Airline Management and Organizational Structure

Introduction

• Every organization strives to achieve goals like profits, community image, or service quality
• Management is achieving organizational goals through planning, staffing, directing, organizing, and controlling
• The major carriers employ as many as 80,000 people
• Airline decision-making has become more complex.
• An organization serves as a base from which management carries out its processes
• A strong organizational structure can be very useful for an airline business

Levels of Management

• Top management is in charge of policy-making
• Middle management is in charge of policy implementation
• Operating management responsible for policy execution by employees

Board of Directors

• Stockholders elect board of directors
• Size ranges from 3-20+ members
• Includes banking, insurance, law, and accounting professionals
• Body decides if the company should diversify or expand
• Has sole responsibility for dividend declarations
• Elects president, treasurer, secretary, and other executive managers

Top Management

• Highest level of management
• Determines objectives and procedures to meet goals set by the board of directors
• Makes recommendations to the board regarding company goals
• Includes president, senior/executive vice presidents

President

• The chief executive officer over proper functioning
• Often a political or business leader
• Primary roles include dealing with the financial community and government segments

Executive Vice-President

• Responsible for the company’s day-to-day operations
• Years of Airline experience - often supervises the senior vice presidents

Senior Vice-President

• Generally reserved for individuals who head a major sector like marketing or flight operations

Middle Management

• Develops operational plans/procedures to implement goals from top management
• Decisions include equipment purchase and selecting advertising method

Operating Management

• This is the lowest Management Level
• Includes managers and supervisors who head sections/units reporting to department heads

Decision Making

• Foremost Management responsibility
• Permeates all management parts
• It takes correct decisions to ensure success of a survival
• Involves choosing actions that will enable companies to fulfill objectives

Steps of Decision Making

• Recognition of the problem
• Problem breakdown and definition
• Attempt to establish/evaluate a comparative solution
• Selection and adoption of the most favorable solution
• Implementation of solution through necessary orders

Airlines and Deregulation

• Deregulation gave managers ability to deploy assets and price services
• Early strategic moves by carriers were ineffective often
• Braniff expanded aggressively and declared bankruptcy in 1982

The new corporate structure

• Low-cost/new-entrant carriers can keep costs down, improve efficiency with streamlined structure
• Good Management is key
• Each team member needs to offer something to the business
• Management team needs at least one experienced person, also known as a "gray hair"

Management Team

• Business background preferred as well as airline background
• Caution for number of pilots in team, as often lack business skills required
• Necessary for management team to be small to be effective
• FAA in the US requires a minimum number of positions on the management team for air carrier certification.
• For FAR 121 certification, mandatory positions are Director of Safety, Director of Operations, Chief Pilot, Director of Maintenance, and Chief Inspector
• For FAR 135 certification, the mandatory positions include: Director of Operations, Chief Pilot, and Director of Maintenance

Organizational Structure Types

• Airlines operate using classic pyramid structure
• Pyramid is divided into administrations each headed by an individual, like marketing, personnel, flight operations etc..

Organizational Structure

• The pressure to cut costs led to middle management being cut
• Reduced costs can improve efficiency
• Delegation to lower levels may occur
• Avoiding duplication of work structures is important
• New start-up carriers have the advantage of tailoring a corporate structure
• Authority delegated with responsibility

Functions of Management

• Main functions: planning, organizing, staffing, controlling and direction
• Key tools: supervisory skills

Planning

• Airlines dependent on top planner’s existence
• Involves forecasting demand for air travel
• Can be large like buying a hotel chain
• Can be small like a report from friday
• Company wide goals include general goals the organization wishes to achieve
• Departmental/Administration goals improve on time performance for a goal
• Individual goals help departments meet their goal

MBO - Management by Objectives

• Tangible goals are given to employees at all levels
• Those emplyees are held accountable
• Company and individual strategies established through discussions of managers and employees
• The employee and manager check their progress after period
• Can implement quantitative feedback (dollar sales)
• Can implement qualitative feedback (customer complaints)

Policy Procedures

• Policy: a course of action employees follow when making decisions
• Procedure: the kind of action required to handle a specific situation
• Rules/Regulations indicate the precise thing to do in a certain situation

Organization

• Involves dividing work for employees + determination of how much authority people have
• Logically grouping activities

Purpose of Organization:

• Establish a line of responsibility designed to provide supervision
• Assign + efficiently schedule work with proper priority
• Provide a means of management to be informed of efficiency
• Establish sequence in job classification so advancement can be judged

Staffing

• Stations people to work in positions provided by the organizational structure
• Defines job requirements/workforce
• Appraising and selecting candidates
• Training job candidates

Directing

• Assign tasks and instruct subordinates
• Getting items done through other people

Controlling

• Measuring + Correct activities to confirm to plans
• Measures performance - correct deviations

Organization Structure Terms

• Previously defined as framework where management occurs
• Plan to connect resources of a firm for effectiveness + productivity
• Achieve advantages with chain of command

Principles of Planning Organization

• Enable control of activities to meet goals
• Principles developed + used widely for success
• Unity of Objectives: each group must contribute to overall goals of the firm

Unity of Objectives - Examples

• Example: must be integrated with finance, personnel, flight operation etc
• Example: cannot plan campaign while finance department restricts credit
• Span of Control: number of subordinates of a manager
• Span of control examples: airline/airport attendant can effectively manage twenty agents
• Examples revenue analyst: supervise junior analysts due to work

Departmentalization

• Divisions based on work task
• Subdividing functions and/or people into groups to gain the benefits of specialization - based on the complexity, size, and route structure of the company.

Departmentalization in the 21st century

• Involves new departments of safety, security, corporate innovation, and training
• Will manage generation Y well