Monarch PLC Airlines - Essay Example

?Monarch PLC Airlines Introduction Monarch PLC Airlines is a family owned British charter airline based in Luton, England. Its area of operations ranges from Europe, to U. S to India and to Africa. The airline has been in operation since 1968. It is the oldest and the largest third party charter airline that has maintained its name and area of operation despite the many challenges it has faced since its inception. The airline has grown from being just a conventional charter airline serving tour operators only to being scheduled flights company hence increasing its profit margins. Its credible services to tourists has made it to stand out for many years and therefore exposing it to higher risks than any other airline. Monarch Airline operates in an environment that has appreciated the advantages of technology, innovation, and rapid changes in their trading environment (Doganis 2006). Its customers have diverse interests and satisfaction levels hence serving as the main drive for change. In addition, the airline faces a lot of competition from other airlines operating within the same locality and destinations. With such a diverse and demanding environment, the airline has had to make major improvements to continue meeting the market demands. For example, to continue meeting the high demands on bookings by customers, the organization had to change from making bookings over the internet to using open skies by Navitaire (DAV 2012). This has seen the company grow to handling large systems of operations within small timelines. It has also favored the company in protecting its information while changing swiftly to the ever-changing demands in the airline market. The survival of any business is depended on how the management will handle the risks since they are inevitable but manageable (Punzel 2011). Challenges and opportunities keep on changing making it hard for any company to operate in a highly competitive area. Therefore, for any business to grow, risk taking is a practice to embrace (Flouris & Yilmaz 2011). Monarch airline is not exempted in this and thus has had to face many risks. Overcoming and managing the risks has seen the company grow to where it is today. Managing risks involve balancing between rewards and losses. It entails minimizing bad outcomes and enhancing good outcomes (Thomas 2002). It comes with a preparedness to handle any misfortunes that will take place in the cause of operation. It has been proved that everybody would play on the safe side of life. This provides a shield against unplanned events that endanger the running of a company or any part in the society (Flouris & Yilmaz 2011). However, some risks are inevitable and uncertain to happen. When they happen, it is only prudent to learn how to cope with them. Uncertainties and ignorance stands as major challenges in coping with the situations. Through the authorities, the balancing act should be approached from an open point of view that will accommodate all parties involved. Risk management in any organization is perceived to be the responsibility of specific individuals. However, this should not be true since every human being by nature is a risk manger. Every person by nature is responsible to handle the nature of risk created by his or her behavior (Douglas & Wildavsky 1983). The only thing that the authority can do is to ensure that every individual within the operations of the organization are well informed of the risks involved and the possible ways out of the risks. In every organization, risk experts and safety regulators stands out as very important part in the daily running of the institution. They identify risk issues early before everybody else does that (Thomas 2002). Risk authorities estimate the magnitude of risk and therefore advise the parties involved accordingly. However, there has been cases where many people insist in taking much risk than can be handled (Douglas & Wildavsky 1983). One could be because of ignorance and two could be lack of knowledge on how much such risks could cost the organization. Risk is understood in three distinct ways; as hazard, uncertainty, and opportunity (Shapira 1997). Depending on how it is perceived, risk management takes a different magnitude equivalent with the level of exposure to the risk. There are three distinct categories of risks. 1. Risks perceived through science These risks can only be perceived through some experts in particular fields. They involve keen observation of trends and operations around the society or an organization through some trained experts in the field. The advice given on how to avoid or handle the risks when they happen suggest a change in behavior. In the case of Monarch Airline, Lata warned a possible loss of 5.6 Billion GBP in 2010. This is such a big financial risk when distributed among the airlines in a recession year. To be able to cover that, Monarch Airlines offered discounts on bookings before end of 2009 as a way of avoiding such risks through increasing income (Wearden 2009). Monarch Airline operates in an industry that has proved to be affected by the global economic climate. “When growth in the world economy slows down, the growth in demand for air traffic and for air freight also slows down” (Doganis 2006, p.5). Adjustments on booking saw to it that the airline saved money that worked as a boost during the recession. This shows that perceived dangers face several limitations since Monarch Airline was able to mitigate the degree of loss it could have faced. This explains the reason why through an established risk management system, science perceived risks can be avoided. In the cases when they cannot be avoided, policies on how to deal with them when they happen can be laid in place. 2. Risks perceived directly These are risks that every party involved can see them coming and therefore get time to prepare for them. Means of coping with the risks get to be prepared. Some of the directly perceived risks involve accidents related to weather conditions. For example, road accidents are well known to happen. The preparedness for such calls for safety measures to be put in place like having safety belts, driving at low speeds, and when worse come to the worse, taking accident insurance cover for the users of the automobile. It is important to note that different organizations, depending on their area of operation and nature of business, face different types of risks. For example, the risks a bank is exposed to are not similar to what an airline is exposed to (Frenkel, Hommel & Rudolf, 2005). Their magnitude of risks and risk management preparedness will be diverse meaning different organizations will approach the problems differently. However all risks create the same kind of threats; death, injury, damage to environment and property (Adams 1999, 7). Therefore, it stands out that the responsibility of risk management does not entirely lie in the hands of the so called ‘risk experts’. In the case of Monarch Airlines, passengers and attendants are at risk of facing accidents at any point of the flight. The accidents can be internal or external but whichever the case; it exposes the victim to injuries. A case in point concerns one of the cabin crewmembers who had an accident that left her injured in the neck and the back. The accident occurred while shutting the door that was known as stiff and therefore everybody had a responsibility of handling it with care (Hahlo & Chamberlain 2007). Such a risk was a directly perceived risk since everybody was aware of the door’s condition. The crew had been warned to ask for assistance and be careful while using the door. This shows that the accident did not find the victim off guard though it could have been avoided should the company take necessary measures to mend the door before hand. 3. Virtual risks These risks are culturally constructed. They are based on imaginations constructed on chances of events occurrence. In this case, myths and cultural believes take lead hence dictating nature of response to the problems. For example, considering airline business as a risky business by itself is cultural (Frenkel, Hommel & Rudolf, 2005). This has been proved with time hence making it easy to conclude that protection against incidences like war attacks in an airline is difficult but solving the issues on attack beforehand could mitigate the incidents. Another example is on the culture the oil prices have laid on the airline company. When oil prices hike, the implication is a drastic drop to company’s earnings that means that the company will prepare for such risks since they are obvious to happen. It is important to note that, the difference between the three categories of risks is so minimal that one cannot draw a line to separate them. However, perceived risks can be avoided by taking adequate measures towards them (Renn & Rohrmann 2000). One among many reasons for that is the fact that safety and danger for the perceived risks are both measurable though the measure cannot be used to predict the future. Each occurrence of risk happens to be new every time it strikes regardless of the type of risk. Due to that, they all complement each other and therefore the management skills required for each does not differ so much with the other. Financial risks are in evitable to occur. When they happen, the organization leadership has no choice than to think beyond the ordinary for the sake of the organization. Monarch Airline has had its own share in such risks. The extent of exposure of Monarch Airlines financial condition has lead to the organization being slashed the odds from 50-1 to 4-1 (Wearden 2009). The announcement of the slash led to further exposure that made the company to display its ability to continue in business. According to Wearden (2009), they had to show that they held substantial assets in its balance sheet despite the fact that they suffered pre-tax loss of 32.3 Millions GBP. As a remedy for the recession, the organization had to change its strategy from being just a charter carrier, but to also being a scheduled leisure airline. The organization had also to expand in terms of financial back up since it was going to affect business when such misfortunes happen. For example, the organization had to strategize on how to get financial boosts whenever there was a loss, an arrangement that was never there before. When fuel prices, poor economy, and political instability got unfathomable in 2011, the company suffered losses that were only recovered through the cash injections from the owners of the organization. The company also increased its flight destinations and routes as a strategy to expand its area of operation and capture much income. They planned to increase their fleet to support the increased level of activity with an aim of increasing their annual passenger capacity. Such strategies are targeted at seeing the organization fixed cost distributed within tradeoffs hence increasing the economies of scale (Billington 2002). Like every other transport equipments, an airline stands a great chance in accidents risks. Some accidents are foreseen while others just happen. In May 2002, the airline through one of its planes had a structural damage. Though the problem was blamed on the captain’s poor landing strategy, deaths could have occurred if the control was not handled correctly. To avoid such incidences, the airline changed procedures as a way of reducing chances of such avoidable accidents. It also developed an in-house aircraft-engineering program to cater for the technical parts of the maintenance needs therefore reducing technical problems and promising safety to their customers. Monarch Airline has attached so much importance to customer satisfaction as private airline (Feitelson & Verhoef 2001). This has served as a major strength to the company’s operations margins. However, the endeavor has faced many challenges that have ended up risking the company’s business to decreasing. For example, through customer reviews, some customer detests some of the airlines services. They have expressed their dissatisfaction on services like food provided to customers while on board. Such dissatisfactions can be avoided by either stopping or improving the services to continue working with the traditional ways of operations. Another complain that has been on the rise, though it is not unique to Monarch airline alone, is the issue of flight delay. This is risky because it affects the customer’s reliability on the services. It also reduces the value of services provided by the company since customers complains lower credibility and trust in the company. Such issues can be handled well when objectives are found on understanding of organizations strengths and weaknesses hence preserving organization values (Thomas 2002). Only through that can the company be able to confirm to the public that it has what it takes to operate as a charter airline and tour operator (Wearden 2009). Air transport industry by itself is exposed to several risks either through their operations or through just the fact that they are all in business. The greatest of the risks that is considered natural is environment related. The environmental attitude of an airline e. g war posses a great risk that cannot be ignored hence creating high environmental costs than should have been mitigated (Feitelson & Verhoef 2001). Risks on accidents and thefts are therefore reduced by ensuring that safety policies are put in place. Risk management is a topic that every person and organization need to put into consideration. Whether one is risk-averse or risk seeking, they all qualify to meet the demands that each risk exposes them to (Shapira 1997). When a risky situation strikes, exposes every party involved to equal danger, which makes it valid for everybody to be on the lookout. For the risk-averse type, they should take precautionary measures but that does not mean that they are free from risks and uncertainties since anything that is not safe to anybody is dangerous to the person (Douglas & Wildavsky 1983). For the risk prone individuals, calculated risks help in proper planning hence avoiding the shock of its magnitude when it happens. However, both should identify with the changing and competitive business environment where risks has to be taken if one has to succeed. Conclusion Monarch PLC Airlines operations have grown with time and amidst many challenges. Some of them have exposed the company to perceived or virtual risks with each having its unique impact on the company’s operation. It being a transport company, it has faced risks of accidents, both internal and external, financial crisis, unfair competition and exposure to public scrutiny. In all the cases, the organization has proved to be smart in risk management hence the reason for its survival since its inception in 1968 to date. One of the ways that have been outstanding in Monarch Airlines risk management is its ability to involve all stakeholders in its risk management. When financial risks face the company, the owners release financial boosts that have seen to it that the operations continue as normal. Through the management, the company has been taking advantage of the high demand for transportation by increasing their flights and destinations. Training their flight attendants on best practice has been their major strength hence creating a sense of responsibility on each member. This has made the company stand out as reliable and efficient to customers around the globe since every person is aware of the risks and the possible ways of handling them when they are unavoidable. In Monarch airline, all stakeholders including the customers have apart to play hence the reason for getting their feedbacks. It is through this that the company has been able to expand. References Adams, J 1999, ‘Risk, Freedom and responsibility’ Paper for Conference on the Risk of Freedom, Institute of United States Studies, Oct 6, 1998. Billington, C 2002, ‘Risk Management’, Purchasing, 21 February 2002, viewed 14 April 2012, . DAV 2012, ‘Monarch Airlines’, DAV Management Limited, viewed 14 April 2012, . Doganis, R 2006, The Airline Business, 2nd edn, Routledge, Oxon. Douglas, M & Wildavsky, A 1983, Risk and culture: An Essay on the Selection of Technologies and Environmental Dangers, University of California Press, California. Feitelson, E & Verhoef, ET 2001, Transport and environment: I Search of Sustainable Solutions. Edward Elgar Publishing, Cheltenham. Flouris, TG & Yilmaz, AK 2011, Risk Management and Corporate Sustainability in Aviation, Ashgate Publishing, Ltd, Farnham. Frenkel, M, Hommel, U & Rudolf, M 2005, Risk Management: Challenge and Opportunity, 2nd edn, Springer Berlin Heidelberg, New York. Hahlo, F & Chamberlain, RP 2007, ‘Case of the Week: Employer Duty of Care Regarding Injury’, Personnel Today, 23 January 2007, viewed 14 April 2012, . Punzel, T 2011, Risk and Decision Making: Using the Example of British Airways, GRIN Verlag, Marienstrasse. Renn, O & Rohrmann, B 2000, Cross- Cultural Risk Perception: A Survey of Empirical studies, Kluwer Academic Publishers, Dordrecht. Shapira, Z 1997, Risk Taking: A Managerial Perspective, Russell Sage Foundation, New York. Thomas, BB 2002, ‘ A Portfolio Approach to Enterprise Risk Management’, Conning Research & Consulting, INC. November 11, 2002. Thomas, BB 2002, ‘A Portfolio Approach to Risk Management’, Financial Risk & Reinsurance. July 2002. Wearden, G 2009, ‘Bookmaker Slashes Odds on Monarch airlines Going Bust’, The Guardian, 29 December 2009, viewed 14 April 2012, < http://www.guardian.co.uk/business/2009/dec/29/monarch-airlines-paddy-power-bets >. Read More