Final assignment - operation & business strategy of a local airline PDF

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operation & business strategy of a local airline...

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Page No.

Executive summary…………………………………………………………….. 2 1.0 Introduction………………………………………………………………… 3 1.1 Call centre department…………………………………………....... 4

2.0 Operation strategy & business strategy of Firefly…………………………. 5 2.1 Order winning criteria…………………………………................... 5-6 2.2 Order qualifying criteria……………………………….....................7 3.0 Supply chain….............................................................................................. 8 4.0 Customer expectation in the airline industry…………………...................... 9 4.1 Firefly delivering customer expectation……………………………. 9 4.2 Firefly not delivering customer expectation……………………....... 9 5.0 Conclusion & recommendations……………………………………………. 10-11 6.0 References……………………………………………………………………12

Executive Summary 1

The purpose of this report is to analyse the operational methods and strategies adopted by Firefly Sdn. Bhd. to provide its services in a way that gives maximum satisfaction to its customers. It includes order winners, order qualifiers, operations objectives and Firefly’s ability to meet its customers’ expectations and also areas where customers’ expectations are not met. It also includes recommendations so that it can improve the ability to fulfil its customers’ needs to maintain and position itself better in the airline industry.

1.0 Introduction 2

The organization that I work for is Firefly Sdn Bhd. Firefly was launched on 3rd April 2007 and is wholly-owned subsidiary of Malaysian Airline Berhad. The name of Firefly comes from a mandarin word “Fei Ying” or 'Kunang-Kunang' in Bahasa Malaysia which describes the characteristic of the airline which are agility, brilliance, charm and fun. The vision of Firefly is to be a trusted brand known for offering safe, reliable, accessible premium travel experiences that resonate with passengers. The mission of Firefly is to be able to strengthen its footprint by exceptional services and sustaining its profitability above industry average. While it continues to dominate its routes, it also takes pride in aligning its business model and work culture to its social conscience. Firefly has positioned itself as a “Community Airline”; offering reasonable low fares while ensuring passenger comfort and convenience. Commercial passenger carrier market is divided into two major segments which are the Full Service Carrier (FSC) and Low Cost Carrier (LCC). Firefly is placed in the Low Cost Carrier (LCC) segment based on its service and price offering. Initially, it operated in Penang and expanded to Subang Airport as its headquarters on 29th October 2007. Firefly provides connections to various countries such as within Malaysia, Singapore, Southern Thailand, Sumatera of Indonesia and so on. The reason Firefly moved from KLIA to Subang is to avoid conflict with others low cost airlines in Kuala Lumpur International Airport (KLIA). Since Kuala Lumpur International Airport is the main Airport in Malaysia, it is very difficult to compete with their competitors such as Air Asia which also departs from KLIA. It is also very difficult for them to manage their system and provide customers a good service. Therefore, Firefly chose to monopolize at Subang Airport. By doing this, they are able store many aircrafts due to their small size compared to others airlines’ aircrafts.

1.1 Call centre department 3

I work as a Call Centre Officer for Firefly in the Call Centre under the Ticketing & Reservation Department. The main duties of the department which I work for is to handle calls with regards to booking, complaints and customer feedback. The objective of my department is to ensure customers receive appropriate and timely feedback from us. The responsibilities of this department are to answer phones and respond to customer requests. We provide customers with product and service information and sell tickets and place customer orders in the computer system. My department also follows up on customer inquiries which are not immediately resolved. We identify, research and resolve customer issues using the computer system. We also provided on the job training for new employees and perform other duties as assigned by the management.

2.0 Operation strategy & business strategy of Firefly 4

Operation strategy is long term plan for the operation function that helps in outlining the design, procedure and making sure the correct use of resource and man power to support the business strategy. Operation strategy must be aligned with the business strategy to get the best outcome. In order for operations to run smooth and profit maximisation, it is important to know that what customers the company is serving and what are the company’s values. Markets trends, economic status of the market, political values and trends in the society must also be considered. Environmental scanning let the company knows to explore opportunities and threats, exploring gaps in what consumers need and what competitors are doing to fulfil those requirements (Waller, 2003). Operation strategy can be formulated when business strategy is finalized. Operation strategy of Firefly can be explained based on its order winners and order qualifiers. Order winner and qualifiers are both very important. The order qualifier an organisation needs to qualify and requalify to stay in competition and in the market. Order winner and qualifier are based on time and depends on market status, so they both change over the time in the market, (Hill, 2005). The decision of a customer which low-cost carrier will be his favourite provider however depends on the price (Doganis, 2006). As a consequence, the key performance objective for Firefly can be identified as cost which is the operation’s focus (Jones, 2007). 2.1 Order winning criteria The first and main order winning of Firefly is low cost. This means that Firefly offers services at a low cost and prices and this is their main business strategy. This strategy helps Firefly to maximise its profit margin by implementing the low cost strategy. Firefly mostly focuses on cutting costs in their operations like reducing labour cost, materials and other facilities which can be avoided in providing services. It emphasises on giving some extra training to employees to get the maximum outcome. Facilities which are provided by Firefly are rationalized, using mostly single type of aircrafts the ATR 600 series (The Star, 2014), so that minimizes the cost on maintenance of different types of aeroplanes. The flying routes of Firefly are mostly short so it can help Firefly to minimise cost of crew changes, maintenance, inventories of parts and many other administrative charges which varies from airport to airport.

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Firefly mainly uses a less crowded airport in Subang to avoid high administrative charges. Its routes are point to point so that they don't have to invest extra on onward connection for passengers and baggage. Low price of tickets is the order winner of Firefly as it offers cheap tickets to different destinations of South East Asia which not only attracts more customers but also this strategy plays an important role in maximizing their profit as it already reduces other unwanted costs (Doganis, 2006). Minimising the overall journey time is order winner for Firefly, fast turnaround keeps its services continue for high earning and by doing so it has its number of flights increased with low number of planes. Flexibility is the order winner for Firefly as it provides wide range of basic and frequent services, changes the volume of services and changing the timings of services to fulfil the customers' demands. Low cost administration gives them to attain maximum profit and Firefly focuses on the IT system which can be accessed from anywhere in the world so they are embraced with the concept of paperless offices (Doganis, 2006). Another order winner is Firefly’s allocated seating which is a plus for travellers especially groups, with no rushing and queuing for preferred seats. Also Firefly’s higher baggage limit and no baggage check-in fees gives advantage over its competitors. Apart from that, strategic partnerships in medical tourism are within Firefly’s upward, socially responsible trajectory as the company works together with the National Heart Institute as well as Sime Darby Group and other hospitals. Some of Firefly’s initiative carried out in the past includes a joint crowd-funding campaign with the Malaysian AIDS Foundation, which allowed passengers to donate RM1 per flight ticket purchased through the airline’s Connecting Communities Programme (The Star, 2014).

2.2 Order qualifying criteria 6

The main order qualifier for airlines is the compliance with general safety standards as well as the accessibility to destinations and scheduled flights. Meeting the safety standards as a functionality aspect of quality is ensured by Firefly through putting safety at priority number one, striving to exceed the regulatory requirements (Jones, 2007). Firefly’s human resource department also plays important role in this strategy as they train new employees to perform multi tasks and emphasis on team work to maximise the customer services. Strong work force, highly trained, quick responsiveness to the customers, flexible in performing multi-tasking and strong customer and technical capabilities of the employees are the order qualifiers of Firefly. Dependability is order qualifier for Firefly which is ensured by scheduling a multitude of flights to destinations in South East Asia. Quality of service of Firefly is order qualifier as their strategy focuses on the service regularity which means how much their quality fulfils customers’ demands. Using of latest IT system is order qualifier for Firefly. The Internet has greatly uplifted electronic commerce and deeply linked customers and suppliers. For example Firefly invested in latest technology by creating a multi-channel remarketing campaign known as the “SaleCycle's SMS Solution” (Brinkworth, 2016). This SaleCycle's SMS communicates quickly and efficiently with visitors who abandoned a flight booking after the customer had initially visited Firefly’s website. Firefly asks for a mobile number during the booking process. The ability to mix SMS remarketing into Firefly’s existing campaigns has really increased its capacity for reconnecting with potential customers. Firefly started to see recoveries and conversions from the SMS tool. Campaign results showed that Firefly saw its first recovered sale from only the fourth SMS message sent with the recipient returning to the site and buying the flight they had left behind. 15.5% of people who received the SMS clicked back to their booking and there was 4.45% uplift in sales attributed to the SMS campaign. This SMS Remarketing Campaign for Firefly has already won key industry awards including the Mobile Sales Promotion/Lead Generation/Direct Response/Strategy award at the UK’s Marketing On Mobile Awards (MOMA Awards 2016) for its world first SMS remarketing campaign where it was nominated alongside Starbucks, Jaguar and Mondelez (Brinkworth, 2016). 3.0 Supply chain

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The supply chain includes the network of suppliers, customers and other operations such as co-operators and competitors. In regard to the management of those supply chains operations, managers have to deal with questions like capacity and inventory management or the extend of vertical integration or outsourcing (Slack et al, 2009). The supply chain of Firefly is known for disintermediation (Jones, 2007) by selling 90% of their tickets via website direct to the customers and saving the commissions for intermediaries like travel agents. Further, Firefly integrates its customers wherever possible and let them carry out many activities themselves for example printing of ticket to reduce transaction cost even if more efforts have to be taken for the process design at the web frontoffice (Jones, 2007). Another key principle of Firefly’s supply chain is “single sourcing” (ATR 600 series) since it purchases all aircrafts from one single supplier (The Star, 2014). This follows the principle of fleet commonality and enables Firefly to save cost for maintenance where training on various aircraft types is not needed and allows them to negotiate lower prices when buying a large quantity of aircrafts (Doganis, 2006).

4.0 Customer expectation in the airline industry

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Customer expectation is the trust about service delivery that serves as standard or reference point against which performance is judged. In the airline industry, customers expect to get good service. Customers wish to get low fare tickets. Customers expect to have short checkin time. In most airports, there are long queues at the check-in counters. Customers would not like to waste their time for waiting. Customers expect to have easy access to the airport. They wish to have transport provided by the airport so that it is convenient to reach the airport. Customers expect to have cheap food and beverages when on board. Customers wish to have refreshments on the plane to reduce fatigue during a long flight. Customers will expect seats in the plane to be comfortable. During the flight, customers expect the flight attendant to be polite (Doganis, 2006). 4.1 Criteria applied by the customer in assessing satisfaction and the areas of FireFly delivering customer expectation FireFly airlines offers low price tickets for customers. Customer felt satisfied as they could travel at low cost. FireFly also has web check-in service in its website to avoid waiting in long queues which may dissatisfy the customers. The seats in the flight are broad and comfortable. Passengers enjoy complimentary refreshments when on board the flight served by attentive cabin crews. Besides that, FireFly recognizes that guests' satisfaction is important for long-term success. Passengers are happy with the flight attendants due to their friendliness and politeness. 4.2 The areas of FireFly not meeting customer expectation Firefly does not provide cab rental services for customers. Customers that live far away from its airport can’t reach the airport easily. Besides that, there is only one airport where they can catch a flight from Subang. Customers feel unhappy as the accessibility to the airport is low. Based on the Skytrax forum, passenger experience on Firefly is commendable except for one issue which is flight delays (Skytrax 2008). Passengers feel that flight delays are commonly encountered and this can cause problems especially if a passenger is rushing somewhere and needs to reach their destination on time for urgent matters such as attending a meeting or interview. 5.0 Recommendation and Conclusion

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On the external front, Firefly continues to face stiff competition from AirAsia, the Low Cost Carrier market leader in this region. AirAsia has many strengths including a powerful brand presence, high efficiency and strong online services. Also, Firefly’s hub, the Subang Airport has poor public transport services, causing inconvenience to customers. FireFly could do more promotions like its competitors to attract more customers such as half price promotion. Customers are always on the look to get promotional prices. Firefly could provide transportation services such as cab rental for customers who live near or far to ease travelling. Firefly should provide a shuttle bus service to and from the Subang Airport, leading to ancillary income and boosting its Community Airline image. It is recommended to have shuttle buses to and from the nearest train or LRT stations for the convenience of customers. Firefly will need to continue improving itself internally. The main areas identified are in marketing and sales of tickets especially through the internet, strengthening its brand awareness and also its on-time arrivals and departures. Firefly needs to improve on on-time flights as it will not only improve Firefly’s branding and perception but it will save significant amount of money due to inefficiency and downtime and reduces airport charges. It is recommended that achieving on-time flights be made an index in employee performance and perhaps have a monthly incentive tied to this performance indicator. On-time flight information can then be displayed on Firefly’s website, indicating Firefly’s commitment to promise customer satisfaction. Consequently, with improvement in efficiency and passenger comfort, Firefly can improve its market share while maintaining profitability. Firefly can also conduct more awareness campaigns to inform the mass that Firefly offers value travel, while maintaining comfort. Once a brand reputation of low fare airlines has become embedded into the minds of consumers, 65% of those passengers travelling on a low cost carrier surveyed did not look at any other carrier when booking their travel (O'Connell & Williams 2005).

Firefly will need to actively study all routes and phase out non-lucrative ones. Firefly needs to wisely anticipate and penetrate these markets as soon the open skies in ASEAN are implemented. 10

Firefly has the opportunity of tapping further into medical tourism, working with tour operators and medical institutions to offer attractive packages. As a conclusion, Firefly needs to continue to re-position itself to be a clear choice for customers, by further improving passenger comfort and making its pricing comparable to its competitors while maintaining its tagline as a Community Airline. Understanding and making the best of these factors will assist Firefly to position and target its product better in future and it will be able to come out stronger.

(Total words : 2618)

7.0 References http://www.fireflyz.com.my/ Hill,T. (2005), Operation Management, Plagrave Macmillan New York. Waller, L.D. (2003), Operation Management, Gray Publishing Kent. 11

Doganis, R. (2006), The Airline Business, Routledge Publishing New York. Jones, T. (2007), Professional Management of Housekeeping Operations New Jersey. Brinkworth, C. (2016), SaleCycle Case Study: Firefly, https://www.iabaustralia.com.au/bigtent-blog/entry/salecycle-case-study-firefly-1 The Star (2014), http://www.thestar.com.my/news/community/2014/04/15/communityairline-turns-seven-firefly-marks-anniversary-with-relaunch-of-its-refurbished-lounge/ Slack, N., Chambers, S. & Robert Johnston, R. (2009), Operations Management, Prentice Hall New Jersey. Skytrax 2008, Airline Quality Forum, viewed 29 December 2008. O'Connell, JF & Williams, G (2005), 'Passengers' perceptions of low cost airlines and full service carriers: A case study involving Ryanair, Aer Lingus, Air Asia and Malaysia Airlines', Journal of Air Transport Management, vol. 11, no. 4, pp. 259-72. http://titan.apiit.edu.my/uctipagol/projectinfo.asp?txtID=TP012861

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