Running head: PROBLEM SOLUTION: CLASSIC AIRLINES
Problem Solution: Classic Airlines
MBA570
University of Phoenix
Problem Solution: Classic Airlines
Today, companies function in an international marketplace with fierce competition in every
industry. Therefore, maintaining viability is essential and change is constant and
non-relenting. For that reason, companies no longer have a choice and in order to survive
they must change (Kinicki & Kreitner, 2004). Classic Airlines is embarking on a journey
of change and in order to navigate the impending changes Classic Airlines will have to
make difficult decisions to assure a competitive advantage. 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. While the airline is profitable, the stock
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, 2008) 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. The company is also facing a restrictive cost restructure due to
optimistic over 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, 2008). Within the constraints of the mandate, Classic also
needs to improve the frequent flier program with methods that will demonstrate a
measurable return on any investment (ROI) while still meeting the cost reduction goal.
Classic is the only carrier which does not have a partnership alliance agreement, under the
assumption that no one else can understand or meet the needs of its customers better than
Classic. In addition, the carrier implemented a pricing strategy that put the company in
direct competition with younger airlines, which do not have the same cost structure as
Classic, resulting in an advantage for the competition. The ability of Classic to predict
accurately 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
customer needs. Therefore, the methodology used and the operational philosophy of
Classic needs to be aligned with such a strategy. These issues have created opportunities
for Classic Airlines to address the root cause of the problem. Additionally, the paper will
discuss the situation, stakeholder perspectives, ethical dilemmas and the end-state vision
for classic airlines.
Describe the Situation
Issue and Opportunity Identification
Some main issues for Classic Airlines are the inadequate use of the customer relationship
management (CRM) software, customer dissatisfaction, issues with the customer loyalty
program, and continued declining stock price due to failed customer service programs,
which has caused the stock to fall 10% from the previous year. Symptoms of this main
issue include 19% decrease in the number of Classic Rewards members, rising fuel, labor
cost, and a mandate for a 15% cost reduction over the next 18 months by the Board.
Classic Airlines has an opportunity to change these issues in to turn positive outcomes.
Classic Airlines has created a Classic Reward team that includes Chief Marketing Officer
Kevin Boyle, Vice President (VP) Customer Service Renee Epson, and Senior VP Human
Resources John Hartman has been challenged to redesign the rewards program without
lowering the price or incurring more cost. The Classic Reward team came to an agreement
that the customer service is the main issue at Classic Airlines. Classic Airlines did
implement a (CRM) system, but the Classic Reward team found that the system is not
being used to the fullest capacity and Classic Airlines continues not to listen to what the
customer wants from the airline. An opportunity exists for Classic Airlines to learn from
the DealerMine, a CRM system that is credited with increasing revenue and improving
customer experience at an auto dealership. (Couretas, 2006) With DealerMine, the auto
dealership was is able to run daily reports on all the customer touch point and give a
performance evaluation or report card to customer facing employees. (Couretas, 2006)
This customer service discovery is especially challenging considering that the Chief
Executive Officer (CEO) Amanda Miller and the Chief Financial Officer (CFO) Catherine
Simpson have had this issue brought to their attention, but the they seem to be only
concerned with the factual numbers. The challenges discovered by Classic Airlines lead to
opportunities to address the issues. The opportunities for Classic Airlines are to raise the
stock price, increase priority for customer service, continuing to combat increase in fuel
and labor cost with increased profits, and decrease the cost expectation for Classic
Airlines. Classic Airlines has the opportunity to change their strategy from a price battle
with other airlines to a customer service driven airline which price is not always the most
important offer to a frequent traveler. Classic Airlines can began to realign itself as a
customer service driven airline with the opportunity to create an alliance with other airlines
with the assistance of Josef Wymann, a previous coworker of Kevin Boyle. The Classic
Reward team will have difficulty in selling the CEO and CFO, but this is an important
direction needed for Classic Airlines.
Stakeholder Perspectives/Ethical Dilemmas
The stakeholders for Classic Airlines are stockholders, senior leadership, union,
