Running head: PROBLEM SOLUTION: CLASSIC AIRLINES
Problem Solution: Classic Airlines
University of Phoenix
Problem Solution: Classic Airlines
Classic Airlines is the world's fifth largest airline with a fleet of more 375 jets and serving 240 cities with more than 2300 flights daily. Classic Airlines has grown to an organization of 32,000 employees since starting operations. Last year the company recorded $10 million profit on $8.7 billion in sales. Although the airline is profitable, its stock prices have decreased by 10% in the past year and employee morale has been at its lowest due to increase scrutiny on the airline industry from all sectors of the economy. (Classic Airlines, 2007)
Classic Airline's customer loyalty is on the decline as evidenced by the 19% decrease in the number of Classic rewards members and 21% decrease in flights per remaining member as of January of 2005. The company is also facing a restrictive cost restructure due to overly optimistic expansion plans based on anticipated rebound of post 09/11 travel. Classic's Board of Directors recently mandated a 15% across-the-board cost reduction over the next 18 months (Classic Airlines, 2007).
Within the constraints of the mandate, Classic also needs to improve its frequent flier program with methods that will demonstrate a measurable return on any investment while still meeting the cost reduction goal. Classic is the only carrier which does not have a partnership alliance agreements, under the assumption that no one else can understand or meet the needs of its customers better than itself. In addition, the carrier implemented a pricing strategy that put it in direct competition with younger airlines, which do not have the same cost structure as Classic, re ...