PROBLEM-SOLUTION PAPER

Problem-Solution Paper

Problem-Solution Paper

Problem Solution: Classic Airlines

Classic Airlines, is 25-year-old passenger airline. Classic Airlines has a fleet of more than 375 jets that serve 240 cities with more than 2300 daily flights making it the fifth largest airline in the world (Classic Airlines scenario, 2007). Classic has grown to be an organization of 32,000 employees, and last year the company earned $10 million on $8.7 billion in sales (Classic Airlines scenario, 2007).

This paper will discuss the current situation that Classic Airline faces; it will determine the key issues in the situation, the opportunities that they must address, and the desired end state goals of the airline.

Situation Background

There is an increased uncertainly about flying which has affected the industries stock prices, and Classic has seen a 10% decrease in share prices in the past year. With a concerned investment community on the watch, the airline industry operates with a microscope watching over them.

The consumers' confidence appears to be waving. By January 2005, Classic's declining Rewards program measured a 19% decrease in the number of Classic Reward members, and a 21% decrease in flights per remaining members. The loyal customer's that Classic Airlines has had are not been happy and they are going somewhere else. Rising costs, such as fuel and labor, have limited Classic's ability to compete for the valued frequent flier.

Classic is now facing a mandated 15% cost reduction to take place over the next 18 months. The Board of Directors has not released much information on the current state of the company and this may be lending fuel to the rumors that classic may have to file bankruptcy if they are not able to control costs (Classic Airlines, 2007).

Problem Statement

Classic Airlines is having issues with attracting new and retaining customers as a result of an outdated and uncompetitive rewards program and poor marketing. There is insufficient use of the CRM system and lack of alliance agreement.

End State Goals

The end state goals are as follows: 1) Classic airlines should focus on achieving a customer solution which will lure the customers back to the airline. 2) Classic must achieve a total cost reduction of 15% over the next year and half and 3) the management staff must create a plan that includes and addresses all concerned parties. The concerned parties are the management team, employees, customers and stakeholders.

Issue and Opportunity Identification

There are several issues facing Classic Airlines in this scenario. These issues are part of the reason for the decisions that the company is planning on making. The first issue facing Classic Airlines is the reduction of customers who are flying on the airline. The member base for the company is shown to be down by 20%, or 160,000 customers. The company is facing a crisis with losing their customers to competitors.

In addition to the reduction in their customer base, the airline cut flight prices over the past year. This price cut placed them right above their acceptable margins. The company is facing a price war with other airlines, but they have ...