MANAGEMENT PRACTICE - PEOPLE’S AIR

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 Executive summary

Generally airline industry covers huge variation of businesses called airlines that provides air
transport services for the normal customers as well as business partners. The report based on
People’s Air which is represented the airline industry.

The current report highlights that the strategic practices of People’s Air with the changes of
its owners and overtaking its management by a new crew. The strategic decisions that have
been taken within last three years are going to be critically analyzed within this practice
report. Altogether there are 12 quarters going to be analyzed in terms of business, marketing
and overall corporate strategies.

To bridge the existing and emerging competitiveness within the airline industry new
management has been taken different decisions and have used different strategies by using
different tools. The new crew has got clear understand on the current situation and the
position of the business. Especially different tools like SWOT and PESTEL have been used
to get an idea on the environment that business is running. Competitive position has been
analyzed by using Porters forces while Ansoff Model and Bowman’s clock have been using
to track the market position of the People’s Air.

Further this reports conclude that the issues that were faced by People’s Air over the three
years of time period and how successively bridge those issue in order to get in success within
the airline market industry. Trends, challenges, driving factors have been elaborated in this
report with respect to People’s Airline.

People’s Airline is with four small departments and all the recommended decisions for all the
four departments of Marketing, Human Resource Management, Finance and operations have
been presented clearly in current report. At the last but not the least, suggestions for the
further improvement of People’s Airline.

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Contents

Executive summary....................................................................................................................2

List of Figures............................................................................................................................3

01. Introduction.....................................................................................................................4

02. Overview of People’s Air................................................................................................6

2.1 Vision, Mission, Key Values and Objectives...................................................................6

2.1.1 Our mission................................................................................................................7

2.1.2 Our vision..................................................................................................................7

2.1.3 Core values................................................................................................................7

2.1.4 Key objectives............................................................................................................7

03. Strategic Review.............................................................................................................7

3.1 Corporate Level Strategy..................................................................................................8

3.2 Business Strategy............................................................................................................10

3.3 Functional Strategy.........................................................................................................11

3.3.1 Marketing strategy...................................................................................................11

3.3.2 Segmentation, targeting and positioning.................................................................11

3.3.3 Marketing Mix.........................................................................................................12

3.4 Operational strategy........................................................................................................13

3.5 Human Resource Management Strategy........................................................................14

04. Conclusion.....................................................................................................................14

05. Recommendations.........................................................................................................18

References................................................................................................................................19

Appendices...............................................................................................................................20

Appendix A - SWOT Analysis.............................................................................................20

Appendix B - PESTEL Analysis..........................................................................................21

Appendix C - Porters Five Forces........................................................................................22

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List of Figures

Figure 1.1Air Line passenger Declines........................................................................05

Figure 2.1 Core values.................................................................................................07
Figure 3.1 Strategic Review.........................................................................................08
Figure 3.2 The levels of Strategy.................................................................................08
Figure 3.3 Ansoff Matrix.............................................................................................09
Figure 3.4 Bowman’s Clock........................................................................................10

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 01.Introduction

Generally airline industry can be identified as a really competitive market industry as within
last two decades it has been expanded and yet to be expanded further. At the very first most
of the domestic and global airlines are partly government owned. But currently the airline
industry has been largely privatized. The airline industry normally can be divided into four
basic categories incusing international, national, regional and cargo in terms of its operations.

With the COVID 19 pandemic all the businesses industries across the world has been faced to
a crisis. Airlie industry also faced to a similar fate with the declining the number of
passengers largely. In 2020, revenue loss has been reported as USD 252 billion (home.kpmg,
2021). It is really important to have strong strategic action plan in terms of serving and
getting success within the market in this much critical situation. According to International
Civil Aviation Organization (ICAO) (2021), it suffers worst year in the history. Figure 1.1
shows how COVID 19 has impacted on airline industry.

Figure 1.1 Airline passenger declines

Source: (Richter, 2021)

People’s Air is a small regional airline. Anyhow the long sustainability of People’s Air is in a
critical situation with the dramatically changing competitive environment. To entrust its
survival, essentially there should be taken some critical decisions also need to efficiently
control its usual operations. It’s indicated that currently providing airline service is not
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bridging the demand on these routes and there is an opportunity if they provide better
service and comfortable flights with favorable price rates are offering.

In terms of its success, recommendations for the each sector have been critically evaluated in
this report. All the decisions that are taken by new management crew is much more combines
with new strategies and all the decisions have been made by considering the situation and the
environmental factors with respect to People’s Air. This report is consisted with possible
recommendations to make the People’s Air turn into more successful one.

02.Overview of People’s Air

People’s Air is a smaller size airline. Under the president, there are altogether four sub
department including operations, marketing, human resource management and finance. All
the functions of setting fares, compensation, promotion, flight scheduling, training, passenger
services, maintenance and asset management are handled by these four departments.
Currently it operates with 81 employees and as an average 27 of crew for an aircraft. The
number of passengers have been increased in first year from 10500 to 37000 of passengers
within the last quarter. Since it’s a small scale airline, it has got small profits and small losses
over the time. Today People’s Air owns three TP-300 aircraft and turboprops which can carry
about 30 passengers. Averagely the load factor has been noted as 60% in last quarter. With
these all only the management has been moved for a spate hands in order to acquire a big
market share as well as make the company profitable.

2.1 Vision, Mission, Key Values and Objectives

There is a big relationship among each of these of strategies, vision, mission, objectives and
action plans. Normally they are exposed for a business organization planned to improve the
rural economy depend on developing rural businesses. Remember, the vision is what you
want to accomplish. Mission is a general statement of how you will achieve your vision.
Strategies are a series of ways of using the mission to achieve the vision. Goals are
statements of what needs to be accomplished to implement the strategy. Objectives are
specific actions and timelines for achieving the goal. Action plans are specific actions that
need to be taken for reaching the milestones within the timeline of the objectives ( Hofstrand,
2021).

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All the things should be strategically fit. Especially it should be match with the
resources and its environment. It can be done by assessing the capabilities of the
organization and opportunities with the environment. Under this fit, strategic intent would
seem to be more realistic. This fit strengthen by achieving a broad vision through mission and
specific objectives (sites.google.com, 2021).

With the incredibly serious business environment we have to hardly focus on pulling
ourselves through the immediate crisis while reading the People’s Air for a better economic
period. Based on the factors long term vision, mission, core values and key objectives
mapped out as below for People’s Air to make it premium airline.

2.1.1 Our mission

To deliver world class excellent air passenger experience in our flights with full
entertainment.

2.1.2 Our vision

To be the most environmental and customer friendly luxury airline service in the region while
offering safe and enjoyable journey.

2.1.3 Core values

Figure 2.1 Core values

2.1.4 Key objectives

 To increase the sales revenue by 20% within next two years

 To bridge the quality ratings of 90% over the years

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  To get the passenger load factor to 70% in next year
 To reduce the rate of employee turnover
 To increase the profitability by 15% within next three years

03.Strategic Review

Strategic review support to enhance the performance of particular department or taking

advantage of a new market industry opportunity. Most of the companies conduct strategic
reviews on an annual basis and it concern as their strategic planning process. Ownership
changes or appointment of a new director board essentially start the need for conducting a
strategic review for the particular business as it supports to understand the key areas of
opportunity as well as the challenges within the existing business portfolio ( Hone, 2020).
Below figure explains it further.

Figure 3.1 Strategic Review

Source: (Goldsbrough, 2021)

People’s Air’s strategies are going to be discussed under three main levels as in figure 3.2.

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Figure 3.2 Level of strategy

Source: (Wright, 2019)

3.1 Corporate Level Strategy

Corporate level strategy supports any organization to outline their goal as an instrument. In
their essentially y should breakdown all the steps and decisions with respect to employees.
Frankly the selection of corporate strategy can be an indicator for the success of the
organization in terms of finance and it largely support to make the organizations profitable,
specially the small businesses (Sitnikov, 2013).

Once developed the corporate strategy for People’s Air, SWOT analysis has been used to get
an idea on its internal environment while using PESTEL and Porter’s 5 Forces for getting
idea on external environment.

After going through all the points attached in Appendixes, People’s Air has taken some
specific decisions on its corporate side. Especially after the critical review with the Ansoff
matrix, they are more tend to be go for the market development as well as market penetration.
Quarterly different decisions had made by People’s Air to make the company profitable.

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Figure 3.3 Ansoff Matrix

Source: (mindtools.com, 2020)

According to the sales report, that we purchased, Region 3 had the lowest amount of seats
sold. Therefore in 6th quarter, we decided to move to Region 6 as it has 690 seats. And the
quarter 8th a flight was assigned to a new rout in current region 4. This is somewhat related
for the market penetration in Ansoff matrix. Here what they have focused is sales existing
product for an existing market. Analysis shows that hat region works and the market industry
is coming up with really few surprises for the company then.

9th quarter we decided to enter a new region; region 5 and three routes in it, where the
competition is low and the advantage is high (The routes are A, D, E2). People’s Air is
planning to develop their market through that. When it get all the things together, it seems
like the business is in matured stage as shown in below. Hence essentially it need to follow
some strategies with respect to differentiating in terms of product, price, market or their
service.

3.2 Business Strategy

Set of actions and the decisions which a business take to achieve a specific goal we concern
as business strategy, these are focusing both the short term and the long term decisions.
Bowman’s Clock has been used to determine the business strategy in People’s Air.

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Figure 3.4 Bowman’s Clock

Source: (getlucidity.com, 2021)

At the first, People’s Air has used hybrid strategy with the mid-range fares and high-end
inflight facilities. But it has turn into differentiating strategy from the 7 th quarter. In 9th
quarter, we decided to lease RJ350E Luxury air craft with luxury lay out to target our luxury
passengers. Also we moved to new region 5 to expand our market as considering the load
factor. We moved to 100% fuel contract from 50/50 because next contract price is less than
the last spot price. In 10th quarter, we selected air ambulance service and selected health and
family care issues for social responsibility area. In the same quarter we leased RJ 350E
luxury lay out jet to enter new region for market expansion. Also we decided to enter to new
region 5 as considering the load factor and competition. When considering the new special
decision air ambulance services, we decided to increase our social reasonability budget and
launch projects to health and family care issues.
3.3 Functional Strategy

3.3.1 Marketing strategy

New management has focuses their higher attention on marketing strategies as they need to
increase the sales as well as position the brand in the airline industry. They have concern
when should increase and when should reduce the advertising budget. Due to coming winter
season we reduced cargo marketing budget. Also moved to local community causes in CSR.
In 9th quarter, a flight was assigned to a new rout in current region 4 as the expansion of the
company and according to that, the promotion expenses were increased with one month sale
promotion. Due to the end of winter season, flights were assigned for some additional routes
to maintain the efficiency. In 10th quarter, due to the changes in flight schedules, the
Marketing efforts has been changed 30%, 50% and 20% in Region 4, Region 5 and Region 6
respectively to increase to attract  more customers. In the 11th quarter, we changed our social
responsibility area in to health and family care issues by increasing social performance
budget from $ 2000. Previously they have not allocated separate budget for this.

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3.3.2 Segmentation, targeting and positioning

At the past, airlines have been segmented by based in the solely on demographics. Customers
of an airline are with different expectations from its services (Bodgam, 2019). But according
to Boone & Kutz (2013), airline industry can be segmented in geography, demography,
psychographic as well as behavioral. As an overall super luxury type customer group has
been selected as People’s Air’s target audience.

Table 3.1 Peoples Air – Market Segmentation

Market type Characteristics

A With light manufacturing and service businesses
Service in between two cities. One is with many service businesses, while
B
other, a military base
C Bigger regional hub that has many heavy manufacturing firms.
D Small but growing technology cluster
E Medium city that has a new and growing industrial park.
F Foreign market industry
R Main resorts and recreation areas

3.3.3 Marketing Mix

Below mentioned actions, tactics have been used by People’s Air to promote their brand
within the market. By going beyond to the 4 Ps it use 7 Ps to grab the market opportunity and
successive within the market place.

Table 3.2 Marketing Mix – People’s Air

Marketing Mix Description

Product Air transportation services, Air ambulance services, Cabin Food
services
Price more complex pricing systems, charged 35 cents per seat-mile-
flown
Place Selling the tickets through third parties such as travel agents,
travel agencies as well as corporate travelling accounts

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 Promotion Promotions such as packaged vacations, incentive plans for
travel agents who sell large numbers of tickets, frequent flyer
programs, familiarization (FAM) trips for travel agents, etc,
allocate the budgetary amount for CSR, Due to the changes in
flight schedules, the Marketing efforts has been changed 30%,
50% and 20% in Region 4, Region 5 and Region 6 respectively
to increase to attract  more customers 
People Stockholders: employees, suppliers, creditors, competitors,
government, the local community, in 8th Quarter hired the new
talented employees with a proper training, 9th quarter additional
compensation applies to Pilots and Managers.1% pay above
prevailing wages.
Process Ticket reservation, flight arranging and baggage handling
Physical evidence Ground including baggage, tickets, documentations, booking
agents

3.4 Operational strategy

Operational strategy always focus the long term planning of a particular company’s business
strategies as well as the customer service. Normally operational strategies keep on the touch
with company’s goals and the aspiration of that company, also focus on the actual action
plans that is going to be used to reach for their goals.

To reduce our operating expenses we moved to level 2 from level 3 of cabin food service. We
didn’t change the regions but did some changes in routes according to passenger load factor
in previous quarter. We planned to hire station manager with highly influential contacts as we
want to increase our sales and offer the quality services. As we are planning to the winter
season we did some changes of flights. As an example reduce flights to 13 from 16 regarding
company massages we managed to not exceeding maximum miles of the flights.  

In 9th quarter, flight was assigned to a new rout in current region 4 as the expansion of the
company. In the same quarter we decided to lease RJ350E Luxury air craft with luxury lay
out to target our luxury passengers. To offer the best service for the passengers we selected
option 3 of the food cabin service. We acquired (leased) new aircraft to go for the new region
to increase our seat sale revenue. And also made higher effort for this new region. And in that

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quarter, We decided to not run the full route miles in some regions as, running with less
demand is costly than less running. (Less running saves cost of fuel expenses and
maintenance). In this quarter we leased RJ 350E luxury lay out jet to enter new region for
market expansion. Also we decided to enter to new region in 10th quarter, 5 as considering the
load factor and competition. When considering the new special decision air ambulance
services, we decided to increase our social reasonability budget and launch projects to health
and family care issues. And the same quarter, we selected air ambulance service and selected
health and family care issues for social responsibility area.

3.5 Human Resource Management Strategy

Human resource management strategy focus the managing human capital that are engaged
with the organization to achieve the business goals and targets. People’s Air also has been
taken some steps in order to successive within the market place in terms of their human
resources.

Specially the company's hiring practices is that; "We are much more to concern about the
educational qualifications, the knowledge situational management of the person, quick
learning ability and construction feedback". Apologies for the damaged bag owners. They
can claim their damage cost through insurance. Highly advised to the employee and had him
trained well.  Due to next contract price being higher than the spot price, we selected 50/50 in
fuel contract. In the 9th quarter, additional compensation applies to Pilots and Managers.1%
pay above prevailing wages.

04.Conclusion

Normally strategic management practice is combining with ongoing planning. Analysis,

monitoring and assessment of all relevancies of a particular organization. People’s Air has
taken necessary actions after making proper analysis of the sector and the position.
Accordingly all most all the objectives could be able to success by new management crew. In
order to that below objectives has been addressed by people’s Air through their strategic plan.

 To increase the sales revenue by 20% within next two years

 To bridge the quality ratings of 90% over the years
 To get the passenger load factor to 70% in next year
 To reduce the rate of employee turnover

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  To increase the profitability by 15% within next three years

Some KPIs have been graphically compared in below.

Figure 4.1 Net Profit-Industry 2 analysis

Figure 4.2 - Quality- Industry 2 analysis

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Figure 4.3 - Stock Price – Industry 2 Analysis

Figure 4.4 - Reliability- Industry 2 Analysis

Figure 4.5 - Cumulative Net Profit- Industry 2 analysis

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 05.Recommendations

After going through a critical analysis in terms of corporate, business and functional
strategies, below suggestions are recommending to further development of People’s Air.

- More focus on social responsibility and communicate their actions to the society
- Use the new technological aspect like Robert technology to reduce the cost of laborers
- Continuously following up the every and each process and conduct the meeting
weekly basis to evaluate the decisions and communicate the necessary information
with the all the department
- Meetings should be conducted by integrating all the departments, then only they can
open for the problems arisen and trying sort out the issue in between different
departments and start to compromise and work together.
- Always give the priority to build up a high quality staff. For that they can allocate the
more budget for the necessary trainings for the employees
- Since today people are more familiar with their smart phones, separate mobile app can
be developed and it will support to do the promotional activities and it will increase
the sales of People’s Air.
- Conduct market research to make aware on what need customers exactly and which
type of changes should be done in their service as well as the business at a large

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 - They can go for a more acquisitions by carefully as they can minimize the risk
through that.

References

Hofstrand, D. (2021). extension.iastate.edu. Retrieved from

extension.iastate.edu/agdm/wholefarm/html/c5-09.html

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Hone, A. (2020). Conducting A Strategic Review: An Elite Consultant's Ultimate Guide.
Retrieved from expert360.com:
https://expert360.com/resources/articles/conducting-strategic-review-elite-
consultants-ultimate-guide

Bodgam, A. (2019). Airlines Customer Segmentation in the Hyper-Competition Era. Expert

Journal of Marketing.

getlucidity.com. (2021). Retrieved from

https://getlucidity.com/strategy-resources/introduction-to-bowmans-strategy-clock/

Goldsbrough, M. (2021). Let's Build More Value In Your Business. Retrieved from
goldsbrough.biz: https://www.goldsbrough.biz/strategic-review/

home.kpmg. (2021). home.kpmg. Retrieved from Airlines and Covid 19:

https://home.kpmg/xx/en/home/insights/2020/04/airlines-and-covid-19.html

mindtools.com. (2020). Retrieved from

https://www.mindtools.com/pages/article/newTMC_90.htm

Richter, F. (2021, 02 18). weforum.org. Retrieved from

https://www.weforum.org/agenda/2021/02/covid19-coronavirus-tourism-aviation-
industry-decline/

sites.google.com. (2021). Retrieved from

https://sites.google.com/site/tribhuvansite/sm/sm102

Sitnikov, S. C. (2013). Encyclopedia of Corporate Social Responsibility.

Wright, T. (2019, 08 21). How to Create a Winning Business Level Strategy. Retrieved from
cascade.app: https://www.cascade.app/blog/business-level-strategy

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Appendices

Appendix A - SWOT Analysis

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Appendix B - PESTEL Analysis

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Appendix C - Porters Five Forces

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