Contemporary Aviation Management - Example

Contemporary Aviation Management Name Institution Contemporary Aviation Management Executive Summary This report is based on the investigation of the issue of passenger comfort that result from reduced seat pitch and seat width. The introduction has offered a brief analysis of comfort associated with Low Cost Carriers. The analysis has established that seat pitch influences passenger comfort and ultimately customer dissatisfaction. The paper has also presented three management issues associated with seat pitch; competitive advantage, innovation and vertical integration. From the analysis of the three management issues, it is evident that airline companies need to boost their competitive advantage by emphasizing on cost leadership and restructuring the seating arrangement. Also, managers should work together with the employees to enhance innovation that can result in better quality of services and high profitability. Furthermore, the company can emphasize on vertical integrations in order to take control of cost and design of its flights. Table of Contents Executive Summary 2 Table of Contents 3 Introduction 4 Key Management Issues 5 Competitive advantage 5 Innovation 7 Vertical Integration 9 Conclusion 10 Recommendations 11 References 13 Introduction The airline industry faces competition due to large number of players in the market. In order for an airline company to standout and hedge ahead of the competitors, it needs to consider the needs and wants of the consumers (Balcombe, Fraser and Harris, 2009). Consumers often search for airline Companies that offer comfort especially in long distance flights. The aspect of comfort is an important element in the airline industry that most companies hope to achieve. The emergence of low Cost Carriers has created opportunities and benefits for both the airline companies and the consumers (Gross and Bjelicic, 2007). These flights are based on low fares coupled with limited services in order to keep the costs at a minimum. One mechanism employed by Low Cost Carriers in order to offer affordable flights is the increase in passenger seats. Low Cost Carriers tread a fine line between comfort and clasping as a way of increasing profitability. The increase in the number of passenger seats in Low Cost Carriers has led to a reduction in comfort (Gross and Bjelicic, 2007). According to Kremser et al (2012), the lower prices of Low Cost Carriers as compared to Full Service Carriers has led to increase in customer base but has also led to numerous challenges in regards to comfort. One element that has affected aircraft interior comfort is legroom and seat pitch. Seat pitch is the distance between one seat row of an airplane to another seat row while legroom is the space a passenger has to fit his legs (Kremser et al., 2012). An airline company with maximum legroom and seat pitch can attract more passengers due to increase in comfort. In order to remain competitive, Air Asia should have seats that cater for the increasing cultural diversity of passengers and the activities conducted during travel. These seats should allow passengers to feel fit after hours of travel without experiencing discomfort. This report will examine seat width and pitch on the basis of three management issues facing Low Cost Carriers; competitive advantage, innovation and vertical integration. The paper will also offer three recommendations that will be useful in improving the operations and sustainability of our airline. Key Management Issues Competitive advantage One management concept that relates to seat pitch and width is competitive advantage. Businesses today face the challenge of finding a means to achieve sustainable competitive advantage over the competitors in the market. According to Kossowski (2007), competitive advantage is a situation that a company can create that allows it to produce products and services that are appreciated by the customers, thereby generating more sales and profits that the competitors (Kossowski, 2007). It involves an added advantage that come from offering customers greater value by either offering products or services at lower prices or offering greater benefits that justifies high costs. Porter offered three generic strategies that can be adapted by companies in order for them to gain competitive advantage. These strategies depend on the nature of business activities and the ability of business to differentiate its products and they include cost leadership, differentiation focus and cost leadership (Kossowski, 2007). Numerous airline industries have established different strategies in order to create sustainable competitive advantage. For instance, Emirates uses differentiation strategy as a means of creating competitive advantage (Nataraja and Abdulrahman, 2011). The use of differentiation strategy by the company has led to best services and valuable products that lack in other airline companies. Emirates Airline has invested in marketing strategy that has resulted in strong brand awareness. The brand is known for offering high quality services at a cost which has attracted more customers (Nataraja and Abdulrahman, 2011). In addition, the airline has differentiated itself from the competitors by establishing and investing in effective leadership. According to Gross and Bjelicic (2007), strong managerial skills among leaders contribute to the success of any company. Effective leadership ensures an organization retains its employees, motivate them and enhance their commitment which boosts competitive advantage. In contrast to Emirates airline, the competitive strategy of our airline is cost leadership. According to Nataraja and Abdulrahman (2011), cost leadership strategy involves creating competitive advantage by offering products and services at a lower prices compared to other companies. It entails maximizing profits by minimizing costs below industry-average costs and increasing market share by offering services and products at reasonable costs. Through the development of Low Cost Carriers (LCCs), our airline company has been able to undercut the competitors’ prices which have resulted into larger customer base (Ahmadpour, Robert and Lindgaard, 2016). Low price offering has been possible through increasing the number of seats in our flights by minimizing seat pitch and legroom. This strategy has increased the number of customers who prefer affordable flight costs. Nevertheless, our airline may suffer tremendously in future due to change in customer preferences and needs. Although increasing the number of seats on board translates into high profit margin, it leads to the reduction in comfort (Kremser et al., 2012). Although most of the consumers are willing to disregard comfort for affordable prices, the new generation of consumers prefer paying more for high quality service and value added proposition. Vink et al. (2012) argues that the well-being of passengers on board is largely influenced by their level of comfort. Our airline has focused on offering affordable prices for its services which may be a challenging strategy in the coming years. The Asian Airline industry is expected to change dramatically due to changes in consumer preferences. Although the LCC in the region with see future growth, the ability of an airline company to have a competitive edge depends on its ability to polish its competitive advantage (Ahmadpour, Robert and Lindgaard, 2016). Since seat pitch in our airline has led to comfort challenge, it is important for the management to ensure that the seat pitch does not affect the quality of the services. Although cost leadership has worked to the advantage of our company, it is time to rethink things in this new era in order to ensure the company maintains its competitive advantage in the Asian aviation industry (Kossowski, 2007). Innovation Another management issue associated with seat pitch is innovation. Innovation is a requirement for an airline company to gain competitive advantage. The changing business environment for airline companies necessitates the adoption of technological innovation (Taneja, 2017). Businesses are under pressure to create new products and services as a result of the volatility and chaotic nature of the airline industry. New products and services that are characterized by innovation should be better that the previous ones. According to Gross and Bjelic (2007), innovation involves developing new ideas that can be applied directly or indirectly in product and service production. One of the most significant innovations in the airline industry is the emergence of Low Cost Carriers. The adoption of the LCCs reflects creativity since they have been able to attract new market segment and increase profitability. Being a Low Cost Carrier, out company has been at the forefront when it comes to innovating (Gross and Bjelicic, 2007). It has increased the number of passenger seats on the board by reducing the seat pitch. Although this strategy has effective in increasing profitability, more innovative strategies need to be implemented in order to ensure that passengers enjoy comfort and high quality services while maintaining the aspect of low cost. It is important therefore to encourage more innovative ideas that can improve the comfort of passengers in Low Cost Carriers. One airline business that has been successful in improving the comfort of its customers is Qantas (Balcombe, Fraser and Harris, 2009). The company adopted premium economy seats to its long distance flights. These seats have assisted in eliminating known triggers of air rage as a result of uncomforted space. These seats have enhanced personal space without affecting the profitability of the company (Mastrigt et al., 2017). These seats have unique headrest and footrest that allow passengers to stretch their legs and support the back of their legs in spite of the small seat pitch. Moreover, these seats have improved on reclining backwards. When a passenger reclines their seat, the backside does not fling into the face of the person at the back. Instead, these seats roll in a more curved motion to reduce invasion of personal space (Balcombe, Fraser and Harris, 2009). Such an innovation has allowed customers to enjoy comfort at affordable prices. Therefore, out company can learn from Quanta in order to improve innovation and creativity. According to Gross and Bjelicic (2007), innovation ensures sustainable competitive advantage. Although the Asian Industry has a potential to grow in the future, the survival of airline companies will depend on their ability to innovate and create products and services that are appreciated by customers. With the opening of political and regional boarders, out airline company has seen tremendous growth due to the adoption of LCCs (Kremser et al., 2012). However, this growth is threatened by the issue of comfort in our flights. Although restructuring and redesigning our aircrafts would have been an innovative way of improving comfort, it is almost impossible due to time and cost that would be incurred. Therefore, the management should work together with the employees in order to look for ways to develop an innovative seating design that would create comfort to the passengers and maintain affordability (Kremser et al., 2012). There are numerous factors that are linked to innovation such as human resources, organizational structure and culture and leadership. Taneja (2017) argues that when these factors are considered and manipulated effectively, they can make innovation essay in an organization. For instance, a company that has an organizational culture that promotes team work and open communication can generate high levels of innovative ideas to improve its products and services. Also, leaders who encourage freedom to the employees to develop their ideas by developing venture teams can enhance facilitate a working environment that promotes creativity (Taneja, 2017). Therefore, our airline should work towards strengthening leadership, organizational culture and human resources in order to nurture innovative ideas. Vertical Integration Another management concept that can apply to the issue of seat pitch is vertical integration. According to Hortacsu and Syverson (2007), a vertical integration strategy involves a process one organization operates at more than one distribution channel. Our company has adopted vertical integration as a way of improving performance. For instance, it has implemented its own ticketing system in order to avoid using computerized ticketing systems. Nevertheless, to enhance sustainability and high quality services, the airline has an opportunity to be more vertically integrated. Through vertical integration, the company can have more control over the value chain. Lafontaine and Slade (2007) argue that companies that acquire a production business have more control over the production process. In addition, vertical integration facilitates cost and design control. In any distribution process, every phase of production entails mark-ups meant to produce profits to resellers. When a company decides to sell a product or service directly to the consumers, it can eliminate middlemen and thereby having control on the cost of the end product (Forbes and Lederman, 2009). A company managing its own production or distribution channel can also optimize its resource utilization and minimize wasted expense. Also, development of vertical integration can assist companies to increase its competitive advantage by blocking its competitors from accessing limited resources (Ferrari, 2014). For instance, an organization can acquire a production company in order to have access to patents or scarce resources that boost sustainable competitive advantage. Delta Airlines has vertically integrated the jet fuel industry with an attempt to reduce its expenses. In 2012, the airline purchased idled oil refinery for $150 million (Ferrari, 2014). This move saw the company save about $300 million in 2013 and supply surplus to other companies. Also, Delta has bought oil manufacturing refinery in Dakota which is a huge help in minimizing the 12 billion dollar bill for its fuel. This example shows how vertical integration can bring our airline company to the forefront of the aviation industry (Ferrari, 2014). Vertical integration can assist our company’s services by enhancing seat comfort (Ferrari, 2014). Acquiring production channel can be beneficial when it comes to controlling the design of its seats. An idea of acquiring and forming a partnership with seat manufacturing companies such as Recaro can allow our company to control the design of its seats by producing seats with small pitch that feel like those found in Full Service Carriers (FSC). Vertical integration through the acquisition of seat manufacturing company can also assist our company cut down on cost associated with restructuring and redesign of the flights (Ferrari, 2014). Conclusion This report was based on the current issue of seat pitch that influence passenger comfort on the Low Cost Carriers. There are three management issues associated with seat width and pitch; competitive advantage, innovation and vertical integration. In today’s competitive environment, airlines are pressured to look for ways to boost their competitive advantage in order to survive. LCCs have increased the number of seats in their flights which has increased their profits. However, this has created the challenge of discomfort that needs to be addressed in order to facilitate future growth. Also, innovation is an important element that airline companies need to adapt. Innovation challenges have contributed to the challenge of seat pitch in our company. Furthermore, LCCs should be more vertically integrated in order to improve sustainability and improve services. There are some recommendations that managers can consider in order to improve the operations of LCCs. Managers should continue to focus on cost leadership strategy but ensure that the comfort of the passengers is not compromised. Managers should also focus on innovation and should further enhance its vertical integration. Recommendations The Asian aviation industry is becoming more competitive than ever. Therefore, in order gain competitive edge, our airline company should focus its attention of boosting competitive advantage by emphasizing on cost leadership strategy while maintaining the quality of its services. In order to increase seat comfort, our airline should consider new seating configurations that are affordable in order to maintain high profit margin. This strategy should go hand in the low-cost approach. Also, our airline should focus on improving innovation and creativity in order to remain competitive. This is possible through effective leadership structure and organizational culture that supports team work and encourage its employees to come up with new ideas to improve its services. Also, the company should work at finding affordable and innovative means of altering seating arrangement in order to improve comfort. This innovative mechanism is able to satisfy the consumer changing preferences for comfort and high quality services. The third recommendation involves a strategic drive to become more vertically integrated. It is clear that vertical integration enhances competitive advantage and promotes control. Our company should therefore work towards partnering or acquiring seat manufacturing company in order to have control of the seat designs and cost of the end service. With this strategy in place, our airline company has the ability to not only improve seat comfort but reduce the amount of expenses which may translate into high profit margins. References Ahmadpour, N., J.-M. Robert, and G. Lindgaard. (2016). Aircraft Passenger Comfort Experience: Underlying Factors and Differentiation from Discomfort. Applied Ergonomics, 52: 301–308. Balcombe, K. , Fraser, I ., & Harris, L. (2009). Consumer willingness to pay for in- flight service and comfort levels: A choice experiment. Journal of Air Transport management, 15(1): 221-226 Ferrari, B. (2014). Update on Delta Airlines Supply Chain Vertical Integration Strategy. Viewed 21st August 2017 https://www.theferrarigroup.com/supply-chain-matters/2014/12/15/update-on-delta-airlines-supply-chain-vertical-integration-strategy/ Forbes, S. J. and Lederman, M. (2009). Adaptation and Vertical Integration in the Airline Industry. American Economic Review. 99(5): 1831-1849. Gross, S. & Bjelicic, B. (2007). Handbook of low cost airlines: strategies, business processes and market environment. Berlin: Erich Schmidt. Hortacsu, A. and C. Syverson. (2007). Cementing Relationships: Vertical Integration, Foreclosure, Productivity, and Prices. Journal of Political Economy, 115(2): 250-301. Kossowski, A. (2007). Strategic management: Porter's model of generic competitive strategies - theory and analysis. München: GRIN Verlag GmbH. Kremser, F., F. Guenzkofer, C. Sedlmeier, O. Sabbah, and K.  Bengler. (2012). Aircraft Seating Comfort: The Influence of Seat Pitch on Passengers’ Well-Being. Work, 41: 4936–4942. Lafontaine, F. and Slade, M. (2007). Vertical Integration and Firm Boundaries: The Evidence. Journal of Economic Literature, 45(3): 629-685. Mastrigt, S., Groenesteijn, L., Vink, P. & Lottie F. M. Kuijt-Evers (2017). Predicting passenger seat comfort and discomfort on the basis of human, context and seat characteristics: a literature review. Ergonomics, 60(7): 889-911. Nataraja, S. & Abdulrahman A. (2011). The exceptional performance strategies of Emirate Airlines. Competitiveness Review: An International Business Journal, 21(5): 471-486. Taneja, N. (2017). Airline industry: poised for disruptive innovation. London: Routledge/Taylor & Francis Group. Vink, P., C. Bazley, I. Kamp, and M. Blok. (2012). Possibilities to Improve the Aircraft Interior Comfort Experience. Applied Ergonomics, 43(2): 354–359. Read More