Following are the factors (Root Cause to use a jargon of TQM) behind the turmoil:

1. Rising costs of aviation fuel, labor & its consequences on the ailing airline-

Rising input costs – aviation turbine fuel (ATF), at “32% of all operating expenses”

and rising labor cost due to “4 % across the board”. Both the factors eat away

profitability.

The solution of backward integration can be explored, (Ford got into steel mines,

steel making etc), however, thinking of late is in Core Competence (C K Prahalad

and Gary Hammel’s Theory of Core Competence), successful organizations are

trying to find their mojo in selective things rather than getting into myriad acts, since

CA could not handle the complexities of service industry, there is no guarantee that it

would be able to crack the ATF manufacturing business, that is a different ball game

altogether.

Besides, albeit ATF is costly and a major cost head, but that is true for the whole

industry, if others can manage the monster, CA should also learn to live with the

ground reality of high cost of ATF.

Labor and its wage rate can be rationalized. If the rate cannot be reduced, right sizing

(retrenchment for critics and affected parties), automation (overall productivity raise

would justify the capex and opex) and productivity increase through existing

manpower are other solutions. Training and development for willing and weeding out

the misfits are in dire need.

Some Benchmarking study with “Best in class” and “industry average” from the

local aviation industry may throw up important learning lessons that can be

implemented to boost productivity, reduce cost or right sizing manpower should it

disclose that CA employs more labor than required.

2. Improper segmentation and lack of innovation

Proper Segmentation – CA should decide for once and all whether to cater to LCC

(Low Cost carrier) segment and hence bare bone infra and features would do or

chase middle of the road or even premium, full service airline – luxury class,

segments too.

For middle of the road and luxury, rebuilding the airline's seats for greater leg room,

creating wider arm rest requirement were never implemented, so CA must have lost

those travelers. The introduction of convertible seats and TV screens for each seat

which already were in other airlines remained on the drawing board. So CA can at

best hope to have economy and LCC crowd, so for this reason, it has no other option

rather than pursuing focused cost leadership. 4 % across the board wage hike does

not go with this segmentation. Wage rate should be rationalized with union and a

resettlement through Collective bargaining or Tripartite agreement should be

attempted.

3. Poor Customer Service issues:

Supports through web (online checking), phone, loyalty program need to be

revamped on urgent basis. Training customer facing employees to improve “moment

of truth”, listen to “VOC- voice of customer” on not to leave her stranded, being

more responsive and less indifferent, a “service blue printing” or service scape” are

in urgent need. They need to implement measures combining Services marketing and

TQM on urgent basis else bankruptcy is imminent.

4. A weak and fragmented management

The management has the below things to do:

Out of the various possibilities shown below they are at stage of Phantom or Rubber Stamp,

no genuine leadership and strategic interventions.

Board of Director Continuum

CA management needs to move from phantom stage to Active participation. The financial

literacy of CA management was questionable and they failed to foresee problems what to talk

of taking preemptive or even post mortem actions. The management was too old (average age

64 yrs) for a sector like airlines that thrive on innovations and agility. In all the confusion and

incompetence, widespread blame game and finger pointing was going on rather any crisis

management. Dissent was open and vicious, annual evaluations was on hold, transparent

feedback, performance review and individual accountability was missing. CA presented quite

a hopeless scenario of mismanagement, indifference and callousness from top to bottom.

5. Competition

In Africa for the airlines, the entry barriers were low (liberalization and globalization,

about 1,300 new airlines were established in the last 40 years. Competition is not only

from new entrants, existing ones may expand into new geographies, new segments like

LCC turning full service or vice versa etc. Related diversification (also called

concentric) is relatively better than unrelated as far as entry barriers are concerned.

Losing a customer (attrition) is easy in airlines more so, when CA is not doing much of

customer services itself. Many airlines form a group called alliance (e. g. Star Alliance),

alliances try to bind customers to some extent but one can move inside an alliance and

albeit to a competitor rather easily.

Strategic alliance in service industry

Lufthansa

Air New Zealand

SAS

Austrian Airlines

Varig

Asiana Airlines

Spanair

United Airlines

Tyrolean

Oviango Airlines merged with Afrik Airlines made them a dominant force in the West

African hub, 4 new airlines has made entry into regional market making life of CA more

difficult.

It would be classic Marketing Myopia (coined by Theo Levitt) to consider only airlines

as competitor, road, train or any other transport option is a competitor and eating into the

pie of airlines, too many suitors for a lone bride – elusive customer.

Singapore AirlinesBritish MidlandThai Airways

Below is a Fishbone diagram and then a solution roadmap:

Cause-and- Effect Chart for

turbulence in CA

Rising costs of aviation fuel,

labor

Competition

Weak management Poor customer service

Solution roadmap:

 Tinkering into ATF manufacture may be too risky, leave it alone and learn to live

with it

 Rightsize labor, renegotiate lower wage rate, increase productivity

 Compete with heart and brain, be proactice, be customer centric or look for chapter 11

(bankruptcy)!!!

 Inject some Viagra into management weed out the old and junk, bring some new

blood.

 PRAY!!!

References & acknowledgements:

1. Operation Management for Competitive Advantage,Richard B Chase F Robert Jacobs,

Nicholas J Aquilano, Nitin K Agarwal, 11th Ed, Mc Graw Hill

2. Concepts in Strategic Management & Business Policy, Thomas L Wheelen, J David Hunger &

Krish Rangarajan, 9 th Ed, Pearson Education

3. Strategic Management – Concepts & Cases, 12 th Ed, PHI, Fred R David

4. Strategic Management – Formulation, Implementation & Control, John A Pearce, Richard

B Robinson, Amita Mital, TMH, 10 th Edition.

5.Industrial Relations, Arun Monappa,Tata-Mc Graw Hill, 2011;

6. Services Marketing, Lovelock, Wirtz & Chatterjee, Pearson