Usda Forest Service

Problem Solution: Classic Airlines

More than 25 years ago a different kind of airline was started called Classic Airlines. Today Classic Airlines is the world’s fifth largest airline which flies more than 375 jets to 240 cities with more than 2300 flights daily. Although Classic Airlines has remained profitable it has been affected by events in the world. Classic Airlines was affected significantly by the events of September 11th like so many in the industry. Most of the major airlines are struggling more than ever, trying to make a profit in spite of across-the-board low fares, high jet fuel costs, and increasing competition from low fare carriers. Consumer confidence levels are being affected by rising oil prices, the spread of the sub-prime credit issue in international markets and the predicted slowdown in the US economy.

The competition seems to be doing something above and beyond that is affected Classic Airlines customer base. Classic Airlines is seeing a declining classic rewards program dropping 19 percent and a 21 percent decrease in flights per remaining members. So, what are the other airlines doing better that faithful customers are leaving Classic to fly with the competition? Something needs to be done to turn the way Classic deals with their customers. Classic has warned that they will have to seek bankruptcy protection if they cannot cut costs soon and fix the decline in their customer base.

Describe the Situation

Issue and Opportunity Identification

Classic Airlines has a membership rewards program called Classic Rewards. Classic Rewards is similar to the competitions rewards programs where you can earn free flights, discounts on vacation packages and preferred hotel and rental car benefits. The problem is that customer loyalty is down nearly 20% from this time last year. That is a loss of over 160,000 repeat Classic customers who are now flying with the competition. There is also a drop of over 20 percent in the average number of flights each member usually flies from a year ago. Classic Airlines made an attempt to lure back their customers from the competition by enticing them with price cuts. Classic Airline has already made cuts in air fair and across the company that they need to find a different way to bring back the competition without losing more money.

Management has set up a lofting goal of reducing costs corporate wide by 15 percent over the next 18 months. It seems that management is focused on ways to cut costs and save money. The real underlying issue is that customers can go to any airline and get a great deal on airfare. Just about all of the airlines also have some sort of membership rewards program. Let’s face it; customers are looking for an airline that sincerely cares about the needs of the customer. Customers are informing Classic what they want, but Classic doesn’t have the service element, operations procedures or marketing programs in place to deliver.

Stakeholder Perspectives/Ethical Dilemmas

Classic Airlines needs to understand what is important to the customers and reconnect with them. Classic Airlines already has one of the best Customer Relationship Management (CRM) systems in place. The problem is that they are not utilizing the CRM for its full potential. When they ordered and had the Customer Relationship Management installed Classic was more concerned with decreasing the amount of time the representatives spent on the phone with the customer, which may be part of the problem as well. There was even a push to have customers deal with the internet and Classics website rather than talking to a representative. It doesn’t get more impersonal than that.

This was all in an effort to cut costs further by getting rid of the only people that dealt with and listened to the customers; and that is the representatives.