Australian Airline Qantas Decision Making Case Study

Introduction

The economic situation in the world has been rather unfavorable lately, which has resulted in many leading airlines going through the state of crisis. Australian Qantas happens to have found itself among them. Therefore, the company’s CEO Alan Joyce is expected to work out an anti recessionary solution and take the necessary steps for its realization. The idea under consideration implies selling Qantas’ frequent flyer program which is designed to redeem not only free flights but also a range of goods from various partner companies. Although the program is acknowledged to be the company’s most precious resource and could help the airline to earn funds, the decision is most likely to have certain drawbacks which might entrain the opposite effect in the times to come.

Types of Decisions

To avoid tackling potential problems, it is necessary to choose an approach aimed to assist in making the right decision. However, before it is done, it is reasonable to define the type of decision to be made. The first opposition is strategic vs. operational. Moshal (2012) describes strategic decisions as crucial for the existence, the earning power, and the achievements of the enterprise. Such decisions appear, therefore, risky. Making these decisions tends to involve employing more assets, applying comprehension and knowledge as well as using outward opportunities, and minimizing outside threats. For the effect of strategic decisions proves to be durable and irreversible, they have a significant impact on the administration. Any strategic decision comprises a chain of operational decisions that are more particular, practical, and short run. Hence, based on the explanation, it is possible to conclude that the decision which Qantas’ CEO is supposed to make is a strategic one.

The second opposition is programmed vs. non-programmed. According to Moshal (2012), programmed decisions are the ones that are acknowledged to be triggered to solve typical problems that happen to occur systematically, for instance, employing new personnel, supplying materials and equipment, paying the rent and salaries. There happens to exist an algorithm to deal with this sort of issue, and once it is detected, the algorithm is applied to cope with it. Since programmed decisions are constantly made, the technique associated with their resolution proves to be rather understandable. (Moshal, 2012). By the above-said, it is possible to admit that the decision in question is not a programmed one.

As for non-programmed decisions, they are accepted to be made in very special cases. There appears to be neither background knowledge nor algorithm to cope with them. Apart from that, all data necessary for a solution elaboration is expected to be collected. These changeable matters may involve undertaking expansion abroad, entering a niche market, launching a pilot project. This type of decision proves to be the executive right of top-level management because they tend to imply having powerful administration skills and the ability to work out solutions using imagination, inventing new methods, and accounting for whatever effects the solution might have (Moshal, 2012). This description is in line with the situation, so a non-programmed decision is to be made.

Rational Approach: Steps

According to Moshal (2012) and Koudri (2011), the steps to take in the course of rational decision making are 1) detecting the problem and understanding it, 2) defining goals and gathering information, 3) outlining possible solutions and estimating them, 4) choosing the best decision, 4) accomplishing it, and 5) making necessary amendments.

The problem can be characterized as financial: “the airline posted a first-half net loss of $235 million” (Gilder, 2014, para. 14), and “the depreciation of the airline’s aging fleet, mass redundancies, and other write-downs are tipped to add $450 million to already heavy losses” (Ironside, 2014, para. 2). Therefore, the goal is to overcome the current crisis. The information available about the program is as follows: it “has hundreds of program partners including 38 partner airlines, all major banks” (“Australia”, 2014, para. 9), “the loyalty division reported a record underlying profit of $146 million” (Gilder, 2014, para. 14), the program “has been valued at up to $3.6 billion” (Gilder, 2014, para. 5).

In the considered case, possible decisions are, first, to sell the whole frequent flyer program, second, to “sell the rights to the program for about half the mooted price and retain the remainder in a joint venture” (Gilder, 2014, para. 17), and third, not to sell the program and “to find more ways to reduce their cost base which was higher than those of its competitors” (Ironside, 2014). To choose the decision, it is necessary to estimate internal strengths and weaknesses as well as to take into account possible external opportunities and threats of all three alternatives. The main advantage of selling the program is expected to be an immediate gain, whereas the major drawbacks are supposed to be “abandoning the most loyal clients” (Ironside, 2014, para. 10) and having further difficulties in “getting those seats” (Ironside, 2014, para. 11). This information provides an analytical basis for decision making. Once chosen, it is supposed to be implemented, and amendments are expected to be made if necessary.

Approaches: Rational vs. Intuitive

Kourdi (2011) states that “how people make decisions depends on the individual experiences” (26). The rational approach is acknowledged to comprise a succession of actions that will bring about the necessary result. This approach is expected to arrange for a mere structure: estimating the case, identifying possible solutions, making a decision, accomplishing, overseeing the results, and making necessary amendments. If rationality is focused on, an inventive constituent tends to be missing. Yet, a decision making might call for imagination and intuition. (Kourdi, 2012). The experienced CEO is likely to choose rationality, as it is data-based and proves possible of estimation. As for a new CEO with no relevant background in the segment, it might find it difficult for him to take the rational approach, as it requires analyzing a substantial amount of new information and using skills and knowledge which have not been gained yet. However, a fresh glance at the situation and administrative experience in a different sphere might involve perceptiveness, so the approach to adopt for a new CEO is an intuitive one.

Conclusion

To sum up, it is necessary to underline the key outcomes of the above-said. First, the situation described in the case requires making a strategic non-programmed decision, since it is unique and there is not an algorithm for its implementation. Second, if the rational approach is chosen, the steps to take are as follows: detecting the problem and understanding it, defining the goals and gathering information, looking into possible decisions and estimating them, choosing the best decision, accomplishing it, and making necessary amendments. Finally, the experienced CEO is supposed to address the problem with a rational approach, whereas a new CEO with no background in the segment is expected to take an intuitive approach.

References

Australia: Qantas frequent flyer hits 10 million member mark. (2014). Mena Report. Web.

Gilder P. (2014). Loyalty faces cloudy. Weekend Gold Coast Bulletin. Web.

Ironside, R. (2014). Qantas warned to ground plans to sell frequent flyer program. The Gold Coast Bulletin. Web.

Kourdi, J. (2011). Effective Decision Making: 10 steps to better decision making and problem solving. Singapore: Marshall Cavendish.

Moshal, B. S. (2012). Principles of management. Cranbrook, Kent: Global Professional Publishing.