Essay About Classic Airlines Scenario And Chief Executive Officer

Classic Airlines Scenario
Classic Airlines Scenario
University of Phoenix Material
SCENARIO: CLASSIC AIRLINES
Company Overview
The worlds fifth largest airline, Classic Airlines, commands a fleet of more than 375 jets that
serve 240 cities with over 2,300 daily flights. In the 25 years since its inception, Classic has grown
to an organization of 32,000 employees, and last year, it earned $10 million on $8.7 billion in
sales.
Though profitable, Classic is no stranger to the challenges that plague today‘s airlines. Increased
uncertainty about flying has affected industry stock prices, and Classic has seen a 10% decrease
in share prices in the past year. With a concerned investment community on the watch, the airline
industry operates under a microscope, subject to scrutiny from all sectors. Not surprisingly, the
negativity from Wall Street, the media, and the public has affected employee morale, which is the
lowest it has ever been.
Consumer confidence also appeared to be waning. By January 2005, Classics declining Classic
Rewards program measured a 19 percent decrease in the number of Classic Rewards members,
and a 21 percent decrease in flights per remaining member. Loyal customers were jumping ship
and the ones still aboard seemed to be flying less frequently — or at least less frequently with
Classic Airlines.
Rising costs, particularly of fuel and labor, have limited Classic‘s ability to compete for the valued
frequent flier. Although the travel downturn that followed September 11, 2001 has subsided,
Classic and many of its rivals overestimated the reversal and expanded too quickly. Now, these
companies face a restrictive cost structure that younger airlines do not.
To counter any further financial crisis, Classics Board of Directors recently mandated a 15
percent across-the-board cost reduction over the next 18 months. Within that mandate, Classic
must still find a way to beef up its frequent flier program with methods that will demonstrate a
measurable return on any investment (ROI). While the board is playing their cards close to the
vest, the rumor mill is churning with word that if Classic cannot meet the reduction, the company
faces bankruptcy.
Attachments:
A: Financial statements (past two years)
B: Chart of stock prices (past two years)
C: Cost reduction plan by department
Key Players
Amanda Miller, Chief Executive Officer (CEO): Amanda was hired as Senior Vice President of
Operations in 2000 and groomed to take over as CEO following the retirement of former CEO
Jack Broadway in 2002. Prior to that, Amanda was CEO of Jackson Energy, the leading utility
provider to the Southeastern United States. A graduate of a leading business school with an Ivy
League JD, Amanda had a private law practice before going corporate. Her pragmatic approach
to operational excellence often leaves her little patience for “soft” business disciplines such as
marketing.
Catherine Simpson, Chief Financial Officer (CFO): More than 20 years ago, Catherine
graduated business school and immediately began work as Classic‘s financial analyst, ultimately
working her way up to CFO. Catherine is “driven by numbers,” and her practical philosophies
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about business are frequently in line with Amandas.
Kevin Boyle,