Introduction
Sky Clear Airline is a company specialising in commercial aviation. The organisation operates in local and international markets. This essay will present the analysis of Sky Clear Airline using the Balanced Scorecard tool, McKinsey 7, SWOT analysis and PESTLE analysis. In addition, the paper will address the issues of leadership and organisational behaviour, the company’s structure and needed change, corporate culture, its effect and conflict, reward system, human capital and prejudices.
General Information
The company that will be reviewed in this paper is Sky Clear Airline with a focus on its Middle Eastern operations. The organisation has a fleet of 50 Airbus aircrafts, 20 of which are used for short-range flights and 30 are utilised for long-range ones. The total number of employees is 8000, including crews, the engineering team, management personnel and the authorities of the company. Sky Clear Airline operates around the globe; currently, its destinations include the countries of South America, Western and Central Europe, and the Middle East.
Leadership and Organisational Behaviour
The model of the organisational behaviour the company shows is primarily transformational and supportive. The company’s leadership strives to provide its employees with benefits in exchange for their high level of professional skills. In the context of Middle Eastern operations, the management of the organization has to pay attention to the cultural norms and practices that are a significant part of business operations. The authorities of Sky Clear Airline encourage interpersonal communication among staff members and try to ensure a healthy working environment for them. Employees are asked to share their feedback on the airline’s operations and policies as well as their concerns and experiences in order to ensure transparency and honesty. It is necessary to mention that the organisation exhibits the elements of the participative leadership style, as the leadership hold the responsibility of making the final decision.
Organisational Structure, Change and Sustainability
Organisational Structure and the Need for Change
The authorities and the management personnel of the company include the board of directors, an executive committee, CEO and departments. The departments Sky Clear Airline consists of are human resources, finances, commercial, marketing, corporate development and flight operations. It is evident that the current organisational structure has many factors that may be challenging to manage. The “before” organisational chart is presented in Figure 1 below.
It is possible to say that the current organisational structure is effective. At the same time, some changes can be made to expand the company’s performance even further. One of the most significant problems the organisational chart reveals is that there are no members of staff responsible for the operations of each of the departments. This report will discuss this issue and provide some recommendations. In addition, the challenges associated with sustainability and diversity within the airline will be addressed in the last section of the paper.
Sustainability
It is vital to mention that the organisation strives to be sustainable; however, its current operations do not include significant measures aimed at reducing its environmental impact. The analysis provided below will show that Sky Clear Airline has managed to increase its renewable energy commitments but these measures may not be considered efficient. The organisation should analyse its ecological footprint and find ways to reduce it; this point will be discussed in detail below.
Culture, Its Power and Effect
The framework presented by Alkaya and Yirik (2014) will be utilised to analyse organisational culture. It includes the dimensions of the structure, support, individual autonomy, identity, justice, tolerance in conflict and encouragement to undertake risks. The strength of this framework is that it allows for evaluating the company’s performance from a multifaceted viewpoint. It is possible to say that this approach does not have any evident weaknesses.
The perspective of structure will be discussed below within McKinsey’s framework. From the perspective of support, the company’s culture is appropriate, as Sky Clear Airline encourages employees’ participation in organisational meetings and service training as well as asks them to provide feedback on the leadership’s decisions. The level of individual autonomy is relatively low; the authority is primarily centralised, which will be discussed below. At the same time, the company encourages members of staff to take part in its decisions. The level of organisational identity can also be considered high. Sky Clear Airline’s employees show high dedication to work, while the company identifies with its members of staff. The workers engage in the majority of the airline’s activities, which enhances their loyalty (Alkaya & Yirik 2014).
Organisational justice can be considered at an appropriate level, too, as the management staff are not engaged in unjust practices and strive to provide full support for all employees and manage their concerns timely. As for conflicts, Sky Clear Airline has not reported any major disputes between its employees and authorities as well as among its management staff. Finally, the company’s level of encouragement to take risks may be considered medium. The airline strives to retain its achievements and avoids significant risks that would result in substantial financial losses. At the same time, the organisation uses innovative approaches to operations, implements new technologies regularly and encourages its employees to learn and develop personally and professionally.
It is evident that the company’s culture can be considered effective and powerful. Its power is in its relative readiness to take risks, implement new approaches and use recent knowledge to guide its operations. It is possible to conclude that the effect of the airline’s culture on change can be positive. The company strives to implement appropriate policies aimed at supporting its employees and ensuring safety for its passengers. As the organisation’s culture is inclusive and relatively flexible, change may be implemented easily.
Reward System and Team Management
Reward System
Sky Clear Airline does not have a competitive reward system; instead, it implements individual and team-based rewards for its employees. The company provides monetary compensations, including bonuses and merit pay, for individuals showing excellent performance. Notably, this reward system is available to all staff teams, including those operating in management departments and those working with customers directly. Team-based rewards in the company are granted for collective results and are aimed at increasing team performance. In Sky Clear Airline, such a reward system has resulted in a significant increase in employee performance by almost 40%.
Team Management
The analysis of the organisation shows that its current approaches to team management are effective. First, Sky Clear Airline tries to build a positive company culture, helping employees to understand its values, mission and vision. Second, as mentioned above, the organisation strives to reward its staff members for outstanding performance. Moreover, the airline invests in training sessions for all employees regularly, ensuring that they can show high levels of performance. The organisation sends workers to conferences and organises in-house training. All of these approaches allow Sky Clear Airline to manage teams effectively, considering their needs for personal and professional development.
Human Capital and Communication
The human resources department at Sky Clear Airline is responsible for conveying vital information from the authorities of the organisation to its present and future employees. Human resources managers’ role in the company is to hire individuals whose skills and interests align with its strategic goals and objectives. They are also accountable for ensuring that appropriate communication measures are established between all departments. The airline does not show signs of ineffective communication among employees as well, as there are training sessions aimed at minimising and resolving possible conflicts.
Prejudice in the Organisation
It is possible to say that currently, Sky Clear Airline has not established policies for eliminating prejudices within its structures. The company does not take action to combat racial and gender discrimination as well as institutional prejudice in general. Jaurique et al. (2019) report that discrimination in the workplace may affect all employees negatively, regardless of whether they are the target of prejudices. The company has no official policies regarding equality and diversity, which is a significant drawback of its culture. At the same time, the organisation does not show signs of prejudice towards its employees on all levels.
Balanced Scorecard
The Balanced Scorecard can be utilised to help the organisation in setting its objectives and results in four vital dimensions of operations. They include the financial and customer dimension as well as innovation and internal processes. In the presented analysis, this tool is utilised to evaluate whether Sky Clear Airline is reaching its aims from the financial perspective, meeting passengers’ expectations, enhancing its services, policies and internal processes and improving its ability to implement innovations.
Financial
Evidently, Sky Clear Airline is achieving its financial goals. The company shows a 35% increase in its profit and almost a 5% rise in its revenue rates. In addition, the organisation has managed to reduce its administrative expenses due to the minimisation of spending on department management. The airline’s financial goal is to reach $300 million income by the end of the third quarter of 2019. In addition, the organisation intends to increase stakeholders’ return on investments through dividends and repurchases. The existing trend shows that the company can achieve this objective.
Customer
The first goal of the company is to deliver excellent customer services and enhance passengers’ loyalty. This goal has been reached, as more than 100,000 new customers choose the airline’s services every month globally. In addition, the airline has been ranked 10 in the rating developed by World Travel Awards in the category of Middle East nominees. Furthermore, the on-time performance rate Sky Clear Airline holds is high, which also affects customers’ dedication positively.
Internal Processes
The current objective of the organisation is to increase its fleet by ten aircraft in the following year. As mentioned above, currently, Sky Clear Airline has 50 Airbus aircraft. Within the last year, the company enhanced its fleet by five aircraft; however, the growing demand in air travel shows that it is crucial to make more significant changes. In addition, the company has managed to ensure sustainability in its operations by increasing its renewable energy commitments by more than 25 million kilowatt-hours in 2017 and 2018. This step is vital for Sky Clear Airline’s goal of using resources responsibly and mitigating the environmental impact of its operations.
Innovation
Overall, the organisation is improving its ability to implement innovations. The first objective of the organisation from the perspective of innovations is to increase employee retention by providing training, educational programs and ensuring positive changes in the existing policies. The purpose to enhance personnel retention has not been reached; however, Sky Clear Airline does not experience a significant shortage of staff. At the same time, the organisation has implemented training sessions for employees focused on enhancing their professional capacities. Another objective of the airline is to automatise the processes related to customer services. The company shows excellent results, as it has started to utilise programs that help the personnel working with passengers to respond to their concerns timely and find the necessary information about their tickets or flights rapidly.
McKinsey 7-S Framework
McKinsey 7-S framework is one of the most significant tools for the evaluation of the organisation’s performance and marketing capabilities. Its elements include strategy, structure, systems, staff, skills, style and shared values (Ravanfar 2015). The first three elements are the hard ones, as they are more tangible and can be directly affected by changes. The last four elements are the soft ones; they represent the qualities that the company shows in its operations.
Strategy
Sky Clear Airline’s strategy is determined by the differentiation of services. The organisation does so by relying on the extensive implementation of technologies, digitalisation and automatisation. The airline’s services show a high level of customisation, too, which has a positive impact on passengers’ loyalty. In addition, the company’s strategy can be defined by its plans for market expansion. Currently, Sky Clear Airline’s authorities are working on establishing new routes.
Structure
The company’s current structure, presented in the chart above, is hierarchical, which reflects the size of the organisation. All of the authorities of the organisation play a vital role in implementing changes in its operations and policies. The CEO is responsible for the operations of departments, while the executive committee and the board of directors are accountable for reviewing Sky Clear Airline’s internal and external processes and approving necessary adjustments in them.
Systems
Sky Clear Airline has a standard set of organisational systems, including the ones utilised for employee selection and recruitment, quality control, complaint handling, staff evaluation and rewards. In addition, the company has several systems that are specific to the commercial aviation industry. They include in-flight entertainment, baggage handling and passenger check-in systems. It is necessary to mention that the company’s system allows it to operate in low-cost, economy and premium economy segments.
Staff
The organisation pays significant attention to its recruitment process. It strives to employ highly skilled individuals that have a passion for aviation and show a significant level of reliability. At the same time, Sky Clear Airline provides staff with no prior experience with opportunities to learn and work among professionals. In addition, the company completes a regular evaluation of its personnel, reviewing their professional and personal skills as well as their health state. This way, the airline ensures the safety of employees and passengers.
Skills
As mentioned above, Sky Clear Airline strives to enhance its employees’ skills constantly. By implementing annual training sessions and regular educational sessions, the organisation ensures that employees know their responsibilities, can handle challenging situations and perform their jobs effectively. The management team undergoes regular training too, improving their leadership skills and the ability to communicate with the staff. Overall, the airline is committed to enhancing its human resources’ capacities.
Style
The company’s vision and mission determine the style of its work. Sky Clear Airline’s mission is to make air travel safe and comfortable for all passengers. Its vision is that all individuals, including the organisation’s employees and customers, should be provided with a safe environment at all costs. The company operates in a style that ensures excellent experiences for passengers, while also supporting its staff members. Such an approach allows the organisation’s authorities to inspire and motivate their colleagues to do their best in providing outstanding services for customers and establishing a welcoming working environment for each other.
Shared Values
Sky Clear Airline demonstrates its core values by offering significant employment benefits, including paid time off, health, life, dental and vision insurance, retirement benefits, wellness programs and relocation assistance. In addition, staff members receive tuition reimbursement along with free training sessions within the organisation. The company strives to provide benefits to customers, too, offering discounts and loyalty programs. To enhance passengers’ safety, the organisation only works with new aircraft.
PESTLE Analysis
Political Factors
Political factors can affect the operations of Sky Clear Airline significantly. As the organisation works nationally and globally, it is exposed to various risks associated with the differences in political systems and political environment of global countries. To achieve success, the airline should address the political aspects that may cause challenges or minimise the quality of its services. The factors that may impact Sky Clear Airline include:
- Corruption in the aviation industry (Bastola 2017);
- Political stability and significance of the commercial aviation sector in the economy of the Middle East;
- High tax rates (Faber & Huigen 2018);
- Trade tariffs and regulations.
Economic Factors
Various economic factors affect Sky Clear Airline greatly, as they have an influence on investment in the economy and aggregate demand. The major issues that can affect the company include a savings rate, inflation rate, economic cycle, interest rate and foreign exchange rate. These factors can have an impact on the organisation, as the company operates both on national and global markets. Microeconomic factors, including the level of competition, can lead to the decreased or increased competitive advantages of the company. Finally, it is vital to mention the effect of the following aspects:
- Trade war has affected air travel significantly, causing an increase in tariffs (IATA Economics 2018);
- Labour costs in Middle East are significantly higher than in some other countries, causing increased expenditures for the company (O’Sullivan, Rey & Galvez Mendez n.d.);
- Efficiency of financial markets, which determines whether Sky Clear Airline should raise its capital in the local market;
- High level of skills of Sky Clear Airline’s workforce.
Social Factors
Social factors are also among the most significant ones affecting Sky Clear Airline because they may affect the demand in air travel. They can have a crucial impact on organisational culture and its working environment. The major social aspects that affect the company’s operations include the Middle Eastern culture, changing demographic trends and population growth, the distribution of power and income between social groups, as well as the level of education (Jaffe 2015).
Technological Factors
Technological factors may seriously affect commercial aviation as well. The transportation industry is constantly changing, as new technologies are implemented in the construction, design and maintenance of aircraft. The airline utilises technologies in all of its operations, which means that it is necessary for the organisation to analyse the issues having an impact on this aspect. The primary technological factors that affect Sky Clear Airline include:
- Technological developments and advances of the airline’s competitors;
- Transitioning towards automation as opposed to the manual handling of aircraft;
- The utilisation of technologies to optimise the performance of airplanes.
Legal Factors
The legal factors have an impact on Sky Clear Airline’s operations, as it works in local and global markets. The primary legal factor that affects the organisation is regulations regarding passenger safety and security. Sky Clear Airline’s operations are guided by the laws meant to protect customers from potential risks. Other legal aspects that have an impact on the company include intellectual property laws, employment laws, health and safety laws and discrimination laws.
Environmental Factors
Environmental factors play a significant role in many organisations’ operations, especially because there is a growing concern about the global population’s environmental impact and sustainability. Sky Clear Airline should analyse the steps it takes to reduce the emission of gases and evaluate the sustainability of its operations.
Some of the most important environmental factors that should be considered include climate change, laws of the countries the company operates in regarding environmental pollution, waste management, the authorities’ attitudes towards renewable energy and the existing perspectives related to the implementation of such strategies. In addition, air pollution regulations in commercial aviation and the problem of recycling are the issues that may have an impact on Sky Clear Airline’s services. It is also evident that recognition by government agencies in the field of sustainability would have a positive effect on the company’s performance, status and revenues.
SWOT Analysis
Strengths
SWOT analysis considers the strength, weaknesses, opportunities and threats Sky Clear Airline may have or may encounter. The primary strength of the organisation is improving operational performance. The airline has earned a four-star ranking for its work in the period between January 2018 and January 2019, which means that Sky Clear Airline is undergoing the phase of steady development. The company’s on-time performance rate for the period reached 85%, showing that the airline provides its services and coordinates its teams effectively. These data allow for making a conclusion that Sky Clear Airline may have favourable investor metrics at the moment. Although the organisation is not among the largest airlines in the country, its share price shows considerable growth and its market capitalisation has reached $15,7 billion.
It is vital to mention that Sky Clear Airline has highly trained staff, including flight crews and management personnel. The company implements regular educational training striving to improve employees’ skills, including their professional and personal capacities. This strength is significant, as it allows for increasing the quality of Sky Clear Airline’s services, ensuring a safe environment for staff members and passengers and potentially enhancing employees’ dedication and customers’ loyalty.
One more strength that should be mentioned is the Sky Clear loyalty program the company has. Within this program, passengers can earn mileage credits that can be redeemed to free tickets or an upgrade of the seat. Any individual can participate in the program but it is the most beneficial for repeated flyers or those buying tickets for business class. The benefit of the Sky Clear program is that it does not deprive passengers of their mileage credits even if they fly less often than once in two years.
Another strength of the organisation is that it provides safety to its customers by using some of the safest aircraft models in commercial aviation, such as the Airbus A350 and the Airbus A320 NEO. The use of these models can improve clients’ trust in the company, as these planes have never recorded a passenger fatality. In addition, the company’s fleet undergoes regular check-ups, which ensures that the planes are prepared for scheduled flights across the globe.
The next strength of the company that should be mentioned is its strong alliances with national and international organisations. Sky Clear Airline is a part of the Oneworld alliance along with other companies, including British Airways. In addition, the airline has a large operational network; in 2017, approximately 60 million passengers boarded its international flights, while more than 85 million passengers boarded the national ones.
Weaknesses
It is crucial to discuss the potential weaknesses of Sky Clear Airline as well. The primary weakness that can be named is that the organisation has a limited number of suppliers. Currently, the airline has a relatively small number of engines, which means that it may potentially encounter difficulties due to mechanical problems, inadequate performance of aircraft and design defects. This issue can result in a significant decrease in customers’ safety. Another potential weakness of the organisation is that it has challenges in sustaining its brand image due to intense competition among airlines. As Sky Clear Airline is not among the largest companies in air travel, it may be challenging to gain customers’ loyalty. The final weakness that can be outlined is that the organisation has many competitors, as it is operating in the low-cost sector.
Opportunities
Several opportunities the airline has can be outlined within this evaluation. First, the company may implement more aircraft for international flights, increasing customers’ loyalty and its revenue. Second, the United States’ airline industry experiences growth as well, meaning that the organisation is operating in an evolving sector, which is beneficial for its development too (Bogaisky 2018). In addition, another opportunity the company has is to expand its domestic strategy, providing its customers with more connecting options. For instance, it can evaluate the need for expanding to smaller cities and establish regular flights.
Such a strategy can potentially help the airline to stand out from other companies that do not perform short-range flights. Finally, the organisation can continue to work on a cultural change within its structures, implementing training sessions for its employees on all levels. Educational programs can aspire to enhance employee-passenger relationships, improving communication between departments and teams and, therefore, ensure individuals’ safety and loyalty to Sky Clear Airline.
Threats
As mentioned above, one of the threats the company encounters is stiff competition in the industry. The market the organisation operates in can be characterised by the severe price competition, especially in domestic markets, due to significant growth of the low-cost sector (Wolla & Backus 2018). Several companies, such as Etihad Airways and Fly Dubai, are among the strongest domestic players, while many organisations, such as KLM, are the airline’s major global competitors.
These companies’ operations and development may result in a decrease in Sky Clear Airline’s market share and financial assets in general. The second threat that can be outlined is public security concerns due to recent airline incidents. Although the organisation is concerned about safety and undergoes regular check-ins and staff training, the global safety concern can lead to the decreased overall passenger traffic and future growth prospects.
The next threat that should be discussed is the growing concern about environmental issues. The company has to ensure that it complies with the changing regulations and global rules regarding these aspects. In addition, the airline has to address the problem of sustainability and may potentially need to change some of its policies to make them more environmentally-friendly. Another threat the organisation may encounter is the shortage of skilled employees and the costs of hiring them.
Currently, the airline spends a significant amount of money and time to provide training for new workers. When skilled staff members leave the organisation, it may lead to significant problems in its operations and the quality of services. Finally, one of the major threats Sky Clear Airline can encounter is high fuel costs. The company uses high-quality hydrogen fuel for its aircraft, which places a significant financial burden on it.
Suggested Changes and Organisational Chart
The analysis shows that from the perspectives of the CEO, several changes should be made. First, the most evident change is that the organisation needs to assign the management of departments to more leadership staff. Currently, Sky Clear Airline may be considered a relatively small company compared to some of its competitors, such as United Airlines. Due to this reason, the company may lack management personnel. The recommended changes in the organisational hierarchy are presented in Figure 2 below.
The current management structure is mostly hierarchal and the CEO is primarily responsible for the work of all departments. As a consequence, the company cannot preserve diversity, as there are no members of staff accountable for this issue. Cloutier et al. (2015) report that diversity is one of the most significant factors ensuring successful employee retention, as well as the company’s growth and stability. By hiring diverse individuals, including those coming from minority backgrounds, Sky Clear Airline can ensure improved employee satisfaction and, as a result, the enhanced quality of services. Thus, the company should assign diversity management to a specific employee.
The final change that can be recommended is the implementation of sustainable approaches in the airline’s operations. Sustainability of business is one of the most significant factors leading to increased consumer trust and economic stability (Daunorienė et al. 2015). The current management structure does not consider the need for sustainable approaches within the organisation. The adjustment that can be proposed is to designate a sustainability department that will consider the environmental impact of Sky Clear Airline’s operations, as well as the use of resources. This way, the organisation can expand its productivity, personnel’s and customers’ loyalty and revenue.
Conclusion
The analysis shows that Sky Clear Airline has an overall positive corporate culture and management structure. The Middle Eastern market represents a positive area for growth because of the high level of expertise regarding airline operations in the region. The company shows significant growth in its share price and market capitalisation; the level of customers’ loyalty is also high. The suggested changes aim at adjusting the organisation’s hierarchy and ensuring that its operations are sustainable not only locally but also worldwide. In addition, the recommendations argue for the establishment of diversity in the workplace.
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