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Case Analysis Lorenzo and Texas Air

Case Analysis Lorenzo and Texas Air

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Published by: api-3774614 on Oct 18, 2008
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01/12/2015

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A Report on
Case Analysis: Lorenzo and Texas Air
1
Contents
Page #
Case
3
Summary of the case
5
Answer to Question # 1
9
Answer to Question # 2
11
Answer to Question # 3
12
Answer to Question # 4
20
Extension
26
2
LORENZO AND TEXAS AIR

Frank Lorenzo battled to keep his airline safe in the air and financially viable. Lorenzo faced intense competition on most route systems severe problems with Eastern\u2019s strong unions and poor image. Texas Air typified the upheaval and change that can occur in a firm as it battles to meet new challenge.

The now defunct Texas Air formed as a result of Frank Lorenzo taking a fairly small airline, Texas international, to the big time through a series of aggressive mergers and acquisitions during the mid- 198Os. Lorenzo acquired Continental, People Express, Eastern, and Jet Capital Corporation (a holding company) as a result of deregulated environment for air transport. Fares and routes were deregulated and thrown open to competition. The result was drastic cuts in air fares, increases in air\u2014passenger traffic and routes, intense competition among carriers, and the creation of many new airlines. In addition, large airlines have attempted to become larger in the market place in order to have the power to acquire turning gates, agreements with travel agents, and stronger promotion. Aggressive promotion techniques, such as frequent flyer programs, have proliferated throughout the industry.

Effect on Human Resources -

The environmental changes have had a profound effect on HRM in the industry. The key to survival has been to cut costs, and HR costs were primary targets for cutting. Unions were busted where possible. For example, in 1983, Lorenzo placed Continental his flagship carrier at the time, into bankruptcy, thus abrogating union contracts he also adopted a two-tire wage system when employees hired after a specified date were paid significantly less on a job than those already holding the job. Flexibility also was a key watch-word. Flexible assignments of employees to jobs, which was pioneered by Peoples Express, was adopted whole heartedly by Texas Air .Baggage handlers collected tickets and vice versa, for example. Lorenzo was not as successful, however, with Eastern Air. Safety, image, and labor problems ploughed the carrier until its death.

- Finally Texas Air, like all other airlines, tried to increase the productivity of its human resources by attempting to get more work and more hours of work out of each employee at little increase, if any, in salary. Pilots and flight attendants flew3

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