How Airlines Make Decisions
Airlines are companies that provide various kinds of services to their passengers and customers. The working environment and the conditions to provide such services differ a lot compared to other kinds of business. This then means various decisions have to be made among the decisions are fares, types of planes to use and the routes to be taken. Tickets Price There are those periods of the year that the airlines are busy such as the thanks giving. This means that there is high demand for seats in these planes. Now the question is how do these airlines decide their ticket price?
Before airline deregulation in around 1975 most planes decided on the amount of fares that they charged and most depended on the distance to be covered. But due to increase in airlines the idea of competition has grown roots. This then leads to the idea that the planes fare has nothing to do with distance. Those routes with many airline companies are cheaper compared to those that have few airlines, these means that the fewer airlines found, the expensive the flight. New discount airlines also drives the prices down, example is Jet blue. Since these fares frequently changes depending on
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They obtain the change of fares through information that they supply and get from organizations that monitor the airlines such as the Airline Tariff Publishing Company. Others obtain this information from the airline agents and online travel sites, which are called Global Distribution Systems. This information is then used to determine the ticket fairs. The needs and demands for the current market fluctuate depending on the nature of the situation. The competition also brings to a decision on what kind of service that the airline can offer to the passenger and customers to maintain them.
(Davies, 1964) Services Provided There are those customers and passengers who are new in the market and they have to be enticed into the airline. This means that the airline has to shape and develop the kind of services and privileges that they render to their customers. Many airline companies provide various kinds of foods and drinks with many considerations to customer health and preference. There is also the idea of entertainment that the company will have to offer and of late other airline companies are planning to have web in their planes.
The security of the passengers and customers’ goods should be put into considerations and nice incentives if something bad happens. To some extent some airline companies fully compensates parcels and luggage that the airline looses. Routes There are many routes that are available for airlines to choose from but the big question is what makes them decide on these routes? Government and other bodies usually regulate the routes that planes can take and incentives that are associated with these routes. There are those routes that are less profitable which tends to make many airlines not to operate.
The government then uses some privileges to entice these airline companies to provide services through subsidies. For the airline companies they have many decisions to make such as whether to merge or purchase other airlines. They could also decide on whether to use hubs, which are stations where smaller airlines called feeders are used to feed major airlines. Apart from these, there is also the idea about the situation of the destination. The security of the destination and the kind of the airports at the region will highly feature.
Some airports are small and can’t accommodate the big planes and others are not safe for planes and passengers. Expansion There are many risks that are associated with an airline if it decides to expand which includes the strength and capability of their competitors. Airline Company can view and see a market that is promising according to the load that is associated, for example, many airline companies are expanding in Asia regions where there are many passengers and they prefer the international flights.
Many airlines have used this cue to expand, for example, Cathay Pacific that wants to add 23 more planes into their fleets and ply these roots. The financial state of the organization also motivates the decision of expansion. An Airline Company may have done well in business in the previous periods and are in good financial position. These then makes them to use these additional funds to spread their wings for better profits, the motivation of the company to expand its services to large customer base and the willingness of the company. (Cajori, 1993)
Type of Planes to Use There are many considerations that an airline company may decide on (what type of planes to use) so as to enable the development of their fleet. This may be due to change of the type of services that they initially provided. There are those fleets that mostly depend on transportation of goods alone such as the DHL. There are also those who deal only with passenger traffic. These companies may decide to either purchase new planes to increase their fleet or lease them. This will solely be decided by the strength of the airline.
The type of market that they want to venture will also decide the kind of planes to use, the distance to be covered and the kind of service they are providing. The internal structure of the company will also be brought into mind. The distance of the seats, for example, leg room will decide the type of plane. For the goods dependent company the idea of the type of goods that they transport will be considered. There are those planes that depend on transportation of fresh produce which means that they must have regulators for temperatures such as fridges. (Rigas, 2001)
To make such tough decisions some techniques are used to avoid bias and to make ground breaking objections. Such techniques are: PMI (Plus, Minus and Interesting) This is usually used to weigh the advantages, disadvantages as well as the end result of a decision. The first thing is to choose the direction of action and then use this technique to gauge its worthiness. For the purpose of this technique a table is drawn with three columns headed with plus, minus and interesting as the full initials of the technique. Then all intentions are put in these columns according to the preference.
For the plus column, it uses the positive sign, a negative sign for minus and the outcomes both as implications or possible end situation. And at the end of the table the total value will be used as a guide line for the decision to be made according to the preference of individual decision. Parento Analysis Parento analysis is used to decide the best change to make, this analysis uses Parento principle which states that by using 20% of the job one can generate 80% of the entire work. It’s normally used in that scenario which has many competing options.
First to take into considerations is what kind of changes to be made, for example, if it’s the amount of profits the airline wants to get then they will have to split the projects into groups and / or parts and each part analyzed differently. Paired Comparison Analysis This kind of analysis helps to work out importance of a project against other projects. This is usually applicable where no previous data is available to check the issue. This method, if used will make it easy to choose most important problem to solve or even select the best initiative, this hence solve the problem where usually there is a conflict of interest in the resources.
This method is useful for decisions to be made if there are completely different options available. Such decisions are usually hard to make compared to simpler ones such as the types of fleets. It is also useful in measurements of relative course of action and in areas where priorities aren’t clear or competing hence it provides a mechanism of comparing action in relative to others and their importance. Six Thinking Hats This is a very useful technique that looks at an issue in different views. It also helps to think beyond habitual thinking way.
This then helps to understand the complexity of any decision and also spot issues and opportunities which at the moment are not visible. Most business people are rational and have positive view point on what they are thinking. Even though they don’t see these issues in an intuitive, creative, emotional or even negative view point. This shows that they usually underestimate resistance for change, lack better plans and they don’t make contingency plans. On the other hand pessimists may be defensive or even may fail to use their creativity.
The six thinking hart is divided into various groups: white hart – use the data they have, red hat – nature of the project in its state as poor, black hat – for example, government plans may be wrong, yellow hat- views that black project in good terms, green hut – they should change the picture of red and blue hat – is mostly used by the person who is running the directors meeting. Cost or Benefit Analysis There maybe a time when decision has been made and a lot of time has been spent with large portion of investment and resources being used but then at the end the project, the project fails.
This problem is then solved through cost benefit analysis, whereby the cost of the project is taken and then subtracted from the benefits. (Victor, 2007) Nevertheless, at other times a problem yields when purchasing a new plane where the initial cost is known but the benefit are not known. A method called payback is used to calculate the expected benefit of the usage of the plane after a certain period. This value is then used in the benefit cost analysis application. Also, the use of financial cost and financial benefits can be used.
Successful decision making is an important skill for career development and its success as well as to those who lead and provide the leadership. This means that if the leader can make decision on time and well considered, then the management staff will achieve deserved success. On the other hand if the decisions made are poor then the direction of the team will be blurred and the leaders’ time will likely come to an end. The airline decision making bases their view on the kind of market and how the company will benefit.
The number of customers and passengers in certain routes make them decide on how to expand. This also views the nature of the market that they want to attract and the situation of the destination, for example, security. The needs and requirements of the market, for instance, the kind of goods that flow and how urgent are they required.
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