There are numerous external forces that affect the airline industry. As a result, the industry is compelled to continuously change its ways of doing things. The industries is not only vulnerable to bankruptcy, terrorism, amalgamation and acquisition but is also adversely affected by political instability in the various countries where it extends it services. Economic conditions of the society also affect the airline industry. There are numerous challenges that affect airline industry ranging from financial, human resource and information problems.
Human resource Issues in airline industry
Due to constant change in demand for services offered by the airline industry, the industry is faced with a shortage of human resources. Human resource managers face problems in recruiting enough and competent staffs to cater for customer needs. Before embarking on recruiting staffs in the industry, it is imperative for human resource managers to have enough information regarding customers’ needs. This will ensure that the recruited employees effectively address these problems. There are numerous departments found within the airline industry. Often, all these departments require extra human resource. Human resource managers will only be able to supply these departments with the necessary staffs if they are conversant with services provided by these departments and number of staff required per department (Milliman, Ferguson, Tricket & Condemi 2003, p. 43). This calls for establishment of a good line of communication between these departments and human resource department. In most cases, there is poor communication between human resource department and other departments within airline industry. Human resource managers fail to get enough information regarding the number of staffs required and the role played by these staffs. Consequently, some departments fail to get enough staffs while others get staffs that are not competent.
This leads to the airline industries having to conduct several employee recruitment exercises for the same department. It costs the company a lot of money which could have been saved if there was proper communication among the departments. In case where incompetent staffs are recruited, it leads to airlines organizing for employee training. There are numerous contingencies that occur within airline industry. These include employee strike, terrorist attack or crash. In such instances, operations in the industry are brought to a halt costing the industry dearly. This calls for human resource managers to come up with a strategy to cater for these problems. In case of pilot strike, it becomes a problem for the industry to get other pilots to replace those gone on strike. Recruiting or training new pilots is very expensive. In case people responsible of ground services go on rampage, it becomes hard for operations within the industry to continue. Competition within airline industry calls for airline companies to offer competitive packages for their employees. This helps them in ensuring that they have retained and recruited competent staffs. Companies that are incapable of doing this regularly lose their competent employees to other competitors. It becomes hard for such companies to maintain competent staffs thus failing to attain customer satisfaction (Milliman, Ferguson, Tricket & Condemi 2003, pp. 51-57).
Effective performance within airline industry depends on reliable communication between different departments as well as coordination between various hierarchies within the industry. Old hierarchical method of management within airline industry contributes to poor performance among employees. It calls for development of a system of governance that eliminates the various hierarchies within the organization. The system would ensure that employees are effectively monitored. Top managers in hierarchies normally carry out their responsibilities through issuing instructions on what to be done to people below the hierarchy. They then monitor the activities of their subjects. This leads to employees failing to make the initiative of carrying out activities within the industry (Milliman, Ferguson, Tricket & Condemi 2003, p. 126). Despite employees identifying areas that may require changes as they conduct their daily activities, they do not take steps to make the changes until they receive directions from the top management. Consequently, it results in most employees underperforming. Failure to implement employee empowerment within the industry leads to poor performance among the employees.
Employee empowerment leads to improvement in their performance. Employees; being the ones involved with daily operations within the company are able to identify areas that constraint growth within the company. Empowerment leads to such employees taking the initiative of making changes to these areas thus attaining organization growth. As employees feel to be part and parcel of the company, their commitment to the company improves leading to consumer satisfaction. The company avoids cases of having to regularly recruit and train new employees as they lose those experienced due to poor working conditions. As airline industry offers it services internationally, it has the advantage of getting staffs with varied experience. To be able to exploit this opportunity, human resource managers within the industry ought to have clear knowledge on how to organize the diverse employees with different talents. Diverse workforce in an industry leads to introduction of new ideas and innovations. This helps in organizations being able to respond to various problems that rock it with minimum difficulties (Laszlo 1999, p. 1). One of the problems that affect airline industry is lack of the ability by its human resource managers to effectively work with diverse workforce. The managers fail to establish a working environment that encourages diversity. As a result, employees fail to offer their varied expertise to the company while other employees quit the company in bid to look for companies where their diversity is appreciated.
To manage and mobilize the diverse workforce found in airline industry, it calls for human resource managers to undergo cultural oriented human resource management training. Local professionals within a country feel threatened when a company employee international employees with diverse abilities. They fear of their job security perceiving these international employees are aiming at taking their jobs. This leads to local professionals failing to deliver as expected. Their commitment to the company goes down, eventually resulting in customer dissatisfaction. A tag of war ensues between local and international employees which may eventually hamper development in the company. To cater for this, human resource managers need to have adequate experience to convince local professionals of the benefits of encouraging diversity within the company. Acknowledging presence of diversity within the organization can not lead to improvement in its performance. Human resource managers need to strategically organize the human resource in manner that it will be able to attain organization goals.
Airline industry regularly experience mergers and acquisition. For mergers or acquisition to work well within the industry, stake holders need to put adequate considerations on human resource (Laszlo 1999, p. 3). Failure to do this is one of the factors that lead to failures of numerous mergers and acquisition within the industry. It requires the organization to come up with a safety and customer oriented culture by establishing a working environment that takes into consideration employee welfare. This guarantees that employees are able to respond to changing customer needs. Before embarking on acquisition or merger, stakeholders in airline industry need to ensure that the system of operations that will be used will encourage employee empowerment. This will make them more committed to new organization’s work. Most mergers curtail powers of employees participating in various activities within the organization. In cases where employees used to participate in decision making in previous organization, the new organization need to ensure that it has retained employee participatory culture that existed before.
Financial Issues facing airline Industry
Airlines face significant financial constraints in their day to day operations. This leads to emergence of uncertainty in cash flow trend in the industry. Characteristics of the industry such as its cyclic demands, high capital investment, strong competition and high cost of labor greatly affect the industry financially. As the industry employ staffs who can work in any country that the company extends its services, the company incur expenses when sending its employees to international assignments. It requires the organization to cater for all expenses incurred by the employee being relocated. A part from offering the employee a competitive salary to lure him or her to take the international assignment, the company is also required to cater for expenses such as relocation allowance, air ticket for the employee, company car, home leave and schooling expenses. According to an airline industry in United States, its total cost in catering for relocation expenses of its one hundred and fifty human resources assigned to international duties amounts to ninety nine thousand dollars per family (Algoe 2010, para. 1).
Increased cost of catering for experts assigned to international duties within airline industry coupled with hiked competition in the industry exerts pressure on financial status of most companies in the industry. This compels companies to look for mechanisms to cut on the number of its employees working abroad. Despite this, for airline companies to offer their services internationally, they have to be represented by experts in all countries they offer their services. To balance the cots of hiring experts to represent the company abroad and protection of investments made by the company in these countries, it requires human resource managers to come up with the most viable option for the company. Airline companies lack mechanisms to determine contribution made by their expatriates abroad in realizing organization profit (Algoe 2010, para. 3). They continue offering support to their expatriates who in return do not help in improving organization performance in the countries they are allocated.
Due to high competition in the industry, it requires every company in the industry to adapt to the latest technology in the industry. This does not go without the company having to invest heavily. It calls for the company not only to install the latest infrastructure to support its operations but to also recruit or train its employees on how to use the infrastructure. Airline industry is one of the industries with very sensitive services. Failure of the industry to employee competent staffs may lead to loss not only to the company but also to the country. To train staffs within airline industry, it requires the company to set aside huge amount of money. As a result, operations within airline industry are hampered by the huge amount of money required by the company to install and train staffs to use the supportive infrastructure. Apart from cost associated with installing and training staffs in airline industry, employees’ salary is another problem that rocks the sector. The amount of salary paid to most of the staffs in the industry is very high. This makes it hard for airline industries to expand. As airline companies offer international services, they are affected by numerous international rules that they have to meet before being allowed to offer their services in these countries.
Political unrest in oil producing countries leads to financial status of most airline companies being shaken (Laszlo 1999, p. 5). Despite these companies struggling to make their status stable, they eventually end up experiencing some financial problems. Some companies ends up cutting on the number of flights made per day which adversely affect profit margin of the company. There has always been a change in oil prices across the globe. This does not translate to increased charges in flight. Competition in the industry does not allow airline companies to increase their flight charges in case of increase in oil prices. Companies that attempt to hike their prices end up loosing customers. To maintain their operations, most airline companies end up looking for debtors to finance them. Such companies enter into a lot of debt with different institutions as they are not able to make profit to repay their debts. Case of airline companies being declared bankrupt is a common phenomenon. Everyday an airline company is acquired while others tries to merge in bid to overcome their financial hardships.
Apart from increase in oil prices, terrorist attack is another issue to that has resulted to financial constraints in airline industry. Due to fear of terrorist attacks, most people have cut down on the number of flights they used to take in the past. This significantly has affected airline industry. At times, operations within airline industry are brought to a halt in case of suspicion of an attempted terrorist attack. During this period, companies pay staffs that are not productive at such instances. Case of terrorist attack within airline sector has led to the industry having to invest heavily on security. Every person using airline services needs to be assured of his or hers security in using the service. Failure to have proper security measures leads to customers declining to use company’s services. As a result, airline companies have resulted in installation of the latest technology to ensure the security of those travelling through their companies. The technologies do not only cost the companies a lot of money but also require experienced personnel to operate them.
Insurance costs also have been increased in airline industry. Vulnerability of the industry to terrorist attacks hassled to insurance companies charging airline company high premiums for them to be covered. It is hard to determine when the company will be attacked. This implies in case the company is attacked, insurance companies will have to compensate for the damage incurred. As insurance companies try to void incurring loses due to terrorist attacks in airline sector, they have decided to charge the industry highly for them to be insured.
Information Issues in airline industry
Airline industry faces numerous challenges with respect to information collection, storage and transmission among its different branches operating internationally. It becomes hard for airline companies to comply with regulations to do with information storage. One of the challenges affecting airline industries is the requirement for them to store information for a long time. According to government regulations, every airline company is supposed to keep information about their planes for a hundred years. This is to make it possible to ensure safety of the plane and facilitate in its maintenance. As every plane has different components designed and maintained by different manufactures, it becomes hard for one to maintain the plane without proper knowledge of how the different components are manufactured. Failure to have proper information about the plane leads to its obsolescence in case of breakdown. Airline companies also need to maintain their information in a way that it is not distorted when a company upgrade or install new technology (Dornheim 1999, p. 40).
As most of airline companies operate in different regions, they require having a good infrastructure that ensures that they are able to monitor operations within the different hubs. Success of such companies lies on their ability to communicate and cooperate through information sending and receiving. Presence of many branches among airline companies implies that the company has to meet the challenges of managing big volume of information. The company is also expected to sort information and transmit to the relevant persons within the different branches for effective operations. The need to provide the right information to the right person and at the right time has been a major problem in the industry. Companies lack proper technology to help them organize data properly. In most cases, information is relied when late with cases of information not reaching the right person being reported. Despite airline sector using information technology in managing its information, little effort has been made to make use of database and collaboration technologies (Dornheim 1999. 42). This has led to the industry not be able to integrate information from assorted sources.
Brief history of JetBlue Airline
A JetBlue airway is a private low-cost airline company run by JetBlue Airways Corporation. The company was founded in 1998 by David Neeleman. Initially, the company was referred as NewAir. Following Neeleman’s experience after working with Southwest Airlines, he decided to come up with an airline that offered services to customers at a low cost. To make the airline popular, he decided to include some facilities that were not found in other airlines. Some of this included satellite radios, televisions and in-flight entertainment. When the company was being established, Neeleman and his group had the intention of referring to the company as Taxi. However, the negative attribute people have against New York taxis led to them dropping the idea. One of the investors JP Morgan also threatened to withdraw his share of investment h if the term Taxi was to be used as the name for the airline company (Eaton 2001, p. 21).
Following the September eleven attack in United States, airline industry was heavily affected. Many people stopped their journey in fear of being attacked. This led to airline companies paying staffs who were not productive at that time. It took long before the industry recovered from the effects of the attack. However, JetBlue airline did not feel the impact of the attack. Operations within the airline company were as usual. The company was reported to make profit despite the sharp downturn in travel. Currently, the airline is one of the most popular in United States with approximately two billion dollars in market capitalization. Its effectiveness in offering airline services led to it being declared the number one United States domestic airline. In 2009, the airline was ranked as the first among airline companies that offer low cost carrier services.
Challenges facing JetBlue airline
Despite the company making great progress in the industry, there are numerous challenges that has hampered it rapid expansion to different countries. These challenges can be classified as financial challenges, human resource challenges and information challenges.
Financial Challenges affecting JetBlue Airline Company
One of the reasons that have led to the company experiencing financial constraints is fluctuation in oil prices. As oil companies continue hiking oil prices, the company incurs extra cost in its operations. This is because it is hard for the company to increase its flight charges. An attempt to increase its charges would lead to the company loosing its customers to competitors. Fuel prices have been accompanied by competition in airline industry. Every airline company is trying to use all means possible to attract more customers and increase its market share. All these require the company to invest a lot of money. In its bid to overcome competition, JetBlue airline has opted to include some services to its customers such as televisions, in-flight entertainment and satellite services. These has greatly added to operations cost within the company. Apart from incorporating more services in the company, airline companies have resulted in charging low fair to attract customers. JetBlue has not been an exception. The company has embarked on charging less fair to its customers. This has not significantly increased the number of flights made by customers. As a result, the company has ended up making little profit. For instance, in 2005, the company’s profit decreased from $8.1 million to $2.7 million. This was attributed to increase in oil prices in the industry.
Competition may prove healthy to customers but it leads to competing companies facing financial constraints. In airline industry, competition leads to companies having to offer their services at low prices as well as having to look for ways to improve their services through using the latest technology. Competition in airline industry has led to JetBlue Airline Company having to always be at par with the changing technology. The company keeps on purchasing the latest aircrafts to attract more customers (Mark 2008, para, 4). This incurs the company a lot of money. Purchase of new aircrafts implies that the company has to either train its employees on how to operate the plane or recruit new employees with knowledge on how to operate it. To be able to recruit new employees, the company is required to offer a good package for them to be willing to work in the company. Bearing in mind the fact that JetBlue offers low cost services to its customers, the company faces high employee turnover. In case the company opts to train its employees, the amount of money required for one to undergo training in piloting becomes costly for the company. As the employee is not productive at the time of going through the training, the company does not only incur cost in catering for his or her training but it also has to pay the employee at the end of the month.
There has been a problem in getting qualified pilots and mechanics in airline industry. For pilots and mechanics available, recruiting them to the company has been a problem due to conditions they present to company owners. Due to their demand, they have required airline companies to offer them huge salaries as well as different allowances. This has led to JetBlue Company incurring huge expense in employing pilots and mechanics. Lack of qualified employees to repair planes and cost of repairing the plane has led to some flights being cancelled in case of mechanical breakdown of the plane in the company. Planes take days before they are repaired. This cost the company as it does not get any proceeds from such planes during this period. To cater for this shortage, airline companies; JetBlue included has resulted in advertising and monitoring trends of such employees. The fact that pilots and mechanics are offered competitive salary packages in foreign countries has contributed to United States having limited supply of pilots and mechanics as most of them work with foreign airline companies. JetBlue has decided to incur an extra cost in ensuring that it does not run short of these vital employees through investing in new pilots. The company monitors new pilots as they continue with their training and offer them services such as free flying experience so as to attract them to work for the company (Springer 2009, para. 6).
Operations in airline industry are greatly affected by weather conditions. Occurrence of storm may lead to flights being canceled or delayed for some time. This has been one of the factors that have led to JetBlue incurring extra cost in its operations. The company established a consumer bill of rights which directs that the company has to compensate its customers for canceled or delayed trips. Compensation is based on the number of hours the trip is delayed. There are cases where trips in the company are delayed for even one week due to poor weather conditions. This has cost the company a lot of money. For instance, in year 2007, the company spent between $20 million and $30 million in compensating customer who had their flight delayed for almost a week (Springer 2009, para. 7).
Human resource Challenges facing the company
Apart from financial problems, JetBlue has experienced a lot of problems with respect to human resource. For many years the company has run short of pilots and mechanics. High demand in piloting services and cost of undergoing piloting training has resulted to number of pilots in the country being low. Most pilots in the country opt to work with foreign airline services where they are offered good salary. This has resulted in JetBlue Company having shortage in number of pilots. Lack of enough pilots in the company has hampered its desire to open new terminals in countries where they have not yet extended their services (Mark 2008, para. 2). This has led to the company having to liaise with other companies in development of pilots and mechanics to meet their needs.
Competition in airline industry leads to some companies facing human resource problems. As companies struggle to attract more qualified employees to work for them, they offer competitive packages. One of the problems that JetBlue has faced with respect to human resource is retaining its qualified personnel. The company is blamed for offering non-competitive package to its employees. This has resulted to most employees declining to work with the company. It is one of the factors that have led to the company facing employee shortage. As much as the company expects its employees to be productive, employees also expect the company to pay them well and provide good working conditions. Failure to offer good salary has led to high employee turnover within the company. Employees leave the company after working for a short period and look for companies where they are paid well. It has led to JetBlue having to conduct regular employee training and recruitment to cater for positions left vacant by those who leave the company.
It has been hard for human resource managers to predict development trend in airline. The industry has increasing continued developing new types of aircrafts. Operational requirements within the industry have also changed with time (Mark 2008, para. 4 Mark, R., 2008). Different countries have changed their terms and conditions for airlines to be allowed to provide their services in the country. As the company continues to expand, it has faced a problem with respect to employee experience. JetBlue has continued purchasing new aircrafts as well as introducing new technology within its operations to improve customers’ satisfaction thus overcoming competition. This has slowed down operations within the company due to its employees not being conversant with the technology or equipments introduced in the company. For instance, introduction of Embraer 190 saw the company struggle as its pilots were not in a position to effectively operate the plane. It is considered to be one of the factors that led to reduction in profit margin of the company during 2005. The company has always been in dire need of employee training and recruitment to cater for the ever changing needs.
When JetBlue Company was established, everybody in the company had the confidence that the company would develop rapidly. Every employee was pleased with working environment in the company. However, this feeling was not to continue for ever. As the company continued expanding, it became hard for the management team to coordinate all activities within the company. In 2002, most of the employees complained of poor leadership in the organization. They also claimed that there was poor teamwork relationship. Success of any organization depends on good management and employee satisfaction. In case employees find to be shortchanged in a company they may drop their commitment to the company leading to poor performance. This has been one of the challenges that JetBlue has experienced. In the past, Promotion in the company was not based on the level of experience among the employees (Mark 2008, para. 5-7). This coupled with the fact that the company offers less salary compared to other companies has resulted to employees not being committed to the company. Their productivity has not been improving as per initial expectations within the company.
Information challenges affecting JetBlue Airline Company
All airline companies offer their services in different countries. To effectively monitor operations within the different branches, it requires the company to have reliable mechanisms of collecting, storing and transmitting information across the branches. This calls for organizations to employ effective information technology infrastructures. Failure in information reliance within airline industry may result to flights being canceled or delayed. JetBlue Company has experienced numerous problems with its system of information collection and transmission. Customers have complained of their flights being delayed without substantial reasons. One customer went to enquire the reasons as to why his flight had been delayed only to be told that the plane he was to use was had been delayed in another terminal (Daugherty 2007, para. 2). It has been hard for operators to predict the time a plane will reach a specific terminal as well as locating the place where specific plane is at specific time.
At times customers has been unable to make calls to customer care center of the company. The size of broad band used by the company is often overwhelmed by number of callers making it hard for others to communicate with the company. Information storage in the company’s website has had some problems. This has led to some more people booking the same plane beyond its capacity while other planes leave with fewer passengers. Some passengers book their flight online only to be told later that their flights do not exist in the company’s system. Poor communication on mode of operations within the company has also led to people missing their flights. It is a culture in the company to take its flights earlier than they are scheduled so long as every passenger has checked in. Some passengers are not aware of this. As some passengers check in online before going to the airport, they have always missed their flights. The company needs to ensure that it has effectively communicated its operation modes to customers to avoid inconveniencies (Daugherty 2007, para. 4).
Recommendations on how to Deal with problems facing JetBlue airline
There are numerous ways that JetBlue airline can employ in solving the problems that hamper its development. As the company continues growing, its financial hardships will only be reduced by overcoming competition. This can be through identifying some of the potential routes that have not been exploited by their competitors. Using such routes would imply that the company will not have to charge low fares for their flights. Establishing themselves in new routes in advance would help them in improving their brand name. By the time their competitors embarks on exploiting these routes, the company will have gained a strong competitive advantage making it possible to reduce operation costs in these routes (Seal & Kleiner 1999, pp. 123-125).
Employee performance within the company is affected due to poor package offered to employees by the company. Success of any business does not rely only on the amount of profit made by the company. The company needs to ensure that it has satisfied its employees to improve their productivity. This calls for JetBlue to look on the available methods of employee satisfaction to satisfy its employees. In so doing, the company will be able to cut down on employee turnover and at the same time improve its profit. Apart from increasing the salary given to its employees, JetBlue can come up with a method of acknowledging the role played by its employees such as giving them an opportunity to grow (Eaton 2001, p. 45). This would make employees remain in the company. Other methods of employee motivation that the company can use include profit sharing and stock option. JetBlue needs to encourage its human resource department regularly monitor changes in airline industry. This would help the company in being prepared for the changes in advance by conducting employee training or recruitment in advance.
Information about company operations and customer needs is important when it comes to developing company strategies. It is through this information that the company identifies areas where it is performing poorly thus making the necessary changes. Great need of information in JetBlue calls for it to come up with measures to ensure that information received is transmitted or stored efficiently. To cater for problems where customers are unable to make calls with the company, JetBlue need to increase its bandwidth. The company can also establish numerous call centers to cater for customers. Regular upgrading of its information system would ensure that it does not crash in moments when it is most required (Eaton 2001, pp. 123).
Apart from ensuring reliability if information collection, storage and transmission, information technology can help in reducing financial and human resource problems that affects the company. The technology can be used in collecting the relevant materials for employee training. Some of the activities performed by employees can be done by one person using the technology. This can reduce the number of employees required by the company thus cutting down on employee turnover. Use of information technology would reduce employee workloads thus ensuring their satisfaction.
Airline industry is growing at very high rate. Everyday there is a new airline company introduced in the market as well as a new model of aircraft. Competition in the industry has continuously increased. This has led to merge and acquisition of companies as they fail to meet the financial requirements. Competition has led to some companies not being able to maintain their human resource (Wederspahn 1992, pp. 56-79). Some airline companies have suffered from high employee turnover as employees quit and go to work with companies where they are paid well. To overcome the problems experienced in airline industry, companies can use the methods recommended for JetBlue. This is because all airline companies offer similar services and face the same problems.
Algoe, S., 2010. How a rise in fuel prices affect the airline industry. Web.
Daugherty, J., 2007. JetBlue IT Woes. Web.
Dornheim, M. A., 1999. Faulty Thruster Table Led to Mars Mishap. Aviation Week & Space Technlogy, pp. 40-43.
Eaton, J., 2001, Globalization and Human Resource in the Airline Industry, 2nd ed. Aldershotn UK: Ashgate Publishing Ltd.
Laszlo, G. P., 1999. Southwest Airlines – Living Total Quality in a Service Organization. Managing Service Quality, Vol. 9, No. 2, pp. 1–5.
Mark, R., 2008. JetBlue Takes the Pilot Shortage Problem into Their Own Hands. Web.
Milliman, J., Ferguson, J., Tricket, D. & Condemi, B. 2003. Spirit and Community at Southwest Airlines: An Investigation of a Spiritual Values-Based Model. Journal of Organization Change Management, Vol. 12, No. 3, pp. 221–233.
Seal, J. & Kleiner, B. H., 1999. Managing Human Behavior in the Airline Industry. Management Research News, Vol. 22, No. 2/3, pp. 123-135.
Springer, J., 2009. JetBlue paying millions to stranded flyers. Web.
Wederspahn, G.M., 1992. Costing Failures in Expatriate Human Resources. Management Human Resource Planning, Vol. 15, pp. 56-79.