Business Overview of Hellium Airlines, Influences on the Organizational Context - Case Study Example

HELLIUM AIRLINES LTD – Business Report A.Business Overview Hellium Airlines is a company that operates for many years in the British market. The company has managed to survive in the particular market for many years despite the strong turbulences occurred periodically both in the local and the international marketplace (especially after the event of the September the 11th). The results of the company for the year 2006 were really positive presenting a growth of about 12% comparing 2005. The main reason for this growth is the change of most of the aircrafts of the company and the significant investment on the training and development of employees. On the other hand, the number of employess has been increased reaching the 870 (comparing the 720 of 2005) which is also a positive indicator for the development of the company and for its prospects for the future. Currently the company is based on Luton on a block of offices sited near the Airport. However, shortly an office in London is going to start operating giving to the company the chance to communicate more effectively with its customers while an emphasis will be given in the promotion of the company to foreigners as two new destinations (Rome and Milan) are going to be added shortly in the current schedule of the firm. Despite its growth the company faces a series of problems which could be divided into the following four categories: a) Legal, b) Economic, c) Environmental and d) Technological. Because of the existence of these problems – as they are going to be developed below – the company is obligated to proceed to a series of changes in order to respond to the needs of the customer and the requirements of the legal and administrative authorities (as expressed through the implemented legislation). Changes in the technological sector are also going to take place at the level that the company can afford the relevant expenses. An analysis of these problems follows while potential solutions are suggested which could be possibly taken into account when having to vote in the next meeting where the new strategic plan of the company will be presented. B.Influences on the organizational context 1. Legal influences The development of the company within its market faces primarily a series of issues related with the current legal framework regarding aviation. In the above context, it should be noticed that the company has been found not to follow strictly the rules imposed in the report of the House of Lords entitled “Air Travel and Health” on 22nd November 2000. The particular report referred to a series of health issues appearing when travelling by air. In accordance with this report the following events should be considered as breaching the english law regarding the protection of health when traveling by air: “a) the high levels of Carbon monoxide (there is no problem if all values are of a similar level or less than those found in studies of air quality in homes in England; mean levels somewhat higher on the ground than during cruise), b) High levels of Carbon dioxide (mean levels are typically between 700 and 2000 ppm during cruise”[1]. In the case of our company, the levels of carbon monoxide and dioxide have been found to be increased. The reasons have not been identified yet although the engines of both aircrafts were checked and there was no sign of failure. However, with the acquisition of new aircrafts, this problem should be regarded as resolved. Another issue is the application of the rules imposed by the UK Government regarding the protection “of air services through the imposition of public service obligations (PSOs)” [2]. In accordance with the relevant guidance every firm operating in the airline services has to follow specific itineries. These rules have been forced in order for the government to protect “existing regional air services to London” [2]. In this context, our company was found to having breach these rules by adding a new itinery in Dublin. Finally, Dublin was deleted by the list of destinations for our company. However, the whole issue is under revision by the governmental authorities which are going to decide relatively in approximately 2 months from now. In order for the above issues to be addressed appropriately there is a need for evaluation of the firm’s performance in order to proceed to the appropriate legal and managerial plan. I should refer here to the study of Robertson et al. (1995, 547) who noticed that “because private sector organizations are driven primarily by market or consumer preferences, organizational effectiveness is more readily measured in terms of efficiency and profitability; as a result, change activity can be implemented and assessed using these narrow criteria as the primary basis for evaluating their success, possibly making it easier for these change efforts to be successful”. In other words, firm has no serious legal problem to face but these two issues developed above need to be reviewed the soonest possible in order to check their development. 2.Economic influences The acquisition by the company of 5 new aircrafts recently has been a really costly decision which has to be ‘repaid’ in the next 2 years in order for the company to reach again its normal rate of profit. For this reason, a series of changes has been considered as necessary the current period. Regarding this issue, Eoyang et al. (2001, 5) noticed that “many organization change initiatives start at the top and deal strongly with any resistance from system agents that blocks progress; common ways of responding to resistance include downsizing, restructuring, and re-engineering”. In other words, even if change is followed by resistance (an expected reaction) it is absolutely necessary to be finished within the time period indicated by the relevant plan – a 6 months period has been suggested in this plan. At this point I would like to refer to the results of a research made in 2005 in Britain regarding the financial performance of airlines in UK. In accordance with this research: a) ‘over 25% of airlines do not expect to sell a majority of tickets over the Internet for five or more years, b) only 68% of airlines expect to have more than half their ticket sales fulfilled as e-tickets by the end of 2007, c) At least 18% of airlines have no current plans to deploy self-service kiosks and d) nearly 40% of airlines see implementation of bar-coded boarding passes more than three years away’ [3]. It seems from the above report that the risk related with the particular industry is high and therefore any effort for restructuring would be limited in the absolutely necessary measures trying to avoid exceeding the cost – limit set by the firm’s accounting department. The first area that needs to be restructured is the supply chain management. A change in the suppliers has been decided in order to reduce the relevant cost. In this context, Krishnan et al. (2001, 259) mentioned that “supply chain management has become an important part of strategic planning in both large and small businesses since the 1990s as firms increasingly choose outsourcing as an externally-driven strategic growth path”. On the other hand, Cook et al. (2001) found that there are certain ‘organizational tools’ which – if used appropriately can reduce the cost involving in the supply chain. These tools can be summarized as following: “making and keeping relationships, implementing new technology in the supply channel, the use of forecasting to increase supply chain effectiveness, outsourcing to increase efficiency, and cost management as a strategic weapon” (Cook et al., 2001, 14). Any suggestions regarding the above proposed plans are welcomed. In any case, the plans proposed are going to be reviewed by the firm’s accounting deparment which will also estimate the cost involved in order to decide on its feasibility. 3. Environmental influences A serious problem in the area of the firm’s itineries is the new rules on “the actual movements limits and noise quotas for the regime from October 2006 to October 2012” which are presented in the table below. These restrictions – the part that refers to Gatwick – one of the airports used by the company should be considered as negative prohibiliting in practice the charter flights (which were likely to be done later in the night). Gatwick           Movements Limits Noise Quotas Effect on community Effect on industry Preferred Option (consultation paper) Reduced to a level more closely reflecting current usage (as predicted from 2003 consultation paper) Decrease to a level more closely reflecting current usage taking into account new QC band Prevents worsening of noise climate at night. Ensuring that restrictions are effective Industry predict severe loss of services at a cumulative cost of £1.1 billion to UK GDP over 6 years Alternative Approximate use in 2002/2003 spread evenly over summer and winter seasons Approximate use in 2002/2003 spread evenly over summer and winter seasons Prevent worsening of noise climate at night Industry predict losses to increased movements since 2002/2003 Decision Reduce headroom in winter Gradual reduction - less reduction than shown in stage two consultation paper Continues to encourage use of quietest aircraft Limited. Reductions in QC should be easily absorbed with quieter aircraft Table 1 – Department of Transport (UK) - actual movements limits and noise quotas for the regime from October 2006 to October 2012 There is not a specific way to face the above issue. Since the hours have been decided and announced, there is no much chance for a new change to take place (at least for the rest of the year). A possible solution could be the introduction of a new schedule and the possible simultaneous use of more aircrafts in order to respond to the needs of the customers. 4. Technological In the area of technology, the company has made its best to meet the increased demands of the customers and the continuous development of the technology. Any further change in the particular sector does not seem necessary at the moment. The company has implemented a new software in order to offer an online booking facility to its clients despite the fact that in practice it has been proved that the customers feel more safe to book through the phone. I should refer here in the study of Katzenbach (1996, 149) who stated that “change efforts are often conceived as waves of initiatives that sweep through an organization from the top down, or the bottom up, or both, and flow across functions; seen through the eyes of the change leader in the middle, however, change looks more like pebbles dropped in a pond, creating expanding waves of energy that spread out to impact people at all levels”. In other words, change can be interpreted in different ways in accordance with the circumstances involved in a particular case and the personal attitudes of the persons involved. It should be mentioned here that Bunker et al. (2005, 12) found that “75 percent of all change initiatives fail”. On the other hand, in accordance with Karp et al. (2000, 454) “the resistance needs to be recognized, honoured and worked with; it is very important that designers and deliverers of diversity training be aware of the positive aspects of participant resistance”. In other words, change should be implemented in any case that it is considered as necessary by the firm’s managers even if employees don’t like to proceed to the necessary initiatives. Changes that have been proved to be necessary – especially under the issues developed above which have to be addressed the soonest possible – have to be implemented no matter the resistance or other reaction of the organizational environment. In any case, we could take into consideration the view of Chase et al. (2006, Ch 5, 2) who noticed that ‘a process that does not match the needs of the firm will punish the firm every minute that the firms operate’. References Bunker, K., Wakefield, M. (2005). Changing Workforce: Leading Effectively When Change Is the Norm Canadian Government Managers Discover How to Weather Draconian Layoffs and Budget Cuts by Turning Inward to Become More Authentic. The Public Manager, 34(4): 9-17 Chase, R., Jacobs, R., Aquilano, N. (2006) Operations Management for Competitive Advantage, 11e. The McGraw-Hill Companies Cook, J. S., Debree, K., Feroleto, A. (2001). From Raw Materials to Customers: Supply Chain Management in the Service Industry. SAM Advanced Management Journal, 66(4): 14-23 Eoyang, G., Olson, E. (2001). Facilitating Organization Change: Lessons from Complexity Science. San Francisco: Jossey-Bass Katzenbach, J. (1996). Real Change. The McKinsey Quarterly, 1: 148-153 Krishnan, H., Park, D. (2001). Supplier Selection Practices among Small Firms in the United States: Testing Three Models. Journal of Small Business Management, 39(3): 259-269 Robertson, P. J., Seneviratne, S. J. (1995). Outcomes of Planned Organizational Change in the Public Sector: A Meta-Analytic Comparison to the Private Sector. Public Administration Review, 55(6): 547-558 SITA (2005) The airline industry’s goal of sustainable profitability depends on speedy and universal adoption of information technology http://www.sita.aero/News_Centre/Press_releases/Press_releases_2005/Airline_industry_in_danger_of_travelling_at_two_speeds.htm United Kingdom Department of Transport (2007), available at http://www.dft.gov.uk/pgr/aviation/hci/hacc/bre/introductionandexecutivesummary [1] United Kingdom Department of Transport (2007), Guidance on the protection of regional air access to London, available at http://www.dft.gov.uk/pgr/aviation/domestic/praa/guidanceontheprotectionofreg2871?page=1#1000 [2] Read More