponsor who provides required finance to carry out project. For arranging finance, sponsor can adopt different methods, they can either take loans which can be from public or can be from private sectors. They can utilise their own financial reserves also. The major part of any project is not just its implementation; it is the management of operational project throughout the life. Quality should be the maintained throughout the whole process, starting from planning to the end of project. (Costin, 1). Different problems faced by airline industry regarding aircraft management Among the other major problems faced by airline industry, security is of great importance. The threat to security to the Aviation Industry has been as old as four decades. The main concern of aviation personnel is threat arising from terrorist attacks. With the growth of a fundamentalist approach to achieve their targets, certain groups or communities have adopted the path of violence and terrorism. The extent of terrorism ranges from hijackers to suicide bombers. They target the airline travelers directly, but their actual purpose is to pressurise the government to change their policies and abide by the terms and conditions spelt out by these groups. A remarkable instance of terrorist strikes in aircrafts is the 9/11 attacks in America, when a group of terrorists belonging to the fundamentalist group Al-Qaida, crashed two planes to the World Trade Centre and a third one was crashed to the Pentagon in Washington D.C., USA, killing thousands of civilians (Cziesche, et al. 1-5). Many such accidents had been tool place at different parts of the world, but this was the most shocking and made the whole world to think seriously about security factors. After this disaster, many travelers canceled their flights, which lead to huge loses to airline industry throughout the world. Thus security implementation became one of the major issues for aviation industry throughout the world. To overcome this situation different technological tools where implemented regarding security inside the aircraft. Different scanning machines where used so that nothing remain hidden. Number of security checks where increased, strict restriction on certain material which might be dangerous for the aircraft and for passengers. Full system got computerised and got interconnected with different departments resulting into improved air traffic control (ATC) computer systems. To regain faith of customers, aviation industry tried it best to prove that they are highly concern about security of their passenger and no compromise will be made regarding safety. Many technical improvements were made within the aircraft so that any security threat can be identified as soon as possible and organization can take appropriate measures before something unexpected happens (GOA, 5). It is equally important for airport authority and aviation companies to work hand in hand to handle such big issue. They should educate the passengers regarding security factor so that they can also participate in making the system work smoothly and to resist any such incident which will lead to lose of human life and to the economy as a whole. Role of government in implementing security tools are of great important, as through passing different legal laws, it can compel people to participation in security plan. Many a time security maintenance can be outsources to third party, but such party should be capable enough because life of several people depends on them. Second major problem with aviation industry is increasing demand of passengers, which leads to high pressure of customer management. Airline industry seems highly attractive for new entrants. Thus numbers of player are increasing day by day. To enter into the market, these new entrants offer heavy discounts to passengers and try to offers some extra services. Pressure is constantly increasing on leading aviation companies to reduce profit element, hence it is not possible to reduce cost below a certain percentage because for many high profile customers, prices are indicator to quality of product and services. In present days many businessmen have to offer travel regarding to business trips, such people does care of different services offers inside the flight, for them cost is the main factor. So to handle different requirement of these people, low cost airline are coming up; these are big threat for traditional airlines. The low cost airlines provides different package to suit different requirement of different people; one can select the survives as per the need and costs. But no such facility is available in traditional airlines where the ride comes in full package. So these traditional airline companies have also started providing different packages which will fit to different class of people like off season discount, or free ticket to one child with three adult people. To overcome the pressure of increasing customers, management have to introduce different management tools. The most important issue is to understand need of people who belong to different social class and to different age groups. Among the other general problems faced by aviation industry is increasing cost of operations. As numbers of aircrafts are increasing, it become problematic or airports to provide landing areas, thus aircrafts have to remain in the air for longer phase of time. This results into wastage of fuel and cost of operation goes high. So aviation companies have to take this factor into consideration. They should impart pressure on airport authorities so that they expand them and can allow lending of aircraft on time. Technological up gradation of airports are also important so that they can provide better service to airline companies’ passengers. These airport authorities are shifting the cost of technological up-gradation and expansion on airline companies which further increases cost of operation. The crude oil price hike of 2008 had affected airline industry badly. This price rise in air fuel lead to huge loses which will take long time to recover. And the worst thing is present economical slowdown which the whole world is facing. This economical slow down has affected people throughout the whole world. They are left with less disposable income and result is less number to airline passengers. So the airline industry has to think seriously that how they can sustain in such stressful environment and can overcome the huge losses which they had in last year. Theories of Operational Management “Operation management is a systemic method that controls the process that translates the input into finished goods or service”. These operations are important assets for organisation and they comprises of large percentage of employees duty. Operation management takes into account each and every step which is related to production of service or a product. Its area of concern is large which includes determination of quality and type of equipments, labours, tools, materials, facilities and information that will be introduced into the operation system. It also takes into account the sources through which input can be obtained and how market demand can be ascertained and be fulfilled successfully. Operational managers are responsible for quality analysis and control, capacity planning for operation, purchasing, scheduling and material management. Hence one can easily understand that what is the importance of operational management in manufacturing and service industry. Due to foreign competition, shortening of production life cycle, educated customers with high concern toward quality and constantly improving technology, pressure has been increased to manage operation in best possible way. Firms have realised that if they have to sustain in the international market for longer time, they have to carry out their operation in cautiously. By gaining operational efficiently, a firm can manage their business in more profitable manner and can enter into new markets to expand their reach. A firm can find that effective operational management will lead to customers’ satisfaction by satisfying their needs in more strategic and tactical manner (The OHIO State University, 1). There are many operational tools which management implements to carry out processes in better way, few of them are Mathematical programming, linear programming, network analysis, project planning using PERT and CPM, inventory management and forecasting, game theory, decision theory, queuing theory. Linear programming is a mathematical tool which management used to imply to attain optimum outcome that means maximisation of profit and minimisation of loss under certain constrictions. Initially this technique was used in transportation, technology and other similar issues. But slowly this technique lost its charm. Management fined this process too time consuming, but after evaluation of computer, as calculations becomes fact so people again started using this tool for solving general management problems (University of Kentucky, “Linear Programming”). Network analysis is a general name which is used to describe certain techniques for planning, management and controlling of project. Two common techniques developed independently in 1950s were PERT and CPM. The program Evaluation and Reviewing Technique (PERT) was developed by US Navy for planning and control of Polaris Missile Program. Critical Path Management (CPM) was developed jointly by DuPont Company and Remington Rand Univac in 1950s. The major different between these two technique is the cost factor, because these two companies being commercial where more concern about cost where as US Navy was more concern about time. But both these techniques are used to create a trade-off between time and cost. With the development of computer, many software packages are produced for commercial use by the management. Network analysis technique is a systematic quantitative structured technique to solve managerial problems for successful completion of operational project. They provide a graphical approach to a problem so that management can get an in-death view of the problem (Rai University 57). Inventory management and forecasting is of great importance for any business. Aviation industry is high investment industry, thus inventory management and forecasting should be carried out carefully (Pearson Education, “Inventory Management”). Management implements different techniques for inventory management. At first demand has to be forecasted, and on basis of that inventory can be arranged. Inventory management is planning and controlling of inventory to meet the requirement of the operations. For efficient inventory management, management need well managed supply chain. There are different costs which remains associated with inventory; among them the most important are inventory holding cost & ordering cost. Thus both high and low level of inventory can lead to high cost of inventory. Management takes into account different techniques to identify the correct level of inventory such as ABC analysis, VED analysis, XYZ analysis and few more to identify the nature of inventory; then with the help of Economical Order Quantity (EOQ) differ levels for different type of items are sets (Murty, 2). Many organisations have starts using Just In Time (JIT) technique, also known as “Zero Inventory” where almost no inventory is maintained. To achieve JIT, management should have good collaboration with their supply chain. By implementing JIT, cost of holding inventory can be minimised to zero but uncertainty increases so it requires proper planning and understanding the need of operations and nature of items used as input. “Game theory is concerned with the decision-making process in situations where outcomes depend upon choices made by one or more players.” (Chen, et al., “Game Theory”). Many a time game theory is regarded as interdisciplinary approach to Human Behaviour Study. This theory which includes mathematical, economical, social and behavioral science was founded by the great mathematician “John von Neumann”. And then many other theorists contributed in further development of this theory (McCain, “Some Basics”). Thus Game Theory helps management to identify the best suited strategy by undertaking different financial and economical factors that have direct impact on the operations. Decision theory and queuing theory both represents science behind decision making. These theories help management to analyse and to understand the situation so that best suited decision can be taken. Decision Theory can be a Normative Theory which describes how one should make decision with using rationality where as Descriptive Theory describes that how one actually take decision under taking psychological factors. Several statistical tools are being used to evaluate risk which can be due to result of Type- I or Type –II error (Duft, 1-2). As per the definition provided by Bose, “the basic phenomenon of queuing arises whenever a shared facility needs to be accessed for service by a large number of jobs or customers.” Where as per Mathworld, “The study of the waiting times, lengths, and other properties of queues is know as Queuing Theory.” It’s a helpful tool in service industry to make decisions regarding sequencing of operations and programs (BMC, “What is queuing theory?”). Total quality management (TQM) definition as per American Federal Office of Management Budget Circular is “TQM is a total organizational approach for meeting customer needs and expectations that involves all managers and employees in using quantitative methods to improve continuously the organisation’s processes, products and services.” (Alexandros, 41). The concept of total quality is pretty old. It gained popularity in early twentieth century and day by day people are getting more attracting toward it. Table:1 Timeline showing the differences between old and new concepts of quality (Source: Texas Tech University, 143) Hence it can be said that TQM associated with management’s approach to fulfill customers’ need and expectation while using qualitative methods so that organisation can continuously improve quality of its process, products and services. Philosophy of TQM indicated that to achieve quality, the whole organisation has to participate as one team and quality should be implemented at each and every point of operation. The different tools of quality are: Statistical Process Control, ISO 9000 series, Pareto Analysis, Matrix Diagram, Histograms, Tree Decision Diagram, Critical Path Analysis, Fishbone or Ishakawa Diagram (Psychogios, 43). There are many concept related to TQM which are as follows: Total Employee Involvement, Continuous Improvement, Continuous Training, Teamwork, Empowerment, Top-management Commitment and Support, Democratic Management Style, Customer/Citizen Satisfaction, Culture Change (Psychogios, 44). These concepts guides that how Total Quality can be implemented within organisation. Quality needs involvement of each and every employees starting from the top management to floor level employees. They all should make an attempt to introduce continuous improvement in operations; management should also provide continuous training to their employees so that they can up-date themselves and can efficiently participate in quality implementation. Employees should make teams to share each others views and to help others in finding solution each they are facing. Quality implementation is not possible until the top management participates and introduces TQM in mission statement. Top management should encourage the floor level employees to search for solution which they are facing. This is because no one can know the problem better then them as they themselves are working, hence it is more convenient for such employees to find out solution. Top management should recognise the employees’ achievement and should reward them. This will make the other employees feel motivated and they also come up with their suggestion. Organisation should pay full emphasis on customers’ need and they should try to satisfy them as far as possible. Customers want utility of the price which they pay for purchasing goods and services, thus they want better quality to attain higher utility. Quality improvement doesn’t mean that quality of the product and services should be inspected as the operation is over by quality control department, rather care should be taken at each and every point to reduce wastes and to up-grade quality. This will develop a trade-off between quality and cast. The different costs related to quality are as follows: Table: 2 Costs of quality (Source: Texas Tech University, 141) The plan–do–study–act (PDSA) cycle is a common management tool that describes what activities management should perform to implement continuous improvement. This cycle is also called as Deming cycle or Deming wheels. The cyclical nature indicated that improvement is a continuous process thus it is never ending. The first phase of the cycle is “Plan” which indicated that management should understand operations which are going on and then on basis of this study, should find out problems faced by employees while working on the operation. As per the problem, management should make out a plan for improvement. Second step is “Do” that refers to implementation of plan. During implementation, management should discuss their plan with all other employees so that they can give their suggestions and they feel themselves as part of the whole process. Third step is “Study” which specifies that data should be collected from different sources and should be analysed and evaluated. This help to find out that whether the plan, which is being implemented, is able to achieve the goal. The final phase of this cycle is “Act”. On the basis of results which are derived from previous three steps, management can find out that, is the plan successful or not. If it is found that plan is successful, then results are communicated throughout the oraganisation and the new procedure is implemented. But as it is a cycle, hence end of the last phase leads to the first phase again and management again starts to reevaluate the operations and to search for another problem which should be solved by implementing a plan. Table: 3 plan–do–study–act cycle (Source: Texas Tech University, 148) Comparison of the theory with the practice In an aviation industry quality is of great importance to satisfy the passengers. Like any other service sector, in aviation industry also customers try to evaluate the company through their front line employees. So company should pay full attention on their front line managers and employees. These peoples should be trained well regarding how they should interact with customers, how they should come up to solve problems faced by passengers. Along with training, management should certain degree of authority to their employee to take decision during adverse situation. This will save passengers time and they will be pleased by getting their problem solved within time and without much hassles. To serve customers in best possible way, many airline industries are implementing Customer Relationship Management (CRM) packages. Through these tools, company will maintain a data base which will contain all the information regarding their customers. By analysing the data collected in this data base, it is quite easy to understand behavior of different customers. So to satisfy different need of customers who belongs to different economical and cultural background, different packages can be formulated and directly communicated to them through electronic media. This will solve time and resources of the organisation and results to high customer satisfaction. Continuous training is also required to educate employees regarding safety measure. They all should understand importance of safety and should participate in implementation of different security tools in more integrated manner. Obviously top management has to come up for arranging and financing such training sections. Safety implementation should be a continuous process with participation of whole organisation. The system should be evaluated on regular basis. For this data should be collected and analysed with help of different quality tools. To find problems which are prevailing in the system, seven quality tools can be put to use. Eye should be also kept regarding different technological changes going around so that latest safety tools can be used. It is also important that all the equipments of aircrafts should be checked regularly, they should be replace on regular interval of time to avoid any accident. For up-gradation and continuous management of safety devices and aircrafts, management should allocate a certain portion of fund separately in their forecasted annual budget. To implement Total Quality Management in aircraft management, integrating between all the departments is very much required. Marketing department is directly responsible for satisfying need of customers, thus they should collect and pass accurate information to operation department; finance department should determine the cost related with poor quality that is preventive cost which includes prevention and appraisal. This cost is to prevent external and internal failure cost. So if management make inadequate or excess of investment regarding prevention, it leads to loss in both the case. Engineering and purchasing department should also try to introduce TQM by keeping coordination with other departments. Role of Information system (IS) doesn’t need any explanation, this is the backbone of TQM as through IS vital information get dissipated to different department and management to take relevant actions on its basis. But the concept of TQM often fails due to non participation of Top Management, due to lack of quality culture within organisation and/or over and under reliance on Statistical Process Control (SPC) methods. Recommendation The above discussion makes it clear that quality is an inseparable component of operation management. Management should make all possible attempts to achieve high degree of quality throughout the whole process. It helps management to take proactive actions and reduce costs related to break down of process. By implementing high standers of quality, the aviation industry will be able to satisfy their customers and to increase their revenue. During implementing of any new process or technique, in-depth analysis should be carried out so that downs the line five or ten years what benefit organisation will gain from such investment. After successful implementation of any process, care should be taken that it function properly, so data should be collected at regular interval of time and analysed using different statistical tools. The report generated should be again scrutinised by top management and wherever any improvement is required, should be made. Work force is one of the greatest assets in aviation industry, so regular training should be provided to them. Management should inculcate such a culture within the organisation that each and everyone actively participate in betterment of operation and up-liftman of the whole aviation industry. Reference Alexandros G. The Meaning of TQM. 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