The advice they are receiving goes along these lines: Concentrate on the core business. Create profit centres. Spin off the parts you don't need. Only invest in the parts you do need. Use a network approach to management organisation. Create a lean management structure in which decisions can be made quickly and there are clear lines of communication. Be proactive, not reactive.
All these sentiments sound logical. But how should they be adapted to the unique circumstances every airline finds itself in? And how should carriers resolve the inevitable conflicts which arise? There are plenty of examples, but those of Air France and Swissair apply to any airline.
Air France's restructuring, detailed in this issue, has created two major contradictions. The first concerns the future of Air Inter, the profitable arm of the company which seems destined to vegetate for two years before being merged with Air France's Europe operation. Is this the best use of the skills and market position of France's domestic airline? What about the morale of Air Inter's employees?
The second contradiction concerns the splitting of Air France into results centres along geographical lines. This sounds like a logical way of splitting up a large, bureaucratic operation, though there are problems.
In turning Paris/Charles de Gaulle into a proper hub, how can the interests of different results centres be resolved? How are costs to be allocated fairly across the results centres? And how will bids for scarce capital resources be prioritised? Having control over your own area of the business is all very well, but sometimes one particular part of the company has to make sacrifices for the greater good of the entire enterprise.
Swissair experienced this dilemma last year. Its maintenance operation is now run as a profit centre, and once free to think for themselves the maintenance managers had a good idea: if the parent company could be persuaded to shift some of its scheduled maintenance work out of the peak winter season into the slack summer time, there would be more scope for winning lucrative third-party work in the winter, when there is plenty of demand but the hangars are normally full.
Naturally, Swissair was reluctant to lose capacity during its seasonal peak, but found a way through delaying the removal of MD-82s from its fleet until a few months after they were replaced by Airbus A321s. This created a cash-flow shortfall, which was met by the maintenance company paying the airline a fee. The end result was, says Swissair, best for the the group overall. Income was improved and the airline was compensated for the inconvenience.
Finding solutions to these questions demands entirely new management skills which most airlines do not have access to. It takes skillful negotiation and, sometimes, mediation, supported by an appropriate analysis of the complex tradeoffs between the opposing interests of different companies within the same group.
There are other major issues. The reaction of employees remains an unknown quantity. While working for a smaller, results orientated enterprise might improve staff motivation, any attempt to create different terms and conditions for different parts of the enterprise is certain to cause trouble, and damage employees' esprit de corps.
Furthermore, it is likely to be more difficult to maintain high standards of customer service when different employee groups have different concepts of who the customer is - to the Swissair engineer, the customer is now Swissair rather than the passenger or freight shipper. The Air France Europe customer service manager may think his or her work is complete once the passenger steps off a short-haul flight at CDG, yet the customer may be transferring onto a long-haul flight operated by another Air France profit centre.
It is refreshing that airlines are finding new ways of organising themselves. However, it is important not to lose sight of the wider picture during this period of change. Internal organisational issues should be subservient to the overall objective - namely to meet market needs by providing a service that customers want, safely and at the right price.
It is refreshing that airlines are finding new ways of organising themselves. However, it is important not to lose sight of the wider picture during this period of change. Internal organisational issues should be subservient to the overall objective - namely to meet market needs by providing a service that customers want, safely and at the right price.
Source: Airline Business
