Sabena Airlines free essay sample

The company Sabena was the Belgian air carrier and one of the oldest in the world. It played it most crucial role in the development of Belgium’s colonial ties to Africa The airline was an important component of Belgium’s national sovereignty. The dependence on African routes resulted in long run problems after the colonies achieved independence Even losing money, the Belgium government continued to support it due to historical and employment importance. Sabena functioned more like a public authority staffed by civil servants than a competitive airline Inefficiency, low quality and political issues. Rigid compensation rules (no incentives to increase in productivity or performance), powerful unions, lack of competence at the supervisory level, poor communication between management and workers. Access to Zaventem Airport was a valuable asset strategic location near the center of Western Europe ideal hub location. The company wasn’t in a good situation in 1990 Unfavorable conditions of the global airline industry and lack of leadership due to the former CEO coma. We will write a custom essay sample on Sabena Airlines or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page Increasing debt and decreasing equity company was near bankruptcy. Context Airline operations were based on high fixed costs. The unification of Europe could lead to a rise in predatory practices n the part of dominant carriers (free borders and reduced regulatory environment) and to industry consolidation (US example). Governments were no longer willing or able to prop up unprofitable operations. Creation of alliances between airlines. The capacity of European airports would be seriously restricted between 1995 and 2000 and governments didn’t have the money to invest. Persian Gulf Crisis led to an increase in oil prices and to decrease in passenger travel due to concern about unstable conditions. The predominant strategy in the airline industry was to focus on low cost. November 1990 The Belgian government announced that Pierre Godfroid would be the new head of Sabena. Godfroid had no experience in the airline business, but was recognized as a highly competent turnaround manager. His task was to help with the transformation of Sabena from public to private enterprise. He believed that business success was the result of competent leadership and â€Å"good people†. Godfroid had to prepare a business plan in two months defining how he would raise new capital and reorganize the airline. â€Å"A New Take-Off for Sabena† 1. Aggressively pursue of profitability: Focus on the company’s core business of air travel, rationalization of routes, reduction of working force and cost cutting. 2. Establishment of a new capital base: Final infusion of government funding to stabilize the financial condition and issuance of a stock offering to attract private capital. 3. Attraction of an alliance partner: Complete negotiations with British Airways and/or KLM. Interest the future partner in the creation of a European hub at Zaventem airport. Within a year, Godfroid replaced two thirds of the original senior executives (including Luc Cloetens, Vice President of Catering Services). As Sabena’s cost structure was clearly uncompetitive, the immediate solution was to differentiate its services to justify higher prices Quality of customer service and punctuality. Sabena Catering Services (SNCS) SNCS was extremely important for the new plan. It was responsible for supplying aircraft with fresh food and supplies, as well as pilot’s maps, cabin documents and other regulatory forms. Sold its services to other airlines whose flights originated in Zaventem airport = 30% of the work. Employees worked in one of two main 8h15min shifts and the operation ran 7 days/week. A small third shift from 11pm to 5 am handled returning materials from late nights and prepared breakfasts for early morning take-offs. SNCS workers were represented by three politically based labor unions. Union discontent was a significant feature of Sabena’s culture. Frequent strikes and labor-management distrust. Workers within the catering division were the most militant and outspoken of all Sabena employees average of 1 strike per month. Strikes originating in other divisions of the company tended to affect operations at SNCS as well, particularly if they interfered with access to flight operations. ERIK WEYTJENS Completed his MBA at INSEAD and was hired by Cloetens to work at SNCS (production department). Master degree in Mechanical Engineering. Had previously worked as a consultant with McKinsey Company. After the MBA, followed McKinsey’s advice to acquire line management experience before returning to the company. Problem Weytjens has to solve a major logistics problem in the dishwashing department. Delays in cleaning carts were caused when machines used to wash dishes broke down breakdowns were happening frequently. Bad relations between dishwashing department and maintenance crew the problem was caused by slow and unreliable repairs or by improperly preparation of the trays before placing them in the machines? Criteria Time spent to put operations back on schedule. Risk of strike after decision. Potential change in employees’ behavior. Alternatives Define on his own specific procedures for the dishwashing department (how to specifically prepare the rays) and for the maintenance crew. Convene a meeting with both departments to identify the existing bottlenecks and reach the best decision together. Analysis The key problem is the lack of mutual understanding and trust among employees It is more a â€Å"people† problem than a technical one. It derives from the previous problems of the company: poor communication between management and employees and nonexistence of incentives for efficiency No one sees the problem as â€Å"his /her problem† because no one feels responsible for the company nor takes pride in the outcome of his/her work. There is the company a lack of management credibility a top-down decision may lead employees to start a strike. On the other side, a â€Å"democratic† process would take more time. Weytjens has to act in order to support the company’s overall strategy (quality of customer service and punctuality), but also to foster initiative and accountability among those doing the job. His main goal is to get the department back on schedule, but he needs to think in long term so as to avoid future similar problems. Decision The best alternative would be to convene a meeting with both departments to discuss the problem and reach a common solution. Action Plan 1. Set a date and time for the meeting. 2. Ask for both departments to think in advance about ways they could improve the process (not about ways the other department could improve). 3. Act as a mediator for the meeting, making sure that the two sides talk to each other and understand the others point of view, but not allowing emotions to take over. 4. Show employees how this problem is interfering in the company’s strategy and how it could affect them in the long term. 5. Request a commitment from both departments to implement the solution reached. 6. Show appreciation to employees and monitor â€Å"from a distance† the execution of the solution. 7. Implement an â€Å"open door† policy to foster an environment of collaboration, high performance and mutual respect.