OUTSOURCING IN AIRLINE

Outsourcing in Airline Industry

Abstract

Outsourcing has been a feature of the airline industry since the early days of commercial aviation. Airlines typically outsource a broad range of business processes: aircraft maintenance, baggage and ground handling and in-flight catering may not be provided or performed by the airline and some or all of its reservation, ticketing and departure control systems will be provided or maintained by service providers on its behalf. As in other industry sectors, some IT and business functions, such as finance and accounting or payroll services, May also be outsourced. So why is outsourcing so widespread among airlines.

Outsourcing in Airline Industry

Thesis Statement

The outsourcing is effective in Airline industry, as it increases the chances of expanding business.

Introduction

Managers of major airlines are outsourcing more than half of their heavy maintenance to third party providers. As airline managers adapted to the changing marketplace, they reduced costs to remain competitive in an industry that competes with airfares. Airline managers reduced costs through service reductions and began using maintenance outsourcing as another method to reduce costs. Passengers could have a concern that airline managers are increasing their use of maintenance outsourcing and this could change their perception about air travel. A focus of this quantitative study was to examine whether an association existed between airline maintenance outsourcing and passengers' perception of air travel. Selection of passengers for the study was through a convenience sample (Alan, 2006).

The convenience sample was a composite of an Internet and an intercept survey resulting in a sample size of 134 passengers. Internet sampling began with employees of a business and a request to recommend acquaintances to take the survey. An intercept of patrons visiting a local community library provided additional respondents. A Likert-type survey captured passengers' attitudes about air travel and airline maintenance outsourcing. A Spearman test indicated the strength of the association between airline maintenance outsourcing and passengers' perception about air travel. The results of the Spearman test indicated there was sufficient evidence to reject each null hypothesis regarding passengers' concerns about maintenance outsourcing, their perceptions of air travel, their perception about safety, and their willingness to pay a higher airfare. Results from the Spearman rho test indicated. Therefore, the results need to be compared and examined with future studies. These findings provided information that can assist airline managers, union representatives, and FAA officials in understanding passengers' perception about air travel and maintenance outsourcing.

How is the airline industry using outsourcing?

There are multiple theoretic explanations regarding why firms terminate in-house operations in favor of outside services. The most common theory in outsourcing research is transaction cost theory (TCT). This explanation entails inter organizational endorsement as part of the outsourcing option, and it involves transactions with outsourcing service providers via market mechanisms and the decision to retain operations in-house via organizational control. A TCT approach helps conceptualize firm outsourcing in terms of the specificity of assets, uncertainty around strategic options, and the infrequency of such arrangements. According to TCT, in-house operations that are more commoditized than others stand ...