Classic Airlines & Problem Solving Model
MKT/571
April 14, 2013
University of Phoenix
Classic Airlines & Problem Solving Model Classic Airlines is the fifth largest airline carrier in the world with over 375 airplanes and 2,300 flights each day. The company also has more than 32,000 employees and has been in business for over 25 years. However, after reading the Classic Airlines scenario, it is apparent that the company is experiencing rough times in the current economy. The companies’ net income has decreased $61 million dollars while shares have also decreased 10%. Moreover, other factors that are contributing to Classic Airlines situation include both internal and external factors which must be identified in order to move forward and reinvent themselves as a top leading and competing airline. Some of the internal and external factors include low employee morale, declining customer base in their rewards program, a failing customer management program, rising fuel costs and restricting cost structures. Classic Airlines must implement a nine-step problem solving model to help sort out where the real issues lie and determine some restructuring methods to conquer all these challenges. The nine-step problem solving model includes the following nine steps: 1) Define the problem 2) Gather facts 3) identify the problem 4) generate solutions 5) identify alternatives 6) evaluate alternatives 7) obstacles and risks involved 8) implement a decision 9) evaluate the results. (Stark, 2012). All of the relevant information from the nine-step process will help to implement solutions for Classic Airlines current situation. Define the Problem Classic Airlines has several issues that directly affect the company’s overall bottom line. The customer rewards program was addressed as having a 19% decrease in the number of Classic Rewards members and a 21% decrease in flights per remaining member. (UOP Classic Airlines Scenario) With rising costs of fuel and labor and Classic’s quick expansion, Classic faces a restrictive cost structure. Customers are also not satisfied with the lack of customer service and customer relationship program. The rewards and incentives are no longer enticing compared with other frequent flyer programs attributed with other airlines such as Southwest, United, and American. Classic must reinvent the customer loyalty program to attract new customers while retaining existing customers. Gather Facts Classic Airlines board of directors mandated a 15% cost reduction over the next 18 months with goals to reduce budget while staying competitive with other airlines. With fuel costs on the rise, Classic will have to cut back on all essential department processes of the business including marketing, sales and operations, administrative, and management salary. By investing in a fuel consumption and fuel efficiency program, Classic can plan on cutting back fuel costs to a minimum. Other issues with low employee morale and increased expenses can cut back as well. The company can help to cut costs by implementing employee retention programs taught by existing employees and higher management rather than contracting from outside hiring companies. By getting rid of unproductive employees the company can also save money by investing more time with employees who are happy to work for Classic and want to grow with the company. Identify the Problem The main problem for Classic Airlines is they are losing their customer base and are becoming irrelevant in a market place full of airlines with competitive rates,