Case Study 2

Topics: Management, Airline, Performance management Pages: 8 (2276 words) Published: April 9, 2013
Masters in Business Administration
Cohort: MBA/09B/PT Year 1
MBEA/09B/PT Year 1

Examinations for 2009 – 2010 Semester I
/ 2009 Semester II
Duration: 3 Hours
Reading time: 15 Minutes
Instructions to Candidates:

This paper consists of Sections A and B.


Section A is compulsory.


Answer any three (3) questions from Section B.


Total Marks: 100

This question paper contains 6 questions and 8 pages.

Page 1 of 8

Staff Motivation: Not so much a pyramid, more a slippery slope

My contact with my direct line manager is limited to irregular e -mails which are purely directional and/or informative. At no point is there any attempt to either help with my staffing problems or to acknowledge that these may be stress related. I t follows then that there is no form of motivation downwards from him to me, although it is taken for granted that I will be self-motivated and able to motivate my team.

In the highly competitive world of international air passenger transport, the bottom line is everything. As such all aspects of flight operations are subject to the rigorous cost benefit analysis known as revenue per kilometre flown. This has led to some decisions which would deeply disturb Joe Star. When he purchases an airline ticket he is taking part in a lottery – the element of chance being the availability of the flight, seat class of flight time of his choice. Joe Star feels that buying his ticket gives him this automatic right – but he should read the small print.

Price branding restrictions linked to historical marketing statistics allow airlines to estimate the number of passengers who will present themselves for a particular flight as opposed to those who will choose to exercise their flexibility muscle. For example, if 70 per cent of the plane’s capacity is made up of economy seats, a condition of which is that no changes are allowed, then it can be reasonably assumed that this group will travel on the given day or not at all. Flexibility to price ratio continues up the scale unt il the top notch ticket is reached. The high prices tag at this level promises that the airline will strive to provide the frequent flyer with all that he requires. Further statistics indicate that having made this investment he will almost certainly trave l since ceteris paribus, he has chosen to pay an inflated price to guarantee that he will reach his destination when and how he wishes.

Page 2 of 8

At this stage there remains only one small percentage of passenger statistics to be correlated and here restrictions linked to price again come into play, limiting the degree of usage of the flexibility muscle to the minority of passengers travelling ‘open -jaw’. These people will have paid a sufficiently large supplement in order to allow themselves the luxury of being flexible in their travel arrangements. As one would expect, this market segment has been shown to be most likely not to travel and it is this information which the airlines use in their calculations. Should, as it is likely, a proportion of this user group decide to change their plans, as is their right, then the airline would be faced with the economic disaster of high revenue seats flying empty and seriously reducing the company’s desired margin of revenue. In order to cover this contingency proactively the company chooses always to overbook these seats by the calculated percentage of passengers who will probably choose not to travel.

The above organisational difficulties are not new, however the system in which they operate has changed drastically both in the attitude to acceptable levels of passenger discomfort and in the variety and number duties which staff are now expected to carry out. As a manager in this environment Steve Prado faces many challenges daily, the most daunting of which is to find...
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