In this assignment I, as the author, am assumed to be the CEO of a leading airline carrier, Green Jet. It is apparent that the company needs to cut customer service costs in order to retain its position in the industry. However, there is a threat of damaging company’s corporate image, which implies dramatic reduction of company’s popularity among its customers.
In this paper I, as the CEO of Green Jet, am encouraged to provide the hypothesis as to the food service costs reduction strategy.
No more pie in the sky?
Today customer satisfaction is the major element of competitiveness. Companies need to be flexible in order to keep the service up-to-date. Quick reaction to customer preferences is a must these days. A company’s flexibility guarantees quick reaction to customers’ needs.
Therefore I as the CEO of Green Jet insist on providing insight research aimed at determination of customers’ preferences in the context of the food issue. In order to achieve objective results the research must be conducted in several directions: (a) surveys; (b) competitors’ analysis; and (c) complex experiment on domestic coach routes. Data collected in the research will help the company to form the model of quick response operations strategy and to design the optimum plan of cutting food service on domestic short hauls.
Cutting the fat
The issue of the research is strategic decision whether the company needs to continue serving free food aboard. This strategic decision affects the company’s strategy and is the part of it. Subsequently, corporate strategy impacts corporate image. Depending on the accuracy of decision, the impact is either positive or negative.
In our case the research is conducted in order to conclude if the decision concerning cutting expenses on food service will be effective and have positive effects on Green Jet’s corporate image.
Control of performance within the organization is one of the key issues to implement in the research. Control of performance should be provided in the form of performance measurement in both financial and non-financial categories. Financial category implies all measurable quantities such as company’s revenues or turnover over the fiscal year. Non-financial category includes qualitative variables such as goodwill or customer satisfaction.
As the CEO of Green Jet, I consider that cutting food services to customers for travel on short haul flights will have positive effect on saving company’s revenue.
One way to test the hypothesis is to conduct a series of surveys among both customers of Green Jet and customers of other carriers. Interviews, focus groups and mail surveys give useful information for further use within the research.
Another aspect of performance measurement is competitors’ analysis. It is known that Green Jet’s competitors use similar methods of cutting costs and saving revenues. Green Jet has access to data acquired in earlier researches.
Also, a short-term experiment could be implemented. Another way to test the hypothesis is to conduct an experiment on short haul routes in order to acquire customers’ response to certain changes in food provision.
Surveys. As regards the surveys, three types of them could be used in this research: (a) interview; (b) focus groups; and (c) mail surveys.
Interviews are very convenient ways to gather information but the biggest problem with interviews arranged for airline companies is the fact that most of their customers would better not waste their time on answering questions in the airport. Customers of the airline can be motivated by the fact that their answers will make changes in the airline services but very few would really choose to answer questions of the interview;
Focus groups bring together customers of different airlines and during several hours they answer the questions and give their opinion on how to make airline service better. For instance, the focus group consists of 10 people and it is known that they use services of different airlines. The focus group is organized for one particular airline but none of its participants should know what airline ordered the focus group. The interviewer asks questions about airline services in general and then specifically for different airlines. Therefore when the information is gathered the airline that ordered the focus group interview is not only able to monitor results about itself but also about its competitors;
Mail survey is a very comfortable way to work on for participants since they can do it at their leisure time. Unfortunately, mail survey is not very reliable source of gathering information since that method has a low response rate. Electronic survey can be more convenient in comparison to mail survey. However, the major problem of the electronic survey is respondents’ limited access to electronic resources.
Experiment. As the Green Jet’s CEO, I insist on providing the experiment based on short-term changes in food supply on short haul flights. These changes may include: (a) cutting food service with and without reduction in price; (b) replacement of meals with snacks such as peanuts or cold meats, at any time or only during mealtime; (c) substitute of free food service feature with fee-based food service feature; (d) introduction of a new multi-menu fee-based food service. I believe these experimental changes would help our company to collect data needed for hypothesis test.
Cutting food services with and without ticket price reimbursement to customers for travel on short haul flights will help to identify the nature of customers’ demand for the service and the importance of the service itself for the customers who travel on short haul flights. David Stempler, the president of the Air Travelers Association says “passengers might complain about the food on airplanes, but they do like having it there” (Sloan, 2002). Ron Turner (Sloan, 2002) identifies meals served on flights as “plain goofy” and adds, “if airlines can keep prices down by not serving food on flights less than four hours, I’m all for it.” Also, the experiment is aimed at demand determination for this option. Apparently, there are passengers who use the service frequently and passengers who never turn to the service.
Replacing meals with snacks on domestic coach routes will certainly save costs spent on serving special meals aboard. "The cost of supplying this service and the demand from customers don't match," Amy Kudwa, the US Airlines spokeswoman, said of serving special meals on-board (Engle, 2004). The experiment needs to be conducted in order to identify if this change would be appropriate in the scope of cutting costs and saving revenues and meet customers' requirements as to the nature of meals on short routes. This option gives the company the opportunity to save the food service, but to cut down it partly. The company will be able to reduce food service costs and increase profits since cold snacks such as bottled water, ice cream cup and peanuts are less expensive and the waste rates for both meals and snacks are almost the same. Also, there is an option of serving food only during mealtime, which will save company from additional expenses but hardly will become the optimum option to fliers.
Another option to implement is to let passengers buy food for cash. Many companies today sell food on board. Average cost of a snack box or breakfast wrap is $5 to $7. As Larry Meltzer, a spokesman of LSG Skychiefs, states "the passengers are willing to buy meals if they are quality products." (Levin, 2003) Outsourcing food services saves carriers extra costs, though the option needs considering. "Outsourcing the meals saves the airline money", Amy Kudwa, US Airlines spokeswoman says, "although predicting demand isn't easy. As of a few months ago, about 30 percent of passengers bought meals, but the rate varied widely by such factors as flight length and whether the flight was at mealtime". However, demand for food service varies greatly. "Some flights you sell out; on some you have food left over," Kudwa says. Also, Amy Kudwa defined the major argument for all carriers struggling between cost saving and customer satisfaction: "the cost of supplying this service and the demand from customers don't match." (Engle, 2004)
Serving multi-menu food aboard could help specify customers' tastes, though will barely reduce costs spent by the company on food supply. These changes should be implemented not longer than 14 days on focus routes. Customers should be notified of changes. This must be done in appropriate terms so that the customer could choose among the alternatives.
Competitors’ analysis. Competitors’ analysis is another way to test the hypothesis. If properly investigated, competitors’ strategies might outline the path for future findings. Below is the comparison of major American carriers that have already updated their policies as to the food service reform.
American Airlines developed the new “Food on Board” program that provides fee-based food service on domestic routes. The company used feedback from customers, flight attendants and employees to design the food service plan. Now AA offers its customers snack boxes and sandwiches for $3 to $5.
Delta Airlines has been using services of Atlanta Bread Company for already six months in order to provide its customers with pay-to-eat option. The company offers both meals and snacks for $2 to $8 cash.
Northwest Airlines provides fee-based food service ($5 to $7, cash only) that includes snacks and special meals as well.
United Airlines has recently canceled free food service on domestic coach routes four hours or less. The company had previously been implementing the strategy of complimentary food service during meal time. Now they serve entrees ranging fro $ 7 to $10.
Ted, United’s low-fare carrier, offers snack boxes for cash.
Southwest is one company of a few that does not offer food service at all. Maybe, that’s why they are so profitable.
Continental is the company that still needs to decide whether to serve food for sale. Meanwhile, the company provides its customers with complimentary meals (Bialecki, 2005).
At US Airways, the company’s management has decided to end up with free meals on domestic flights almost a year ago. Today, the company serves snack boxes, breakfasts, lunches and dinners for about $7.
Several years ago Alaska, a low-fare carrier, updated its food service policies defining it as ‘meals at mealtimes’. The exception for this definition, however, could be found on some short routes provided by the company.
Continental Company serves both free snacks and meals dueing mealtime, thogh only on flights three hours and longer. The company provides for its own catering on board and does not serve food for sale. Moreover, nearly fifteen various menus are available aboard including Hindu, Muslim, diabetic and kosher. However, the company began limiting special menus to certain flights lately. Such limitation is caused by the fact that only 5 percent of customers at Continental order special meals (Engle, 2004).
As it could be seen from the brief analysis above, most companies offer food-for-sale option with prices ranging from $2 to $10. There are carriers that provide free snacks, mainly in meal hours. It is worth mentioning that only Alaska and Continental serve free food aboard on domestic flights.
As it was mentioned earlier, customer satisfaction has the highest priority today. In order to keep the financial characteristics from downfall the company needs to implement the performance measurement, which includes various surveys and competitors’ analysis; and to define compliance of the company’s performance with the demands of customers. The objective of this research is to shape quick response operations strategy. This strategy implies provision of alternatives to airlines’ customers. In other words, the experiment held by company’s representatives is to determine the form of response to customers’ needs in short terms.
In the long term, Green Jet must shape flexibility of response to customers’ demands as customer satisfaction is major element of competitiveness today.
However, the company’s profits analysis over the last fiscal year shows that cutting expenses on services is urgent. Among services the company offers I have chosen food service. Researches conducted recently (Levin, 2003; Sloan, 2002) give ground to conclude that food service budgeting needs revising.
In order to re-assess the values Green Jet strives for the company’s management needs to implement a number of ventures such as surveys of several types, competitors’ analysis and a series of experiments on focus routes.
Personal interviews, focus groups meetings and mail surveys will provide the basis for the research. The target audience of the surveys are customers directly, flight attendants and employees of the company.
Another approach to new food service plan development is a series of experiments, which will include several options such as total exclusion of the free service, partial exclusion and other options. Fee-based food service option and the option f partial exclusion seem the must advantageous and profitable.
The same conclusion could be made analyzing Green Jet’s competitors. Among companies that compete with Green Jet within the market these trends are the most popular. However, few companies such as Alaska and Continental still continue to offer free meals and snacks.
When making a decision it should be noticed that Green Jet is the leader in the industry. What fits other companies might not fit Green Jet. As the CEO of Green Jet I may accept two approaches to decision-making. One approach is to approve the use of fee-based food service. Another way is to determine optimum balance between customers’ demand and company’s potential. Anyway, both approaches require considering facts acquired using as many methods as possible.
Lothar, C. (2000, January 15). Airline Food Quality Begins Gradual Ascent. The Washington Times.
Bridges, L. (1994, June 13). No Pie in the Sky. National Review. Vol. 46. Issue: 11.
Sloan, G. (2002, August 22). You are free to growl about the cabin. USA Today. Retrieved from http://www.travelsecrets.com/secrets/08-22-02-01.htm
Levin, D. (2003, November 18). Airline food is nothing to write home about, but some carries try. Bloomberg News. Retrieved from http://www.detnews.com/2003/business/0311/18/c01-328381.htm
Engle, J. (2004, September 12). Latest mystery about airline food is if you’ll get any. Los Angeles Times. Retrieved from http://www.startribune.com/stories/1513/4972756.html
Bialecki, L. (2005). Food in the Air: What Are They Selling Us? Retrieved from http://businesstravel.about.com/od/airlines/a/meals.htm