Major Changes in Aviation Industry - Essay Example

Running Head: MIDTERM ESSAY PART Midterm Essay Part In APA Style By Gordon Bethune and Frank Lorenzo were two of the more noted CEOs in the last 25 years of commercial aviation. Describe in-depth their management style and how they used their management style in running the airline they were associated with. Please name the airline(s) and if their management style had any long-term effects on the industry. (25 points) Frank Lorenzo is the founder and one of the most noted executives of Continental Airlines which sprang from the merger of Texas International Airlines and the original Continental Airlines. It should be noted that in his reign as the CEO these two companies have been fused with other significant airlines such as New York Air, People Express, and Rocky Mountain Airways. His efforts in transforming this air carrier gained him the recognition of having been successful in influencing the pre-deregulation airline industry. However, most people are still skeptical on his contributions claiming that his strategy becomes detrimental to Continental and brought damages in its operation. In managing the airline, Lorenzo used a highly centralized decision making approach. It should be noted that he solely the airline is solely run by Lorenzo and even though he assigns executives to oversee the different functional areas, he often bypassed them and implement his own decisions. His administration also emphasizes the goal of profitability by cutting down operational costs. This move had jeopardized employee morale and commitment leading to massive labor union strikes. Lorenzo should also be noted by introducing new practices in the pre-deregulation aviation industry. He has been apt in targeting the middle and lower social strata by revamping the typical marketing strategy. Lorenzo introduced "Peanuts Fares" which is the first CAB-approved low fare scheme, provided consumer benefits like forbidding pipe and cigarette smoking in planes, and utilized the advancement of technology through computerized airport check-in. After being forced to leave the Continental Airways in 1990, Gordon Bethune took over. The new executive has been recognized to have brought the major turnaround in the airline. From being financially distressed, Continental Airways had become one of the most admired business organizations. In direct contrast with Lorenzo, Bethune implemented a decentralized management style which empowers employees to make significant decisions. He improved employee morale by treating them as strategic partners which are instrumental in attaining organizational goals. He also recognized employee contribution by rewarding them. His move for profitability is seen by eliminating unprofitable routes and outsourcing maintenance which helps the airline to focus on its core competence. 2. Early aviation got its start with those men in their crazy balloons. Describe in detail the beginning of balloon age, its uses, and the impact it had on aviation today. (10 points) The first successful human flight in history occurred aboard a hot air balloon it took place in France, 1783. Jean de Rozier and Francois d' Arlandes flew 5 miles in a hot air balloon which was invented by Monthgolfier brothers, they were inspired by the lifting power of hot air rising from a fireplace. The first hot air balloon was powered by a wood fire; it was not steerable; and flew wherever the wind took it. The first recorded circumnavigation of the globe in a balloon was accomplished by Betrand Piccard and Brian Jones, it took them 19 days and flew over 26,000 miles. The first successful solo-flight around the world was achieved by Steve Fossett after six attempts. Initially, hot air balloons are solely used for showmanship. The succeeding years proved that hot air balloons can be utilized for military purposes. It should be noted that hot air balloons are used during the French Revolution and American civil war. In order to maximize its uses, the military brought structural changes like making it more elongated and attaching motors. Being the earliest predecessor of the modern aircraft, hot air balloons provided man with the possibility of air transport. Balloons have become the foundation and origin of what we know now as air travel. 3. By all accounts, Lockheed had a great impact on the industry as we know it today. Describe in detail how Alan Lockheed salvaged his company and how he used the recommendations of the National Advisory Committee for Aeronautics (NACA) to turn his company into the leader it is today. (15 points) Long before it became an industry leader, the Lockheed Aircraft Corporation had invested in unprofitable products like the ten-seater flying boat which threw it out of business. In order to bring the company to life, Alan Lockheed had sought the recommendations of the National Advisory Committee for Aeronautics in the creation of more technologically advanced aircrafts. It can be recalled that the NACA had called for monocoque construction of fuselage, higher performance engines, and cowlings to reduce drag. Thus, in 1927, Lockheed Vega is created featuring the latest technology in aircraft: a light weight air cooled engine; a streamlined engine cowling; all wood stressed skin monocoque fuselage; and open space in the interior of the fuselage. With the introduction of this innovation in the airline industry, the aircraft manufacturer has gained recognition throughout the industry. Alan Lockheed continued to implement advancements such as the production of an all-metal aircraft from the traditionally wooden ones and two engine planes. He innovated further by creating twin and triple tailed fighters to aid military in wars to other advanced aircraft which features luxury, speed, and operating efficiency. 4. In class we have discussed the competition between Airbus and Boeing. Explain in detail how the two companies differ and why you believe from what you have read and what we have discussed in class why one company has an advantage over the other. (NOTE: Do not use the argument that one has more orders than the another has that can change from day-to-day!) (25 points) Airbus and Boeing has always been regarded as the competitors in the global airline manufacturing industry. Traditionally, the American company Boeing has gained a foothold in the world market. However, the relative strength of its European competitor Airbus becomes threatening and has brought a decline in the US aerospace trade balance. The ascent of Airbus in the global aviation industry can be credited from the strong financial subsidy that it receives from the European government in order to finance its research and development as well as its operation. In comparison, Boeing solely supports its operations from its profits and does not receive subsidies from the American government. The two aircraft manufacturers have decided to differentiate the products that they offer in their markets. Airbus focuses on the production of large aircrafts which will cut the operating costs of major airlines who are serving major routes. In direct contrast, Beoing is taking the strategy of producing smaller aircrafts as it believes that the hubs will be more fragmented. With these strategies, it should be noted that Airbus needs a lower number of aircraft to break even than Boeing. Airbus also has an advantage against Boeing because of the overall business climate in the economies where they operate. It should be noted that the United States is currently suffering from the weakening of the dollar. On the other hand, euro continues to show strength. Lastly, even though the European aircraft industry is relatively smaller, the US is facing instability because of the decline in aerospace trade balance. 5. Deregulation has brought about many changes in the airline industry. Describe two of the major changes anticipated by the legislators (and there are more) and the actual effects the legislation had on the industry. (25 points) Deregulation has always been anticipated to transform the once highly state controlled airline industry. One of the major changes which were anticipated in even before the deregulation is the increase competition in the industry which can lead to the exit of other less competitive airlines. It should be noted that the post deregulation era, industry players are insulated from launching aggressive attacks against each other because the state intervenes with their strategy. However, allowing the airlines to operate more freely could possibly mean the start of head-one competition in terms of pricing and marketing. It also allows the entry of other air carriers which can heighten the competition. True enough, deregulation has created a more competitive business atmosphere. Most airlines have launched their individual attacks in order to shake off their rivals. The more intense competition has lead to the failure of 100 airlines which ranges from the start-ups to the more established business organizations. The deregulation in the airline industry has had great implications in the operation of players. Even though not fully anticipated, the deregulation has provided the possibility of the formation of global strategic alliance among industry participants. Being more than just partners, these alliances work together in order to benefit from customer by enhancing their experiences through the provision of more flight options and more frequent flier opportunities. Through these alliances, airlines expose themselves to a larger market and higher opportunities. The end goal here is the generation of higher revenues and the minimization of costs. Read More