Classic Airlines | Course Paper

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Problem Solution: Classic Airlines

Classic Airlines is the worlds fifth largest airline with a fleet of more 375 jets and serving

240 cities with more than 2300 flights daily. (Classic Airlines, 2007) Classic Airlines has

grown to an organization of 32,000 employees since starting operations. Last year the

company recorded $10 million profit on $8.7 billion in sales. (Classic Airlines, 2007)

Although the airline is profitable, its share prices have decreased by 10% in the past year

and employee morale has been at its lowest due to increase scrutiny on the airline industry

from all sectors of the economy. (Classic Airlines, 2007) Classic Airlines customer loyalty

is on the decline as evidenced by the 19% decrease in the number of Classic rewards

members and 21% decrease in flights per remaining member as of January of 2005.

(Classic Airlines, 2007) The company is also facing a restrictive cost restructure due to

overly optimistic expansion plans based on anticipated rebound of post 09/11 travel.

Classics Board of Directors recently mandated a 15% across-the-board cost reduction over

the next 18 months. (Classic Airlines, 2007) Within the constraints of the mandate, Classic

also needs to improve its frequent flier program with methods that will demonstrate a

measurable return on any investment while still meeting the cost reduction goal.

Classics Airlines is the only carriers which does not have any alliance agreements, under

the assumption that no one else can understand or meet the needs of its customers better

than itself. In addition, the carrier implemented a pricing strategy that put it in direct

competition with younger airlines, which do not have the same cost structure as Classic, a

decidedly advantage for the competition. The ability of Classic to accurately predict

changing market and consumer trends will enable the carrier to augment marketing

campaigns, adjust budgets, and reallocate resources to take advantage of prevailing trends

or conduct informational and promotional marketing during the off peak seasons. The

more data that Classic can collect from all sources, but especially existing customer, the

more accurately the carrier can predict and meet changing or unmet needs. Therefore the

methodology used and the operational philosophy of Classic needs to be aligned with such

a strategy.

Describe the Situation

Issue and Opportunity Identification

Classic Airlines faces several critical issues with its current operation, first is an

ineffectively implemented CRM tool. While the existing CRM system is powerful, in fact

one of the most substantial system in the industry, its deployment is sketchy. The failure to

enable total integration of the phone and web portal with the CRM tool has hindered the

level of customer service Classic representatives are able to provide. This shortcoming has

also affected the data collected by the system because it is in essence excluding the web

portal using client population.

Further hindering its ability to meet customer need is the fact that Classic is the only

airline without an alliance agreement. This is limiting the flight options available to

customers there by limiting their ability to earn and redeem reward miles. The lack of an

alliance also has the indirect effect of making more work for the consumer when shopping

for flights; the consumer is forced to visit multiple search functions rather than a single

point of access. This condition is the result of a non-customer relation focused operating

model and number driven senior management with little understanding or patience for

Customer Relations or Marketing.

Further troubling Classic Airline is the rising costs in the fuel and labor. These two factors

have limited Classics ability to compete for the valued frequent flier as it can not compete

on price with an ever narrowing margin. In addition to the rising cost of fuel and labor

Classic is also locked into a restrictive cost restructure, due to a expansion plan based on

overly optimistic predictions of post 09/11 travel rebound.

Despite all the issues facing Classic Airlines, the carrier does have several opportunities.

First and foremost is the realignment and leveraging of the existing CRM tool. Integration

of the CRM tool across phone and web portals would provide the carrier a much rounded

and accurate data on consumers. It would also enable the customer service reps to better

serve clients no matter which communication vehicle they chose to use. Better data would

enable Classic to identify values for Classic Rewards Program from the customers

perspective. Thereby enable it to change value generating features for highly desirable

ones, further improving customer relations. To fully support the new CRM tool Classic

needs to transition to a customer relation oriented operating model. In addition, the carrier

needs to explore alliances with other carriers.

Stakeholder Perspectives/Ethical Dilemmas

All ethical dilemmas should be resolved by the solution, the solution will provide the

clients the level of service, the variety of choices and the level of participation that they

desire. The solution would also enable Classic Airlines to solidify its market position and

position itself as the premier world class airline with impeccable service. Employees and

management would receive continues feedback on the performance of the firm; giving

management the critical data needed for forecasting and long term marketing strategies.

Driving the feedback would be the ability of the firm to increase the level of service and

provide the consumers with the products and flexibility that they desire as well as

engaging clients as true partners in improving services. Improved client relations would

translate to increase client retention and positive references would allow Classic Airlines to