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Ref No: 3538
Title of the Case Study: “Going places together with closed airways”.
The purpose of this assignment is to identify, evaluate and propose solutions for a real life strategic problem of “Q – Airways”. The case study is prepared in order to critically evaluate the up risen strategic management problem of the closure of the Gulf – Egypt area FIR, focusing on the critical organisational situation of “Q – Airways”.
There are numerous limitations of the study, which include the reliance on limited secondary research and the focus on the impact of the closed airways.
The case study is focused on the Gulf Crisis and its potential impact on the “Q – Airways” operations. Being the national airline of Q-state, “Q-Airways” ’ successful story is marked by its reputation as one of the fastest growing carriers in the aviation industry (“Q – Airways”, 2017).
Under the leadership of the CEO “A. Al B” , “Q – Airways” has quickly become an award-wining carrier with a regional and global expansion strategy that leads to an average of double digit growth rate annually.
Recognition includes awards like Airline of the Year in both 2011 and 2012, Skytrax Airline of the Year, and other notable awards such as World’s Best Business Class, Best Business Class Airline Lounge, and Best Airline Staff Service in the Middle East, (“Q – Airways”, 2017).
The airline’s procurement and acquisition, research and development, operational and supply chain management strategies are aligned and coordinated to fuel the organization’s growth and expansion plans.
The initiatives include the purchasing of leading edge aircrafts, the proliferation of real-time tracking capabilities to meet and exceed ICAO’s Global Aeronautical Distress Safety System requirement, the arrangement of joint business ventures with British Airways parent company International Airlines Group.
The continued development of global network of international destinations, and the launch of premium lounges to match customer expectations.(“Q – Airways”, 2017).
However, recent emergence in the international relations in the Gulf region has the potential to dampen its growth and especially the closure of routes for the “Q – Airways” affected its performance significantly. These events are likely to affect the “Going places together strategy of Q – Airways”.
Due to the political and other differences between the Q-State and Saudi Arabia, UAE, Bahrain and Egypt have led to banning of “Q – Airways” in the airspace of Bahrain, Saudi Arabia and UAE. The breakdown was announced on June 5th 2017.
These actions have been seen to largely affect Q-state and especially “Q – Airways”. These countries banned “Q – Airways” to use the airways in the GCC – Egypt – Yemen airspace. The closure of airspace to Q-state has seriously affected “Q-airways’ connections with other countries.
To avoid the restricted airspace, many flights have to be re-routed and adopt lengthy detours by diverting to Iran and Turkey. One of the first effects was that “Q – Airways” had to cancel many daily flights to the GCC countries. To Saudi Arabia alone, “Q – Airways” cancelled daily over 100 flights (Aljazeera, 2017).
Strategically, “Q – Airways” is facing now a number of problems. Closed airspace of these countries is a strategic problem as “Q – Airways” announcement “Going places together” is directly affected due to reduced destinations, flight time and endurance limitations jeopardizing the future of this airline.
Usually, countries work together in an alliance to help each other in various activities that are useful to the government and its assets and investments. In the case of Q-state, the relationship and union that it had with these counties, allowed for Q-state to make use of the airspace of Bahrain, Saudi Arabia and UAE (Anthony Taylor, 2017).
The airspace belonging to Bahrain and Saudi Arabia are vast and cover a large area where “Q – Airways” relied upon for the European, America and Africa destinations.
With the severing of diplomatic ties, “Q – Airways” now has to take longer routes, which are costlier, in terms of time and money, and is leading to a reduction in the number of customers and cargo using “Q – Airways”, due to aircraft performance limitations (Anthony Taylor, 2017).
Another strategic problem that “Q – Airways” is facing is in the loss of its largest market. Saudi Arabia and UAE used to be the biggest market for “Q – Airways”. To understand the magnitude of this strategic problem, it must be understood that Saudi Arabia and UAE together make up for 70% of the market of “Q – Airways”.
Closure of these destinations grounded 40% of the 49 airplanes of the A-320 fleet. Also the company lost all these customers that were followers of “Q – Airways”.
Such a loss will affect the company’s profits as well as the cost of operation, which due to alternate routes go higher over time, fuel and operating hours (Anthony Taylor, 2017). Both the top line and bottom-line of the income statement is going to get a hit as a result of this ban.
The closure of airways is going to cause many strategic and business problems for the “Q – Airways”; this mini-case aims to highlight the important potential problems for the organisation. (News.Com.Au, 2017).
The first problem is that the fleet time of its flights will be increased due to longer routes which will require higher monitoring of aircraft, a higher amount of fuel and higher operational costs as well in the form of fuel, maintenance and salaries of the employees.
Moreover, the longer flights also increase the risk of diversions, which is possible due to the weather or Air Traffic restrictions.
“Q – Airways” will also need to decide on its operational areas in terms of geography and it will need to change its operational priorities because some of its routes have been closed and some others have become unattractive due to longer duration.
The operational costs are also likely to be hiked because of the number of planes that are not going to fly each day due to the costs imposed by the respective airports (Airbus A-320 fleet).
Therefore, it requires a strategic shift from the top management in the terms of geography in order to find reasonable routes, which can yield profits and growth for the “Q – Airways”.
These conditions suggest a significant cut in the profitability of the company in the near future, which will also affect its financial and strategic position that it has gained over the years. Core competitors of “Q – Airways” in the Gulf region i.e. Emirates and the Etihad Airways will be yielding the benefits from the demise of “Q – Airways”.
The rise of its competitors means that the “Q – Airways” is going to lose its strategic position if strategic planning and implementation are not performed to cope up with the new situation.
Besides the strategic problems related to the operations and financial performance of the “Q – Airways”, the company is also expected to face hindrance from customers for its long haul flights.
The customers will not prefer to take longer flights for same distances; it provides another competitive edge to the competitors. Even if the “Q – Airways” starts charging lower, it will still cause problems because business customers are the main audience of the airline and they may not prefer prolonged flights.
Secondly, the reduction in prices will have another hit on the top line of the income statement of the “Q – Airways”. Therefore, it may not be a reasonable option for the management of “Q – Airways” to reduce the prices. It suggests another strategic problem for the management leading from the same cause.
The above case discussion on the “Q – Airways” suggests that the airline is facing problems due to the macro economic or international issues.
Though there is no strategic mistake or weakness of the company that is leading to severe consequences, country’s relations with neighbours and other countries have the potential to cause problems for businesses, as evident from the case. As “Q – Airways” has identified the potential issues that can be faced and is severe in nature, the airline needs to shape its strategies accordingly.
Based on the given status, the following questions arise:
- Do you think that partial opening of airspace is sufficient to address the emerging problems for “Q – Airways”?
- May existing partnerships be the key – solution in a crisis management situation?
The readers are expected to answer these questions using the strategic management concepts and models in order to enhance their knowledge on the subject and resolve the strategic issues in a real organisation situation strategic problem.
Part 2 – Briefing Note
The main purpose of this brief note is to resolve the case study formed earlier i.e. “Going places together with closed airways”. As evident from the case study, the strategic problems have arisen for the “Q – Airways mainly due to the Gulf crisis.
The major organizational problem that will lead from this event is operational in nature because financial and marketing problems are a result of highlighted operational problem. Therefore, the purpose of this briefing note is to propose possible solutions to the operational problem using the models and theories pertaining to the strategic management.
Before the strategic solutions are proposed, the diagnosis of the problem is highly important. It must be noted that
“Q – Airways” is not able to solve the problems by the employment of its internal resources or by expanding the internal resources. The solution is possible by a strategy that is going to utilise external sources either by shaping its corporate strategy or by changing its strategic positioning. Any similar measure can be helpful for the “Q – Airways” to avoid the worst case scenario of bankruptcy.
The first possible option available to the “Q – Airways” is to devise its corporate strategy by selecting among merger, acquisition and strategic alliance (horizontal alliance).
The first possible option is merger; in this case, the “Q – Airways” can be merged in the name of another company where the profits are shared between the shareholders of two entities (Grant, 2016).
This option is not feasible given that the registration number of airplanes has also been blocked and they cannot be leased or operated in those countries.
Another option in the context available to the “Q- Airways” is the horizontal alliance with any of its competitors. The strategy can be useful by employing the airplanes of other airline for countries including Saudi Arabia, Bahrain and UAE.
On the other hand, the airplanes of “Q – Airways” can be used for the flights to other countries. Capron and Mitchell (2010) conducted an in-depth analysis of……….
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