PE Airlines: Rise and Decline

Dr. Koustab Ghosh

IIM Rohtak
(Circulation Restricted)
What was PE known for both inside and
outside the organization?

Dr. Koustab Ghosh, IIM Rohtak 2

- Low cost frequent flights
- Highly committed non-unionized work system
- Self-management, participation, multi-tasking
- Low salary, ownership, profit sharing
- High volume low cost, bare bone reservation
system including in-flight ticketing, a la carte
pricing for baggage, food etc.

Dr. Koustab Ghosh, IIM Rohtak 3

What type of growth PE experienced in
its early stage? Was it organic or
inorganic?

Dr. Koustab Ghosh, IIM Rohtak 4

- 20 aircrafts, 3 million passengers
- Wide margin between yield per RPM and cost per ASM
- Load factor in excess of break even
- 1000 full time and 900 per time employees, 9 GMs, 50 team
managers
- Around 1 mn. net income and growing stockholders equity
- Cost per ASM 5.4 cents and average price per passenger mile
8.9 cents

Could this growth be attributed to internal measures or

favourable/conducive externalities or both?

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How serious or sensitive PE was towards customer
service?

Were employees / teams / managers geared up to

support this growth? Were the company policies and
practices supportive / inhibitive / coercive at this
stage?

Why and how the restructuring was done? How

effective was it?

What was the visible impact of internship programme?

Dr. Koustab Ghosh, IIM Rohtak 6

What was the reason(s) behind the
decision of entering high density
competitive routes (West and North
West)?

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Was PE getting too large to support itself on peripheral
routes?

OR

If it didnt expand, would be squeezed into seeking a

merger partner for itself

OR

It might be acquired by a major carrier

OR

Donald Burrs high ambition

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Was PE equipped enough to shift from low density
routes to hub and spoke system?

Why the reservation system was not made competitive

with yield management capacity?

Could PE effectively charge different prices to different

customer groups? (given poor customer service image)

Was this lack of system a failure of strategic

leadership or the result of inadequate resources?

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What could have been done otherwise?
Higher quality service through higher prices
Better staffing policies and practices
Slower growth target in chosen segments
Better positioning for direct competition

Is high growth / inorganic disruptive growth always

good for the organization?

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Was PE as an organization designed properly
in terms of structure, culture, system, and process
to warrant a different business strategy?
High cost unionized system or low cost non-unionized system??

Rapid or steady but moderate growth??

Moderate pricing strategy with better customer service or low pricing

strategy with poor customer service??

Dynamic reservation system with better yield management or bare

bone reservation system with average yield management??

Consolidation of culture or growth through acquisition?? (Boundary

Spanning)

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 Linkage with Theoretical Concepts

Natural Selection - (ability to fit best with the environment) early or

late entry into industry versus operating in one or multiple niches (time of
entry in a route, single versus multiple routes)

Institutional Environment - the set of values and norms in an

environment that govern the behaviour of all firms in the same or similar
industry (Deregulation of airlines industry)

Organizational Isomorphism the similarity among a group of

organizations in the same industry (mimetic pricing behaviour, coercive
no. of hours pilots could fly, Shift to CRS etc.)

Organizational Inertia internal forces inside an organization that

make it resistant to change (cross utilization practice)

Decision Making Control Systems - MIS, DSS, ERP etc. (booking

system, tracking CASM, Yield etc.)

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 Major Perspectives of the Balanced Scorecard

2010 South-Western/ Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in
whole or in part.
Was PE a success or failure? Was Burr a success or
failure? (Organization vs Leader)

Are individual emotions / ideology / philosophy good

enough to sustain business at different stages of OLC?

How effective were the Boundary Spanners in terms of

interactive (feedforward) and diagnostic (feedback)
control system at PE?

Organizational Schizophrenia ??

Key Lesson from this case??

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 Organization Design and Organizational
Environment are complementary to each other
to support Organizational Growth

Inside out Outside in

(Design) (Environment)

Growth

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