Airline

Reorganization of the Sales processes in the Gulf for Air France-KLM

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Chapter One: Introduction

1.0. Introduction

Air travel is indeed, one of the largest and fastest growing industries in the world. It is of

utmost importance to a number of countries for it facilitates economic growth, world trade,

international investment and tourism. It is then because of this that the travel industry has

increased its role in the process of globalization that is occurring in almost all other industries

(The Airline Industry, 2009). In the past decade, traveling by air has increased by 7% per year

due to the rising number of people who have engaged in either business or leisure travels (The

Airline Industry, 2009). Of these two purposes of travel, however, more people engage in leisure

trips. For this reason, airlines began the development of large aircrafts in order to make it more

convenient and affordable for people to travel to new and exotic destinations (The Airline

Industry, 2009).

In a span of ten years (2000-2010), the International Air Transport Association or IATA

has estimated international air travel to grow by an average of 6.6% a year. This growth,

according to the said organization, is more visible and dynamic in the Asia-Pacific region

wherein trade and investment are steadily rising together with domestic property. On the other

hand, however, the main travel markets of the future, in terms of passenger trips remain to be

Europe, North America and Asia (The Airline Industry, 2009).

The abovementioned statement only shows that undoubtedly, the profitability of the

members of the airline industry is closely tied to economic growth and trade. It is because of this

that during the first half of the 1990s, the said sector suffered not only from worldwide recession

but also from the existence of the Gulf War (The Airline Industry, 2009). Because of such

difficulties experienced by the members of the airline industry during the 1990s, they began to

recognize the need for radical change in order to guarantee their survival and prosperity. Thus,

they began cutting down their costs in order to reduce capacity growth and to increase load

factors. Furthermore, airline companies also had to develop other initiatives which would allow

them to meet the demands of their customers. These initiatives usually include the provision of

better services to their customers, both on the ground and in the air. More or less, these also

include the provision of ticket less travel, new interactive entertainment systems and comfortable

seating in order to attract and retain the customers.

Without a doubt, the members of the airline industry have all increased their efforts in

order to properly respond to the changes in their environment. This then becomes the core factor

that has been taken into consideration in the field of airline management which would play a

central role to this research. Taking the said concept into consideration, this research is then

aimed towards the discussion of the different initiatives and processes adopted by Air France-

KLM in the Gulf Region in order to enhance their sales processes.

1.1. Background of the Study

The airline industry is currently affected by a number of factors that threaten their operations.

For instance, the poor economic times have negatively affected their operations. The high

operational costs have significantly reduced the market size due to the effects of the global

economic melt down as well as the uncertainty that defines oil prices. Because of this then, it is

without a doubt that members of the airline industry are operating in an environment that is hard

to predict and very costly. The inability of the airline companies to give paramount consideration

to strategic planning could more or less lead to their bankruptcy. For this reason, the

performance of corrective actions is necessary so as to ensure the generation of value by the

airline (FTP, 2009). The said initiatives include the development of cost cutting systems and

innovative approaches that are aimed towards the attraction of customers and increasing their

loyalty in order to ensure the success of the airlines’ operations. Beiske (2002) further states that

the said the success of the airline industry must be firmly anchored upon the following factors to

guarantee the loyalty of their customers which is essential to their business: (1) customer service;

(2) frequent flyer programs; and (3) complaint management.

Taneja (2008) stated that the environment of the Gulf Region tend to present a number of

opportunities that the members of the airline industry can take advantage of. This include its

perfect geographic location, high traffic growth, the sufficient aircraft and airport capacity, the

availability of large amounts of capital investment, the integrated management of aviation and

tourism supply chain, robust expansion, and the drive to create an alternative to oil production.

On the other hand, however, the global economic crisis remains a negative factor that threatens

the stability of the members of the said industry. This research is then aimed towards the

examination and analysis of Air France-KLM in the Gulf Region with regard to the manner by

which they manage their operations in order to sustain their profitability and sustainability

despite the challenges of the global economic meltdown.

This is because of the fact that as earlier mentioned, in reference to the work entitled ‘The

Airline Industry’ (2009), the profitability of the said sector is greatly dependent upon the

initiatives that they adopt in order to attract and retain customers. The corporate website of Air

France-KLM stated that they are constantly improving their services in order to tap the biggest

markets of Europe, Asia and the Americas in order to guarantee their development (Air France-

KLM, 2009). It is in line with this that they increased their operations in the Gulf Region in order

to take advantage of the economic success of the said region. However, the website of Air

France-KLM (2009) reports that they are currently facing intense competition with the gulf

carriers.

The strong competition is generally brought about by the following factors: (1) the

financial support given to these carriers by their local states, thus providing them with services

such as airports, civil aviation authorities, airport and navigation charges, and complementary

infrastructure and (2) the existence of a favorable tax environment i.e. absence of corporate tax

and social security charges. This particular situation then points to the main subject of this

research. True enough, while the airlines undergo initiatives aimed towards their attainment of

sustainable development, a number of factors continue to negatively affect the former, thereby

requiring them to put more effort in order to improve their services.

1.2. Problem Statement

As earlier stated, the changes in the environment wherein airline companies operate have

greatly affected their operations. These changes were both positive and negative in nature. Most

of the time, however, the negative factors tend to outnumber the positive ones. Furthermore, it

was earlier showed that the local factors in a certain region also tend to cause the misalignment

of the initiatives of the foreign airline companies as governments tend to show paramount

support to the local carriers. Hence, it has been relatively difficult for the members of the airline

industry to take advantage of the positive changes due to the inability of the companies to lessen

their vulnerability to the said risks. Taking the experience of Air France-KLM in the Gulf

Region, it has been noted that it has been relatively difficult for them to take advantage of the

growing economy of the countries contained in this geographical area due to the unfair

competition existing between them and the other Gulf Carriers. It is in line with this that the

following research questions shall play a central role to this research:

1. How does Air France-KLM apply the concepts related to airline management?;

2. What are the programs established by Air France-KLM in order to ensure the proper

management of their business operations?:

3. How does airline management affect the operations of Air France-KLM?;

4. What are the initiatives adopted by Air France-KLM in order to ensure their proper

operations in the Gulf Region?; and lastly,

5. What are the opportunities and challenges faced by Air France-KLM in the Gulf Region?

1.3. Objectives of the Research

The main objective of the study is to determine the exact position of Air France-KLM in

the Gulf Region by analyzing its internal system and the nature of the macro environment to

determine opportunities and the threats that the organization is faced with. In general, this

examination and analysis are firmly anchored on the strategies developed by the said

organization in order to increase their profitability in the Gulf Region. More specifically it also

aims to determine the following:

1. To analyze how Air France-KLM applies the concepts related to airline management.

2. To look into the programs established by Air France-KLM in order to ensure the proper

management of their business operations?;

3. To determine how airline management affects the operations of Air France-KLM?;

4. To analyze the initiatives adopted by Air France-KLM in order to ensure their proper

operations in the Gulf Region; and lastly,

5. To examine the opportunities and challenged faced by Air France-KLM in the Gulf

Region.

Aside from the abovementioned, this research is also aimed towards the acceptance or

rejection of the following hypotheses, as derived from the research questions earlier enumerated:

Null Hypothesis 1: Air France-KLM does not apply the concepts related to airline management.

Alternative Hypothesis 1: Air France-KLM applies the concepts related to airline management.

Null Hypothesis 2: The programs established by Air France-KLM do not ensure the proper

management of their business operations.

Alternative Hypothesis 2: The programs established by Air France-KLM ensure the proper

management of their business operations.

Null Hypothesis 3: Airline management does not affect the operations of Air France-KLM.

Alternative Hypothesis 3: Airline management affects the operations of Air France-KLM.

Null Hypothesis 4: Air France-KLM does not adopt initiatives in order to ensure their proper

operations in the Gulf Region.

Alternative Hypothesis 4: Air France-KLM adopts initiatives in order to ensure their proper


Null Hypothesis 5: Air France-KLM does not experience opportunities and challenges in the

Gulf Region that affect their operations.

Alternative Hypothesis 5: Air France-KLM experiences opportunities and challenges in the Gulf

Region that affect their operations.

1.4. Significance of the Study

The significance of this study lies on its capacity to determine the importance of airline

management to the members of the air travel industry. More specifically, this study is

advantageous to Air France-KLM, a company that seeks to further strengthen their position in

the world as one of the most successful airline companies in the world as they enter into

operations in the Gulf Region. However, as repeatedly pointed out in the foregoing sections of

this chapter, Air France-KLM tends to face a number of negative experiences that prevent their

profitability in the said region. Aside from the aforesaid, the significance of this particular study

can also be perceived from its capacity to propose changes to the members of the airline industry

in order to ensure their profitability despite being subject to a number of negative factors.

1.5. Scope and Limitations

This study covers the management and strategies being adopted by Air France-KL as

they begin their operations in the Gulf Region. In addition to this, the following are the main

topics that this study shall look into:

1. The organizational process and structure relative to the nations that Air France-KLM

operates in;

2. The business demographics in the nations wherein the airline operates in;

3. The evaluation of data regarding processes and undertaking a research to determine vital

processes that have to be kept local;

4. Developing a proposal that seeks to set up a common unit for all countries;

5. Determining the financial cost and benefits; and lastly,

6. The rolling out and development of an evaluation plan.

1.6. Organization of the Study

This dissertation is composed of five chapters in order to facilitate a better discussion of

the topic at hand. These chapters are the following: (1) Introduction; (2) Literature Review; (3)

Methodology; (4) Analysis, Results and Discussions; and (5) Conclusions and recommendations.

The first chapter, as clearly stated, is devoted to the provision of necessary concepts that

are important to the study.

The second chapter then presents the findings obtained by the researcher from the

literature review conducted.

The third chapter, on the other hand, discusses the methods used by the researcher in

order to obtain pertinent information with regard to the main issue of this research;

Chapter four then presents the analysis, results and discussions obtained by the researcher

with regard to the topic at hand.

The fifth and last chapter then provides the conclusion to the study as well as the

recommendations that the researcher deems necessary for Air France-KLM, in the betterment of

their practices related to airline management and for future researchers who wish to undertake

the same study.

1.7. Summary

This study is devoted to the discussion of the concepts and principles related to airline

management. As previously stated in the foregoing paragraphs of this chapter, the airline

industry is heavily dependent upon economic growth and development. It is then for this reason

that the presence of a global economic meltdown has threatened these businesses. Generally,

airline companies have undergone a number of initiatives by which they could ensure their

sustainability and profitability despite being caught in the midst of a financial crisis. One of the

said initiatives is usually concerned with the provision of better services to the customers in

order to attract and retain them. However, still a number of problems exist that prevent the

continuous entry of revenues into their companies. Furthermore, local situations that have been

tapped by these companies tend to cause the misalignment of their business initiatives. This

study is then aimed towards the analysis of the initiatives of Air France-KLM and how they

adopt the concepts and principles of airline management. The next chapter then discusses the

literature reviewed by the researcher in order to provide a solid ground by which this research

shall rest on.

Chapter Two: Literature Review

2.0. Introduction

The second chapter of this dissertation has been devoted by the researcher to the review

of extant literature concerning airline management and how its concepts apply to the experience

of Air France-KLM in the Gulf Region. This paper is then divided into the following sections in

order to ensure a better flow of discussion with regard to the topic at hand: (1) introduction, (2)

summary of the organization that includes organizational structure, culture, innovation and

communication, market presentation and recent performance; (2) summary of the operational

environment, taking into consideration the social, industrial, economic, political and

technological trends; (3) the tools by which the organization may be studied such as PEST,

Porter’s Five Forces, SWOT Analysis and Marketing Mix; (4) strategic planning; and (5)

summary.

The first chapter presents a definition of airline management that shall be applied

throughout the entire research. As stated, airline management refers to the manner by which the

members of the airline industry align their goals in order to achieve their ultimate objective; that

is, to sell the right seats, to the right person, at the right time (Yu, 1998). Shaw (2007), on the

other hand, enumerates the following principles as of utmost significance to airline management:

(1) the customer, (2) the marketing environment, (3) strategy formulation, (4) product design and

development, (5) pricing and revenue management, (6) distribution channel selection and

control, and (7) selling, advertising and promotional policies. Without a doubt, a number of

factors have significantly affected the said industry and this is the reason why airline

management are of paramount importance nowadays in order to prevent the bankruptcy of the

members of this particular industry. Thus, the concepts enumerated by Shaw (2007) are worthy

of note in the discussion of airline management and how this is practiced by Air France-KLM in

the Gulf Region. The topics contained within this literature review shall thus be discussed both

from the general and specific perspectives. General, in a sense that it would cover an extensive

discussion with regard to the topics earlier enumerated; and specific, as these concepts shall be

applied to the experience of Air France- KLM in the Gulf Region in order to determine the

manner by which they operate.

2.1. Summary of the Organization

As stated in the introductory portion of this chapter, the first section is devoted to the

summary of the organization wherein this study shall focus on: Air France-KLM in the Gulf

Region. To understand the said organization, the succeeding paragraphs shall highlight the

following factors: Organizational Structure, Culture, Innovation and Communication, Market

Presentation and Recent Performance. Through the extensive discussion of the aforementioned,

the researcher expects to gain a better understanding regarding the manner by which the

organization manages its businesses in order to achieve the objective of their company.

2.1.1. Organizational Structure. The first factor that is highlighted with regard to the

discussion of Air France-KLM in the Gulf Region is concerned with the structure by which the

company is organized. The researcher believes that the organizational structure of the company

in question must be taken into consideration as this is of paramount importance in analyzing

management strategies, especially those that have undergone mergers, as in the situation of Air

France-KLM. According to Bouchikhi and Kimberly (2007), there are usually four identity

integration models that offer alternative approaches to making one organization out of many. In

general, each of the said models is a representative of certain trade-offs between how to deal

with historical identities in building a common future, a necessity for merged companies in order

to help them achieve their goals when implemented consistently, Bouchikhi and Kimberly

(2007) argued.

Mergers and Acquisitions tend to commit two common mistakes in post-merger

integration. The first one is concerned with the involuntary ignorance of identity as they

formulate their post-merger organizational design and management structure. According to

Bouchikhi and Kimberly (2007), leaders tend to focus only on the strategic and operational

alignment of their merged companies without taking into consideration the implications of these

on the identities of their organization. Naturally, an organizational plan that disregards the

historical identities of the companies involved will not result to a successful endeavor. Aside

from this, another mistake commonly committed is concerned with use of language from one

model yet pursues integration from another. More or less, this is referred to as the colonial

approach by which the autonomy and identity of the company being acquiesced tend to be

compromised for it loses its autonomy to the other organization with the bigger share (Bouchikhi

and Kimberly, 2007).

While the aforementioned are the common mistakes regarding organizational structure as

established amongst merged companies, Bouchikhi and Kimberly (2007) cited the experience of

Air France-KLM as a successful endeavor based on the statement of Jean Cyril Spinetta, the

CEO of the Air France-KLM combination. The merged company was able to restructure their

organization in a sense that they never took their historical identities for granted in order to

ensure viable and dynamic balance between theoretical synergies and organizational realities.

The claims of Bouchikhi and Kimberly (2007) are then supported by the work of Laws, Prideaux

and Chon (2007) that also affirmed the capacity of the said merged company to give paramount

importance to integration as a process; therefore, there is a need to reconcile the strategies with

their historical identities.

In order to further illustrate this concept, Bouchikhi and Kimberly (2007) cited the

statement of the company’s CEO who said that their organization does not rule out upfront all

those factors that create value for they relied on value creation by which the success of their

organization will be firmly anchored on. It is in line with this then that their organization has

created ten task forces (one dealing with cargo, the other with passenger business, others with

local branches, maintenance, IT, etc) in order to determine those areas where cooperation

opportunities exist. Aside from this, it was noted that the organization has also established a

strategic management committee in order to drive their alliance. From the said statement, one

can see that Air France-KLM adopts an organizational structure that transcends the classical

view of such, thereby guaranteeing the success of the programs they adopt concerning business

practices.

2.1.2. Culture. Having looked into the organizational structure by which the company

operates, this research then looks into the culture that prevails over the manner they conduct their

businesses. Azevedo and Pomeranz (2008) as well as Bouchikhi and Kimberly (2007) cited the

importance of culture in companies that have merged just like that in the case of Air France-

KLM. Despite being merged with one another, both Air France and KLM decided to maintain its

brand, identity and culture in order to render efficient service to their customers. According to

Azevedo and Pomeranz (2008), the value given by these companies to culture is most notable

with regard to their establishment of a common loyalty program in April 2005, the first time two

leading European companies merged an initiative of that form in order to create a single one.

Basically, the said program was aimed to accomplish the following: (1) show the benefits of their

merger to the travelers, (2) emphasize local client satisfaction, (3) capture and generate more

value, and lastly, (4) to reduce costs (Azevedo and Pomeranz, 2008). Basically all these were

developed in order to ensure their customers of better services thus encouraging them to fly with

Air France-KLM.

The success of the said programs was also illustrated by Azevedo and Pomeranz (2008).

According to them, the following figures testify the said efficiency: (1) the increase in the

number of members from 10 to 11.2 million (thus showing a twelve percent increase); (2) the

program member activity rate increased from forty four percent to fifty eight percent; (3) rates of

turnover decreased (from 8.1 percent to 6.8 percent); (4) there was a true e-change success; and

(5) costs invested by asset have been rationalized by 2.5 percent. Without a doubt, culture is

needed in order to ensure the success of the programs adopted by members of the airline industry

with regard to the management of their businesses. As seen from the discussion presented,

retaining the culture of the organization is of paramount importance for this could increase the

number of customers and at the same time helps them in maintaining their loyalty towards a

certain business (Azevedo and Pomeranz, 2008).

The importance of culture to a certain organization has also been highlighted by the

discussions made by Finkelstein, Harvey and Lawton (2006). According to them, mergers and

acquisitions are usually undergone in order to expand a certain company’s horizon. However, in

order to reap the benefits of the said action, they must be able to establish markets and

restructure according to the needs of the customers. Finkelstein, Harvey and Lawton (2006)

noted that in order to accomplish the abovementioned, it is of utmost significance that a company

must be able to remain intact with its customers prior to the merger. Thus, the need to retain the

culture of a company prior to its merger with another is once again highlighted.

2.1.3. Innovation and Communication. Other factors that are central to the discussion

of the manner by which Air France-KLM in the Gulf Region carries out their management

strategies and objectives are innovation and communication. Azevedo and Pomeranz (2008)

earlier noted that the culture is important in a certain company for this allows the latter to remain

intact with its customers. This is more significant with regard to those companies that have been

subject to mergers and acquisitions, such as the experience of Air France- KLM. According to

Azevedo and Pomeranz (2008), innovation and communication are important to these companies

as it allowed them to properly determine the needs of their customers, and from these, satisfy

their needs.

2.1.4. Market Presentation.

The market for the services of the members of the airline industry must be taken into

consideration as they develop their strategies with regard to the proper operation of their

businesses (Shaw, 2007). It is in line with this that they must be able to take a number of factors

into consideration in order to determine the most appropriate way by which they could present

themselves to the market. Shaw (2007) enumerates the following factors as the necessary issues

that airline companies must take into consideration: (1) transportation, (2) communication, (3)

leisure, (4) logistics, (5) information and (6) selling services. Aside from this, Shaw (2007) also

reiterated the need for airlines to closely determine who their customers are. In this regard then,

they will be able to determine the needs of the customers and thus provide them with these,

making their businesses successful. Moreover, their constant regard for the identification of the

customers would also allow them to choose the most suitable way by which they could market

their services to the targeted population.

2.1.5. Recent Performance. The recent performance of Air France has been described by

SAM Research AG (n.d.). According to the research produced by the certain organization, Air

France-KLM is the largest airline company in the world in terms of their total operating

revenues. Aside from this, the company is also the third largest in the world in terms of

passenger-kilometers and passenger fleet size (SAM Research AG, n.d.). In general, the success

of the said company can be attributed to the successful merger of its components (Air France and

KLM). More specifically, SAM Research AG (n.d.) also attributes the said success of the

company to their proper establishment of initiatives that deal with the following areas: (1)

passenger transportation, (2) cargo, (3) aeronautics maintenance catering, (4) charter services,

and (5) other air-transport related activities. Without a doubt, Air France- KLM has undergone a

number of initiatives by which they could improve the services they render to their customers. In

the same manner, the success of the abovementioned can also be highly correlated with the fact

that both Air France and KLM were able to maintain their own cultures and identities even after

undergoing through the processes of mergers and acquisitions.

2.2. Summary of the Operational Environment

This section of the literature review is then devoted to the discussion of the environment

wherein Air France-KLM operates, taking into consideration previous researches that looked into

the social, industrial, economic, political and technological trends. More specifically, this section

shall also provide details with regard to the common trend in the Gulf region to which Air

France-KLM is subject to.

2.2.1. Social Trends. Shaw (2007) notes that in order to properly look into the operational

environment, one must first look into social factors that influence the latter. The following are

usually, in general, the social factors that influence the airline industry where Air France-KLM is

a part of: (1) the ageing population, (2) changing family structures; (3) the changing tastes and

fashions in holidays; (4) the uncertain and deregulated labor market; and (5) the female business

traveler. These social factors shall be discussed in detail in order to gain a better understanding

of such. The said discussion shall then be anchored on the work of Shaw (2007) but will

incorporate the findings of other researchers.

Ageing population. Shaw (2007) considers ageing population as a general factor that

affects the members of the airline industry. The ageing population has some notable implications

with regard to the manner by which members of the airline industry market their services and

products. Without a doubt, the term ‘ageing population’ refers to the fact that more people live

longer. In this sense, Shaw (2007) believes that airlines must cater to the needs of these

customers. Hence, they must provide special services and attention to those who are disabled and

need medical help. Furthermore, Shaw (2007) noted that this could also imply a number of

changes that the travel industry must undergo regarding promotional policies. Because their

customers are in general, part of the ageing population, they must shift away from their

promotions that focus on images that appeal only to the fun-loving younger people for this may

discourage the older people from going to these destinations (Doganis, 2006).

Changing Family Structures. Shaw (2007) also mentions the change in the family

structures as another important factor that must be given utmost significance in their use of

promotions that would market their services. According to Doganis (2006), the travel industry

must accommodate the modern views of the family that simply transcends the picture of one

man, one woman and two children (a girl and a boy). Through the use of better promotional

measures, they will be able to somehow cater to the needs of the modern day .

Changing Tastes and Fashions in Holidays. Page (2003), Doganis (2006) and Shaw

(2007) all noted that travelers nowadays have their own requirements regarding the activities that

constitute their holidays. True enough, they are no longer after relaxation in a hotel and spending

their days sunbathing beside the pool. It is for this reason then that the airline industry must be

able to accomplish the so-called ‘de-packaging’ the package in order to give their passengers

more freedom in choosing the right vacation for them (Page, 2003). It is also for this reason that

airlines must not constrain their passengers with packages that make them a mere part of the

herd, following someone around (Shaw, 2007). Thus, airlines must come up with travel packages

that are compatible with the changing tastes and fashions of their passengers in holidays.

The Uncertain, Deregulated Labor Market. Shaw (2007) recognizes the fact that unlike

before, most employees are no longer experiencing job security. Most of the time, according to

Page (2003), those that enjoy travel are those that are employed in part time jobs or those that

have recently retired. For this reason, Doganis (2006) believes that it is of paramount importance

to ensure that the promotional activities of the airline companies are compatible with the needs

of this people.

The Female Business Traveler. For Shaw (2007), airline companies must be able to cater

to the needs of the business travelers, especially the women. This particular factor must be

significantly embedded on their promotions in order to ensure the effectiveness of the latter

(Shaw, 2007).

The abovementioned, although appropriate to the entire airline industry must be given

paramount importance by Air France-KLM as they operate in the Gulf Region.

2.2.2. Industrial Trends. Industrial trends are another group of factors that are essential to

the concept of airline management, Shaw (2007) stated. Basically, this would enable the

company determine their particular position in a certain industry, thereby devising their

strategies based on this standing, as compared with their competitors. Taneja (2008) noted that

companies operating in the Middle East must consider a number of factors in order to ensure

their proper operations; these are the following: (1) the perfect geographic location; (2) high

traffic growth; (3) sufficient aircraft and airport capacity; (4) the availability of large amounts of

capital investment; (4) the integrated management of aviation and tourism supply chain; (5)

robust expansion; and lastly, (6) the drive to create an alternative to oil production. Without a

doubt, Taneja (2008) believes that the Gulf Region is becoming a powerhouse for the aviation

industry. For this reason then, the airline companies operating in the said region must be able to

take advantage of these in order to ensure their success.

Aside from the abovementioned discussion in reference to the work of Taneja (2008),

Pershing, Stolovitch and Keeps (2008) highlights the importance of industrial trends as those

factors that significantly affect the entire airline industry as a whole rather than just one company

contained in such. According to the said authors, industry tends usually constitute the following:

(1) supplier bargaining power, (2) buyer bargaining power, (3) threat of substitutes; (4) intensity

of rivalry and lastly, (4) industry growth. The last factor had the most significant on the airline

industry for its growth is usually hampered by certain factors such as the continuously rising of

oil prices that obviously hamper the businesses of the different airline companies (Heinberg,

2005; Pershing, Stolovitch and Keeps, 2008).

2.2.3. Economic Trends. Shaw (2007) identifies economic trends as those that are

concerned with economic growth and the trade cycle. Without a doubt, economic situations tend

to significantly affect the businesses of the members of airline industry. Page (2003) stated that

the success of the airline industry is usually dependent upon the growth of the world economy.

Consequently, the decline of the world economy may pose significant implications to the airline

industry. Nevertheless, as Taneja (2008) mentioned, the aviation industry in the Gulf Region is

increasing due to the factors enumerated in the foregoing section. Hence, it is expected that

airline companies that will operate in this region will obtain more chances of increasing their

revenues and obtaining more customers.

2.2.4. Political Environment. Trends in the political environment must also be taken into

consideration. In general, this should include the analysis of the effects of the following to the

members of the airline industry, Shaw (2007) enumerates: (1) terrorism fears and political

instability; (2) deregulation and open skies; (3) marketing policies for a deregulated

environment; (4) privatization and state aid; and (5) allocation of airport slots. For Dibb and

Simkin (2005), these factors tend to pose either negative or positive implications to the airline

industries that may enhance or hamper their business operations. The abovementioned factors

that constitute the political environment that significantly affect the members of the airline

industry shall then be discussed in detail, as perceived by previous authors who have written with

regard to the said issue at hand.

Terrorism Fears and Political Instability. Undoubtedly, fears of terrorist attacks and the

instability of a political situation in a certain country can be disadvantageous to members of the

airline industry. The effects of this particular factor are demonstrated in the situation in the

United States of America following the terrorist attacks on the World Trade Center as well as in

Pentagon. The said effects led to a lot of losses for the members of the airline industry for they

were forced to cut down their operations due to the closing down of operations in the Eastern

coast of the United States of America (Shaw, 2007). Drakos (2002) noted of the effects of

terrorism on Air France-KLM which also suffered from tremendous amount of losses following

the events of September 11, 2001.

Pettus (2003) and Page and Connell (2006) also cited the negative effects that the

existence of a Gulf War has brought about to members of the airline industry. Pettus (2003)

discussed that the presence of the said has tremendously reduced load factors of the airline

companies to its all-time lows.

Deregulation and Open Skies. Another political factor that tremendously affects the

members of the airline industry is concerned with deregulation and open skies. According to

Shaw (2007), the airline industry has always been constrained by decisions made by politicians

and governments. In general, the said controls are usually aimed towards limiting the areas

where airline companies can fly. Furthermore, it is usually concerned with the manner by which

the members of the said industry come up with policies relating product planning and pricing.

Aside from the abovementioned, Burghouwt (2007) notes that the governments has

always engaged themselves in the regulation of the members of the airline industry by focusing

on the safety standards they promote, as well as their prices in order to ensure fair competition.

On the other hand, however, Burghouwt (2007) and Shaw (2007) stated that these regulatory

measures had been halted. Nowadays, airlines had been given the opportunity and challenge to

respond to a freer economic environment. Hence, airlines were given leeway with regard to the

manner by which they price their products. Furthermore, they had also been given easier access

to markets by allowing them to adopt newer routes (Doganis, 2006; Rhoades, 2008).

The abovementioned trend with regard to deregulation and open skies was largely

acknowledged by de Boer and Turner (2007) in their article entitled “Beyond Oil: Reappraising

the Gulf States.” According to the said article, the governments of those countries found in the

Gulf States tend to adopt different measures by which they liberalized the airline industries.

Through this, they were able to somehow allow the said companies to freely conduct in the said

business.

Marketing Policies for a Deregulated Environment. It is then in line with the second

political factor discussed in the foregoing paragraph that the third category or the different

marketing policies that are essential for a deregulated environment is highlighted. According to

Doganis (2006), members of the airline industry are facing numerous challenges pertaining to

change and adaptation due to their being subject to a deregulated environment. True enough,

according to Shaw (2007) airline companies used to enjoy reassurance of regulated conditions as

they only faced limited competition and a very slow pace of change. With deregulation,

however, new opportunities are provided which these companies must take advantage of in order

to ensure their success (Doganis, 2006; Rhoades, 2008). On the other hand, however, this could

also bring threats once the airline companies fail to respond to the said changes efficiently

(Shaw, 2007). Thus, without a doubt, there is an increasing need for members of the Airline

Industry to give utmost importance to marketing policies as they operate in a deregulated

environment (Burghouwt, 2007).

The marketing policies that members of the airline industry must adopt in order to cope

with the deregulated environment must be firmly grounded based on the following factors, as

identified by Shaw (2007): (1) the control of distribution channels, (2) advertising and

promotional policies that build the brand; and (3) a low-cost base.

Privatization and State Aid. The airline industry has traditionally been controlled by the

government, several authors earlier pointed out. In general, governments used to regard the

existence of a national airline as an important factor by which they could attain a sense of

nationhood. Aside from bringing prestige to a certain country, airlines bring about benefits such

as it being a back-up for national defense capability, employment and the balancing of payments

and tourism income (Morrison and Winston, 2000; Shaw, 2007). Because of this, common

perception was that state ownership was suitable to the members of the airline industry in order

to ensure their services to be aimed towards the fulfillment of the national interest. In fact, the

main role played by the government was to ensure the members of the industry that they will

face no major setbacks for they will take care of the latter’s financial matters.

The changes regarding the economic situation encouraged the privatization of the airline

companies. Eventually, this particular step has resulted to a number of problems and

opportunities experienced by the members of the industry (Aharoni, 2000). True enough, one of

the major benefits obtained was concerned with the fact that the said companies were given a

more ways by which they could effectively manage their practices. On the other hand, however,

the said privatization could more or less make the companies more vulnerable to economic crises

(Shaw, 2007).

Nevertheless, an issue concerning this particular matter surfaces and this is with regard to

state aid. Governments tend to provide aids to their national flag carriers in order to help them

cope with the changes in the environment despite having allowed them to attain a private status.

In general, the provision of the said aid varies from one airline to another, depending on the rules

of the government to which it is subject to (Shaw, 2007).

Allocation of Airport Slots. The last political factor discussed under this particular chapter

is related to the government’s allocation of airport slots for the members of the airline industry.

In general, Shaw (2007) regards this factor as of paramount importance in terms of allowing a

certain airline company to include a particular country into its list of destinations in order to

obtain a significant amount of profits, most especially if there is a high demand for such amongst

tourists.

2.2.5. Technological Trends. The latest advancements in technology must also be adopted

by the members of the airline industry in order to guarantee the success of their initiatives. For

instance, they can take advantage of the internet in order to further ensure the efficiency of their

programs that are aimed towards the consolidation of their business practices that are designed to

increase the loyalty of their customers to their programs.

2.3. Tools

In this study, the researcher shall make use of four tools in order to analyze the operations

of Air France-KLM in the Gulf Region. This will include the following: PEST (in order to

further examine the political, environmental, social and technological factors that affect their

businesses); Porter’s Five Forces which include the analysis of the rivalry amongst existing

firms, substitution, new entry, power of customers and suppliers and disintermediation; SWOT

(strengths, weaknesses, opportunities and threats experienced by Air France-KLM); and lastly,

Marketing Mix (to determine how the organization takes product, price, promotion and place

into consideration). The abovementioned shall then be discussed extensively in the fourth

chapter, devoted to the presentation of the results obtained by the researcher into the operations

of Air France-KLM in the Gulf Region.

PEST Analysis

The first tool that the researcher shall be using in this particular study is the PEST

Analysis. PEST stands for Political, Economic, Social and Technological Analysis in order to

properly examine the macro-environmental factors that are used in environmental scanning as an

essential part of strategic management (Wilmshurt and Mackay, 2002). The succeeding

paragraphs shall discuss the different factors that make up this model in order to better

understand how the framework shall be used in this particular study.

The first group of factors is political in nature which shows how or to what degree the

government intervenes in a certain economy (Harris, 2007). More specifically, this group

includes factors such as tax policy, labor law, environmental law, trade restrictions, tariffs and

political stability. Furthermore, political factors may also include the goods and services which

the government wants to provide and be provided or those that they do not want to be provided

(Drummond and Ensor, 2005).

The second group of factors then includes economic matters such as economic growth,

interest, exchange and inflation rates (Harris, 2007). Basically, these are the factors that have

major impacts on the manner by which businesses operate and render decisions.

Social factors on the other hand covers the cultural aspects of a certain group of people,

including health consciousness, the growth rate of the population, age distribution, career

attitudes and emphasis on safety (Drummond and Ensor, 2005; Harris, 2007).

The last group of factors under this particular frame work is those that are related to

technological advancements that also cover ecological and environmental aspects (Harris, 2007).

In general, the technological aspect of this framework refers to the manner by which

organizations use advancements in order to provide better services to their customers

(Drummond and Ensor, 2005).

Porter’s Five Forces

The second tool that the researcher shall use in this study is Porter’s Five Forces.

Basically, this particular model is concerned with the determination of the weak points where the

company must improve on in order to develop an edge over rival firms in order to guarantee their

survival and profitability despite being in the midst of intense competition (Wilmshurt and

MacKay, 2002). The following are the five forces that make up this particular framework: (1)

rivalry, (2) threat of substitutes, (3) buyer power, (4) supplier power, and (5) barriers or threats to

entry (Stonehouse, Campbell, Hamill and Purdie, 2004; Porter, 2008). A number of other factors

that influence the abovementioned forces shall then be discussed in order to gain a better

understanding of the manner by which the researcher shall use this model in order to analyze the

sales processes of Air France-KLM in the Gulf Region.

The first factor is rivalry which must be analyzed by looking into its particular elements

such as the different exit barriers, industry concentration, fixed costs and value added, industry

growth, intermittent overcapacity, product differences, switching costs, brand identity, diversity

of rivals and corporate stakes (Stonehouse, Campbell, Hamill and Purdie, 2004; Porter, 2008).

Threat of substitutes, the second ‘force’, meanwhile refers to the costs of switching, the

inclination of the buyer to substitute, and the price performance trade-off of substitutes (Porter,

2008). On the other hand, buyer power focuses on the bargaining leverage, buyer volume and

information, the identity of the brand, sensitivity of the price, threat of backward integration,

product differentiation, buyer concentration vs. industry, availability of substitutes and the

incentives of barriers (Porter, 2008). In the same manner, supplier power refers to concentration

of those providing supplies, importance of volume to the latter, the differentiation of inputs, the

impact of cots of firms in the industry, the presence of substitute inputs, the threat of forward

integration and the cost relative to total purchases in the industry (Stonehouse, Campbell, Hamill

and Purdie, 2004).

The last force contained under this particular model is then concerned with the different

barriers to entry that more or less include the following: absolute cost advantages, propriety

learning curve, access to inputs, policy of the government, the economies of scale, capital

requirements, brand identity, switching costs, access to distribution, expected retaliation and

propriety products (Stonehouse, Campbell, Hamill and Purdie, 2004; Porter, 2008).

Without a doubt, the use of Porter’s Five Forces is of paramount in this study as it

determines the current status of Air France-KLM in the Gulf Region as it highlights the

competition it faces in the said geographical area, thereby threatening the alignment and

effectiveness of its sales processes.

SWOT Analysis

Aside from the use of PEST Analysis and Porter’s Five Forces, this research shall also

employ the SWOT Analysis in order to examine the operations of Air France-KLM in the Gulf

Region. SWOT analysis is often employed in order to evaluate the strengths, weaknesses,

opportunities and threats that are involved in a certain project of business venture (Wilmshurt

and MacKay, 2002; Stonehouse, Campbell, Hamill and Purdie, 2004). Strengths are basically

those attributes of the company that are helpful in attaining strategic development. On the other

hand, weaknesses refer to the characteristics that are harmful in their achievement of objectives.

Opportunities then refer to the external conditions that are helpful to the company as they try to

achieve their objectives while threats are the factors existing outside the organization that are

harmful to the latter. The SWOT Analysis shall then look into the different factors that either

increase or reduce the chances of Air France-KLM in attaining strategic development, based on

the abovementioned criteria.

Marketing Mix

The last tool that the researcher shall use in the study is the marketing mix which s

accepted as the use and specification of the four Ps (product, price, place and promotion) in order

to properly describe the strategic position of a product in the market place (Wilmshurt and

Mackay, 2002). In general, product refers to the tangible or intangible services produced by a

certain company. Price, on the other hand, is concerned with the amount a certain customer pays

for a certain product, as determined by factors such as market share, competition, material costs,

product identity and the perceived value of the product. Meanwhile, place refers to the location

where the product can be purchased. Finally, promotion is discussed as the communication

methods employed by a certain organization in order to market their products (Stonehouse,

Campbell, Hamill and Purdie, 2004).

The discussion related to the previously mentioned tools is of utmost significance to this

study as it looks into the performance and sales processes employed by Air France-KLM in the

Gulf Region.

2.4. Strategic Planning

Given the number of factors the significantly affect the airline industry both in general

and in the Gulf Region, Katsioloudes (2002) gives paramount importance to strategic planning in

order to reduce their operational costs while increasing their market share. It is for this reason

that the principles of management that take into consideration the abovementioned is of

paramount importance in order to further establish strategic planning amongst these companies.

Strategic planning, then, in this study, as taken from the context of Air France-KLM’s

operations, is the manner by which they manage their business initiatives and practices, by

ensuring their profitability despite being caught in the midst of intense competition.

2.5. Summary

This literature review provided the concepts by which this research shall be grounded

upon. In general, it provided a holistic overview with regard to the environment wherein Air

France-KLM is currently situated and how this could increase or reduce their chances of

attaining development in the Gulf Region. Furthermore, the provision of such overview shall

earlier help the researcher in determining whether the sales processes adopted by the company

are appropriate to the environment where they are operating in. Furthermore, this chapter also

enumerated the different tools that the researcher shall be using in order to ensure the proper

conclusion of this study by pointing out the strategies of the organization. The succeeding

chapter then provides a discussion of the different methods that the researcher used in this

particular study.

Chapter Three: Methodology

3.0. Introduction

The third chapter of this study has been devoted to the discussion of the different research

methodologies used by the researcher in order to obtain the data needed for the attainment of the

goals of the study. Aside from this, these methodologies are also expected to help the researcher

in terms of finding the data needed in order to provide answers to the research questions that

were enumerated in the first chapter of the study. It is then in line with this that the main purpose

of this chapter is to develop a research study that the author may use in order to collect and

obtain important data which will then be used in order to yield reliable and valid conclusions that

are congruent to its goals. In order to provide a better and extensive discussion of these

methodologies, this chapter is divided into the following sections, namely: (1)

Introduction/Overview, (2) Research Design, (3) Data Collection Method, (4) Sampling, (5) Data

Analysis, and finally, (6) A Summary of the Chapter.

3.1. Research Design

The first section of this chapter is devoted to the discussion of the manner by which this

research is designed. Research design, according to many scholars, is of paramount importance

to any study (De Vaus, 2001; Myers and Well, 2003; Cresswell, 2007). This is because of the

fact that it provides the foundation by which a project can be held together. Basically, a design is

used in order to provide the structure of the research as well as how its’ major parts- samples and

groups, measures, treatments and programs and the methods of assignment – work together in

order to address the central research questions (Miller and Salkind, 2002; Marczyk, DeMatteo

and Festinger, 2005).

In general, in order to provide the best manner to explore the phenomena; this research

shall make use of a quantitative design of which the survey questionnaire would be the main tool

for data collection. It is basically through the methods falling under this that the researcher will

be able to collect, obtain and analyze the data needed for this study’s accomplishment of its

research goals.

Quantitative Design. As previously stated, this research, shall first and foremost, adopt a

quantitative design. According to Black (1999), a research that makes use of the quantitative

approach is basically a study that aims to determine the relationships existing between its

variables. Because of this, the use of statistics is deemed to be of vital importance under this

particular approach. Black (1999) believes that this is because of the fact that statistics provide

the best aid to quantitative researchers in determining how their variables are related with each

other. Cohen, Manion and Morrison (2003) then point out the advantages that researchers may

gain in their use of the quantitative design; these are the following:

• Quantitative researches provide an excellent way for the finalization of results thus aiding

the researcher in the rejection or acceptance of hypotheses;

• Quantitative research designs are easy to adopt for they are structured in a standard way;

• The statistical analysis of the results leads to an easier way of reaching comprehensive

answers to research questions; and finally,

• Results obtained by the researcher can be discussed and published legitimately.

The researcher then recognizes the abovementioned advantages of the quantitative

research design, thereby supporting the fact that the latter is indeed, appropriate to this research.

There are, however, disadvantages that are associated with the use of the quantitative

approach to research. Some scholars cited the tendency to collect a narrower and superficial

dataset. Aside from this, quantitative researches were also perceived to provide limited results

through numerical descriptions rather than through detailed narrative statements that provide a

better understanding of the human perception. Nevertheless, considering the topic at hand, the

researcher believes that a quantitative research is a more suitable approach to this study as it

would give a better analysis of the strategies adopted by Air France-KLM in order to properly

manage their sales and operations.

While this research is quantitative in nature as it employs the use of the questionnaire

method, it shall also employ the use of various techniques of secondary research in order to

provide a more holistic approach to the discussion of the business initiatives and processes

adopted by Air France-KLM as they engage in the operations in the Gulf Region. Thus, the

analysis of secondary data shall be employed as an important data collection method in order to

properly support the results of the survey obtained by the researcher.

3.2. Data Collection Method

Aside from the previously mentioned, this research shall also make use of the

questionnaire method in order to obtain the perceptions of the one hundred and fifty respondents

with regard to the issue at hand. It is basically the main method by which the researcher collects

pertinent data and information for this study. The Questionnaire Method, also known as

statistical surveys is often used in order to collect quantitative information regarding certain

items in a population. According to Bernard (2000), the questionnaire method is one of the most

important ways of measurement used in social research. Ornstein (1998) further states that there

are usually two research objectives by which this is deployed. One of these is to depict certain

facets of the group being investigated in the study. It is also used in order to solicit individual

evaluation through predetermined items or questions. Their responses then, which may contain

their own views, compose the data set for statistical analysis, Ornstein (1998) discusses.

The questionnaire method, has a number of disadvantages as well, including the fact that

it tends to confine the answers of the respondents to items that are predetermined. However, the

researcher believes that the goals of this study can be better accomplished through the use of the

questionnaire as this would help in evaluating the perceptions of the employees of the company

with regard to their initiatives concerning the proper management of their strategies.

As earlier stated, this study shall also employ the use of analysis of secondary data in

order to obtain pertinent information with regard to the topic at hand. According to Duffy (2005),

analysis of secondary data is the most valuable alternative source of data that would allow the

researcher to obtain important information with regard to the topic being written. In general, the

use of the method is necessary for it entails the discussion of previous researches and studies

undertaken in relation to the subject matter of this dissertation.

3.3. Sampling

The researcher believes that it is important to discuss the manner by which the sampling

procedure would be carried out. Sampling, as defined by Thompson (1992) is the process by

which the researcher selects the units from a population of interest. As previously mentioned, the

samples that would be obtained in this study belong to the organization of Air France-KLM

dealing with operations in the Gulf Region.

In general, the manner by which they will be chosen shall take on the non-probability

design, making use of the convenience sampling method. Since the sampling method of this

study takes the non-probability design, this means that the subjects would not be chosen in a

random manner as done in probability sampling. Hence, non-probability samples can not be

used in order to make statistical references (Robson, 2002; Saunders, Lewis & Thornhill, 2007;

Curwin & Slater, 2008).

According to Curwin and Slater (2008), the use of non-probability sampling methods are

of vital importance to studies that make use of the survey questionnaires as a data collection

method. This is because of the fact that the use of this particular method does not entail some

element of justice in its selection (Curwin & Slater, 2008). Furthermore, it has been that the

characteristics of random sampling are not also appropriate to researches that make use of the

survey questionnaire method for the use of such does not exclude persons based on their other

characteristics aside from the population to which they come from (Curwin & Slater, 2008;

Druckman, 2005).

The non-probability sampling design then is further divided into two specific categories:

accidental and purposive (Druckman, 2005). Taking the nature of this study in consideration, as

previously stated, this research shall adhere to the purposive sampling technique. According to

Ritchie and Lewis (2002), purposive sampling is a technique used by researchers wherein the

subjects are selected based on the purpose that the researcher(s) have in mind. Silverman (2005)

concurs to this definition, stating that the researcher must develop the inclusion criteria which

shall help him or her in selecting the appropriate respondents to his or her study, based on its

goals.

A total of one hundred employees of Air France-KLM were obtained for this particular

research, making sure that they meet the following criteria: (1) must be knowledgeable of the

programs adopted by the company in order to attain development; and (2) must have expressed

his or her consent in participating in the study.

3.4. Data Analysis

In order to analyze the data obtained by the researcher, the Statistical Package for the

Social Sciences (SPSS) will be used. The researcher then provides the descriptive statistics that

would show the responses of the survey participants to the different questions included in the

data collection tool. For instance, the researcher shall present the Min in order to determine the

lowest rating given by the respondents to a particular topic. Meanwhile, Max shall also be

presented in order to discuss the highest rating given to a certain topic. On the other hand, Mean

will give the readers a better understanding of the collective responses of the survey participants

as well as their general perception regarding a given topic. Finally, Standard Deviation would

also be presented in order to show the difference in the responses of the sample used by the

researcher.

3.5. Summary

This research, as stated in this chapter, was carried out through the use of the quantitative

design to research that makes the survey questionnaire the primary data collection tool. The

subjects of this study are the members of Air France-KLM involved in operations in the Gulf

Region whose sample size will be set to one hundred and fifty. The next chapter of this research

is then devoted to the presentation of the results obtained by the researcher.

Chapter Four: Analysis, Results and Discussions

4.0. Introduction

This chapter is aimed towards the presentation of the following: (1) the analysis of the

manner by which Air France-KLM operates in the Gulf Region; (2) the results obtained by the

researcher from the use of survey questionnaires and the analysis of secondary data; (3)

discussions of the abovementioned in order to aid the researcher in ascertaining the threats,

opportunities and position of Air France-KLM in the region; and lastly, (4) the evaluation of the

strategic planning means employed by the certain company. It is through the abovementioned

that the researcher aims to gain a better understanding of the concepts adopted by Air France-

KLM in relation to the manner by which they manage their company as a part of the air travel

industry, pursuant to the principles of airline management earlier defined.

4.1. Analysis

The first section of this chapter is devoted to the analysis of the business operations of

Air France-KLM, based on the following tools: (1) SWOT Analysis, (2) Porter’s Five Force

Analysis, and (3) PEST Analysis. Data presented in this particular section were obtained from

the researcher’s analysis of the secondary data published with regard to the topic at hand.

Furthermore, the abovementioned are also supported by several items contained within the

questionnaire developed by the researcher.

4.1.1. SWOT Analysis

The first analysis performed by the researcher was related to the examination of the

strengths, weaknesses, opportunities and threats being experienced by Air France-KLM, most

especially with regard to their operations in the Gulf Region. As defined in the second chapter of

this study devoted to the review of literature, analysis using the SWOT framework refers to the

examination of factors that affect a certain business venture whether positively or negatively

(Wilmshurt and MacKay, 2002; Stonehouse, Camplbelly, Hamill and Purdie, 2004). As earlier

discussed, strengths refer to the attributes of the company that are helpful in attaining their

strategic development. On the other hand, weaknesses refer to those characteristics that are

harmful to their achievement of objectives. Opportunities then refer to the external conditions

that are helpful to the economy as they try to achieve strategic development whilst threats are

those factors that may be harmful to their operations. Each factor contained within this particular

framework shall then be discussed extensively by the researcher in the succeeding paragraphs.

Strengths. One of the strengths of Air France-KLM is related to the size of the airline

company. Fyall and Garrod (2005) and Latrou and Oretti (2007) generally attribute the success

of the merger, making them the largest European fleet as of paramount importance in order to

ensure the success of their business initiatives. It is then in relation to this that one can conclude

that the airline company has a relatively large market. Delfmann and his colleagues (2005)

supported the abovementioned discussion by stating that the merger between Air France and

KLM did not just merely increase their wide range of customers. The merger also allowed them

to increase their routes in order to cater to the needs of their customers and frequent passengers

(Delfmann, Baum, Auerbach and Albers, 2005). More or less, the commitments were of

paramount importance to increasing the profitability and competitiveness of the company as it

enabled them to provide better services by merely increasing the frequency of their travels from

one point to another rather than by simply starting from scratch on a particular city pair which

could eventually lead to bankruptcy if not supported by the demands of their passengers,

Delfmann, Baum, Auerbach and Albers (2005) discussed.

Aside from what has been discussed in the foregoing paragraph, Fyall and Garod (2005)

also stated the importance of the company’s possession of twin hubs that provided the company

with the better way by which their services could be accessed by their customers. It is also in

relation to this that Latrou and Oretti (2007) and Kernchen (2007) mentioned the capacity of the

company to over a wider range of destination to its customers as another important strength by

which the company possesses.

In the survey questionnaire developed by the researcher, a certain section has

been devoted in order to analyze the perspective of the employees of the airline company with

regard to the strengths of their organization. In general, this particular section contained eight

statements which the respondents were asked to rate using the scale: 5- strongly agree, 4- agree,

3- neutral, 2- disagree, and 1- strongly disagree. The use of this Likert-Scale is deemed to be

advantageous for this study as it would enable the researcher measure the perceptions of the

respondents effectively. The researcher, however, recognizes the fact that the use of the Likert-

Scale would limit the answers of the respondents to only those specifically provided by the

researcher. In this case then, the researcher undergoes extensive research in order to properly

select the items that the survey questionnaire shall include in order to ensure its reliability and

validity.

The following were the statements in relation to Air France-KLM’s strengths analyzed in

the section: (1) it is the leading European Global Airline Group with significant economies of

scale, (2) it has an enhanced European catchment area, (3) it possesses a twin hub which focus

on the reinforcement of the pricing marketing power, (4) their possession of an efficient new

fleet, (5) the growing proportions of long-haul flights, (6) their capacity to offer unique

destinations from Europe, (7) the service it provides to its customers, and (8) the wide margin for

profits due to its membership in the Sky Team.

In general, the respondents:

1. Agreed that one of the strengths of Air France-KLM can be attributed to its

characteristic as the leading European Global Airline Group with significant

economies of scale (X= 4.05 ; SD= 0.88);

2. Agreed that one of the strengths of Air France-KLM can be attributed to their

enhanced European catchment area (X= 4.85; SD= 0.48);

3. Were neutral with regard to Air France-KLM’s possession of a twin hub that

reinforces their pricing marketing power as a strength of the company (X= 3.48; SD=

0.89)

4. Agreed that their possession of an efficient new fleet is a strength (X= 4.39; SD=

0.99)

5. Agreed that another strength that must be taken advantage of the company is

concerned with the growing proportions of long haul flights (X= 4.54; SD=0.83)

6. Were neutral regarding their capacity to provide unique destinations from Europe (X=

3.82 ; SD= 1.18)

7. Agreed regarding their capacity to ensure efficient service they provide with their

customers (X= 4.77; SD= 0.61)

8. Agreed that the company possesses wide margin for profits due to their membership

in the Sky Team (X= 4.08; SD= 0.98).

Table 1.

Min, Max, Mean and Standard Deviation: Strengths of Air France-KLM
N Minimum Maximum Mean Std. Deviation
II1 100 1.00 5.00 4.0500 .88048
II2 100 3.00 5.00 4.8500 .47937
II3 100 2.00 5.00 3.4800 .89307
II4 100 2.00 5.00 4.3900 .99387
II5 100 2.00 5.00 4.5400 .83388
II6 100 2.00 5.00 3.8200 1.17534
II7 100 2.00 5.00 4.7700 .60059
II8 100 2.00 5.00 4.0800 .98144
Valid N (listwise) 100

The discussions made in the foregoing paragraphs pointed out the different strengths

possessed by Air France-KLM. From the discussion, it was relatively clear that the strengths

resulted from the fact that the airline company is the largest organization within the air travel

industry in Europe. It is for this reason then that they have a larger access to customers, have

bigger fleets and also has the capacity to provide their customers with more routes. Without a

doubt, both the analysis of secondary data and the survey conducted by the researcher reveal that

the strengths of Air France-KLM stems out from the successful integration of its two component

companies.

Weaknesses. Having discussed the strengths of Air France-KLM, this subsection is then

devoted to the identification of the weaknesses that prevent the company from achieving its

strategic development. Several authors – Jarach (2005), Onkvisit and Shaw (2004), and Light

(2004) - have identified the different weaknesses of the company. Usually, the list includes the

following: (1) the relatively low capex when compared to their competitors; (2) their inability to

promote further a competitive culture; (3) a declining financial leverage, and (4) the complexity

of cost cutting. The abovementioned causes the inability of Air France-KLM to take advantage

of the strengths presented in the foregoing subsection.

The researcher then seeks to validate the abovementioned by devoting a section in the

questionnaire that deals with the examination of the most common weaknesses experienced by

Air France-KLM. The following were the statements included in the questionnaire, to be

analyzed using the same Likert-Scale (5- Strongly Agree, 4- Agree, 3- Neutral, 2- Disagree, 1-

Strongly Disagree): (1) the unfair competition, (2) their incapacity to promote a competitive

culture, (3) the high business costs that result from high fuel costs, (4) the insufficiency of their

promotional activities, and (5) the inefficiency of their promotional activities aimed towards the

marketing of their destinations.

In general, respondents agreed to the first two as visible weaknesses of Air France-KLM,

based on the means (X=4.12; 4.85 respectively) and standard deviations (SD= 0.92; 0.46

respectively) that their responses produced. Meanwhile, all respondents agreed that another

weakness stems out from the rising business costs due to the high fuel costs (X= 5.00; SD=

0.00). Lastly, the respondents were neutral with regard to the two last statements contained in the

section as judged by the means (X= 3.76; 3.41 respectively) and standard deviations (SD= 0.95;

1.13 respectively) obtained.

Table 2.

Min, Max, Mean and Standard Deviation: Weaknesses of Air France-KLM
III1 100 2.00 5.00 4.1200 .92420
III2 100 3.00 5.00 4.8500 .45782
III3 100 5.00 5.00 5.0000 .00000
III4 100 1.00 5.00 3.7600 .95473
III5 100 1.00 5.00 3.4100 1.12900

Opportunities. Having looked into the preceding factors, the researcher then looks into

the opportunities that Air France must take advantage of in order to ensure their survival and

profitability. According to Palepu, Peek and Bernard (2007), Fyall and Garrod (2005) and Iatrou

and Oretti (2007), the presence of emerging markets in the European continent is one of the

major opportunities that Air France – KLM must take advantage of. It is discussed that it is

through giving paramount importance to this particular opportunity that the company will be

able to increase their customer base, thereby increasing their profit.

Aside from the afore-said, Bruhn and Georgi (2006) considers the membership of Air

France-KLM in the Sky Team alliance as another opportunity that must be taken into

consideration in order to increase the profit margin. According to them, the membership can

help them secure more customers by offering the latter with new routes despite the fact that they

are loyal to other members of the alliance that do not cater to the different destinations that they

offer. It is in line with this then that Iatrou and Oretti (2007) capitalize on the size of the airline

company, thus having the capacity to service more destinations and cater to the needs of more

customers.

Morrell (2007), on the other hand, gives importance to the need for Air France-KLM to

improve labor relations through employee ownership program. It is thus through this that they

are able to ensure that all members of the organization are aimed towards the development of

better services for the benefit of their customers. Finally, Fyall and Gallod (2005) state the

importance of cutting down costs in order to expand their profit margin to further ensure their

profitability.

The survey conducted by the researcher the responses of the survey participants concur

with the abovementioned findings obtained from the analysis of secondary data. The responses

of the employees revealed that without a doubt, the membership of Air France-KLM in the Sky

Team presents an opportunity to their business (X= 4.08; SD= 0.98).On the other hand,

however, they were relatively neutral with regard to the capacity of the company to offer

exciting destinations from Europe as another opportunity they must take advantage of (X= 3.82;

SD= 1.17).

Threats. The last factor examined by the researcher through the SWOT framework was

concerned with threats. With regard to their operations in the Gulf Region, Air France-KLM

(2009), in their official website noted of the most common threats that they encounter.

According to them, the presence of unfair competition is very evident. In general, Gulf Carriers

tend to benefit from a number of factors that are not applicable to Air France-KLM. For

instance, the airlines receive financial support from their local state that provides them with a

wide range of services such as airports, civil aviation authorities, airport and navigation charges

and a complementary infrastructure (Air France-KLM, 2009). Aside from this, they also enjoy a

favorable tax environment for the government has waived their corporate tax and social security

charges (Air France-KLM, 2009). Hence, the foregoing factors have strengthened the edge of

the carriers over that of the European airlines (including Air France-KLM) within their

particular region.

The threats to the operations of Air France-KLM were also recognized by Haberberg and

Rieple (2008). According to them, competition is indeed, one of the threats to the company.

Aside from this, another important threat that must be highlighted is the continuous increase in

the prices of oil that may more or less contribute in the growing costs of the company, thus

hampering their goal of profitability. Furthermore, costs of the company tend to further increase

as they compensate for the services rendered, Fyall and Garrod (2005) and Haberberg and

Rieple (2008) noted.

The threats of unfair competition and higher business costs were also recognized by the

survey participants, garnering means and standard deviations of 4.12 and 9.24; and 5.00 and

0.00 respectively. In this study, unfair competition refers to the inability of Air France-KLM to

properly vie for the same amount of market share as their rivals in the Gulf Region due to the

extraordinary support received by the latter from the government.

4.1.2. Porter’s Five Force Analysis

As earlier stated, this particular section is also aimed towards the analysis of Air France-

KLM using Porter’s Five Forces. As discussed in the second chapter of this study, this model is

concerned with the determination of the weak points where the company must improve in order

to develop a competitive edge over rival firms in order to guarantee their survival and

profitability despite being in the midst of intense competition (Wilmshurt and MacKay, 2002).

There are basically five forces that make up this framework: (1) rivalry, (2) threat of substitutes,

(3) buyer power, (4) supplier power, and (5) barriers or threats to entry, Stonehouse, Campbell,

Hamill and Purdie (2004) and Porter (2008) enumerated Each of the factors shall be discussed

individually in order to properly examine the operations of Air France-KLM.

Rivalry. Air France-KLM (2009) discussed that it is greatly affected by a certain degree

of rivalry in their operations. According to them, the competitive environment has been brought

about by the number of factors which include the following: (1) the deregulation of the US

market, (2) the deregulation of European Air Transport, (3) the prevalence of the concept of

globalization which facilitated the formation of alliances, and (4) the development of fast-

developing new technologies. As a result, Air France-KLM is situated within a new competitive

environment (Air France-KLM, 2009). Aside from these factors, the degree of rivalry to which

Air France-KLM is subject to is affected by the presence of low-cost operators in the medium-

haul network and from carriers in the Gulf and Asian regions (Air France-KLM, 2009).

Threat of Substitutes. Another essential factor under the Five Forces model of Porter is

concerned with the presence of substitutes. According to Air France-KLM (2009), De Burca,

Fletcher and Brown (2004) and Graham (2008), the prevalence of low cost airlines has

significantly influenced the environment wherein Air France-KLM operates., Customers tend

to choose these low cost carriers over established ones such as Air France-KLM because of the

low prices they offer. Nevertheless, Air France-KLM (2009) claims that the said low cost

carriers have not damaged their operations significantly for they were able to rework their

pricing strategies thereby reducing their costs in order to lower down the prices of their seats.

Buyer Power. The strength of Air France-KLM as one of the biggest European fleets is

its source of buyer power. The merger of the two component companies has resulted to an

increased buyer power (Smart and Megginson, 2008). On the other hand, however, the buyer

power that the said airline company possessed has been hampered by the existence of low cost

carriers as well as by other airline companies in the Gulf Region. Customers tend to search for

the better price that members of the airline industry can offer. As previously mentioned, low

cost and Gulf carriers tend to possess other factors that are not present within Air France-KLM,

thereby making it relatively difficult for them to lower their prices easily (Fyall and Garrod,

2005). Nonetheless, Air France-KLM, as earlier discussed, make sure that they offer the best

service to their customers by providing them with a better experience while travelling in order

to encourage and retain the former to ensure the company’s profitability (Keynes, 2008).

Supplier Power. Another important factor that must be taken into consideration in order

to properly examine the strategic development of Air France-KLM through Porter’s Five Forces

Framework is supplier power (Haberber and Rieple, 2008). This is more or less likely to be

connected with the provision of other external parties of pertinent products or services that are

necessary to the operations of the said company. In general, the supplies of Air France-KLM

with regard to their initiatives to increase their flights to the Gulf Region are concerned only

with regard to the provision of new fleet in order to satisfy the said operational initiatives (Air

France-KLM, n.d.). Furthermore, according to Holloway (2008), the supplier power of Air

France-KLM must be taken into consideration when looking into the equipments used by the

company in order to provide better services to their customers to attain more buying power.

With regard to oil, however, another important resource necessary for the execution of

business within the airline industry, Nasser, Nguyen, Boelke and Yu (n.d.) stated that

…………….

Barriers or Threats to Entry. The last component of Porter’s Five Forces was concerned

with the common barriers or threats to entry experienced by Air France-KLM as they enter into

business in the Gulf Region. As earlier pointed out, a number of factors threaten the entry of the

said airline company into the Gulf Region, these are the following: (1) airport and landing slots,

(2) tax incentives provided by the state to the gulf carriers, and (3) the unfair competition to

which Air France-KLM is subject to due to their inability to receive aid and other factors that

Gulf carriers receive from the states to which they belong to (Iatrou and Oretti, 2005; Air

France-KLM, 2009).

Using the abovementioned framework in order to examine the operations of Air France-

KLM in the Gulf Region, it is evident that the said airline company is subject to intense

competition due to the a number of factors. Without a doubt, thus, there are a number of issues

that they must address before they could ensure their profitability as they enter into business in

the Gulf Region.

In order to better understand the examination of Air France-KLM’s operations in the Gulf

Region through the use of Porter’s Five Forces, the researcher shall present the responses of

survey participants with regard to the current position of Air France-KLM in the Gulf Region.

The following were the results obtained: (1) the respondents were neutral with regard to the

statement that Air France-KLM currently dominates the airline industry in the Gulf Region (X=

3.07; SD=0.76); (2) they were neutral regarding the fact that the airline company is facing

unfair competition in the region (X= 3.53; SD= 1.17); (3) the respondents disagreed with the

statement that Air France-KLM was able to take advantage of the growing market in the Gulf

Region (X=2.97; SD= 0.83); and lastly, (4) they disagreed that customers in the said region tend

to prefer Air France-KLM over other airlines in the said area (X= 2.85; SD= 0.90).

Table 3.

Min, Max, Mean and Standard Deviation: Current Position of Air France-KLM in the Gulf
Region

I1 100 2.00 4.00 3.0700 .75552
I2 100 1.00 5.00 3.5300 1.16736
I3 100 1.00 5.00 2.9700 .83430
I4 100 1.00 4.00 2.8500 .90314

4.1.3. PEST Analysis.

The last method of analysis employed by the researcher is the PEST framework. In the

second chapter, this particular framework has been defined as the tool by which macro-

environmental factors are analyzed in order to determine how Air France-KLM strategically

manages their operations (Wilmshurt and Mackay, 2002). As its name implies, it looks into

several factors such as: (1) Political- how the government intervenes with the industry, (2)

Economic- the effects of economic growth and other concepts to the operations of the

organization being studies; (3) Social- the cultural aspects of a certain group of people; and

lastly, (4) Technological – the different steps undertaken by companies in order to provide better

products or services to their customers. In order to better understand the abovementioned, the

researcher shall then discuss the said factors in relation to the airline industry of the Gulf Region

in order to properly ascertain the environment that Air France-KLM will be entering.

Political. The political aspect of this analysis is usually concerned with regard to the

manner by which governments influence the operations of a certain industry. As discussed in the

earlier portions of this chapter, Air France-KLM (2009) discussed that the airline industry in the

Gulf Region is heavily supported by the governments of the states located therein. The said

members of the airline industry receive so much support from their government through

favorable tax policies and the provision of airport slots as well as complementary infrastructure

in order to better conduct their businesses. It is then for this reason that it has been relatively

easier for the Gulf carriers to reduce their prices as compared with Air France-KLM.

Economic. Currently, the whole world is experiencing a global economic meltdown that

affects many businesses. The earlier portions of this dissertation maintained that the airline

industry has always been affected by the economy. For this reason, the global economic

meltdown has in one way or another, reduced the number of air travelers. On the other hand,

however, there are those who still continue to travel yet nevertheless prefer those airlines that

have cheaper rates. Thus, in general, customers tend to prefer the competitors of Air France-

KLM in the Gulf Region as they tend to have the ability to cut their prices, as already presented.

In the same manner, the presence of low cost carriers also tend to greatly affect Air France-KLM

for they are preferred by customers due to the cheaper prices they offer.

Social. Social factors then refer to the attitudes of the customers towards the airline

industry in the Gulf Region. In general, this particular aspect is also related to the social standing

of the customers that make them search for lower air fares due to the effects of the global

economic crisis on them. Once again, this research reiterates the tendency of customers to prefer

low cost airlines due to the relatively weak global economy. On the other hand, however, social

factors refer to the popularity of the Gulf Region as a destination. The vastness of Air France-

KLM has influenced them in ensuring that they offer members of the European Community

with frequent flights to the Gulf Region. Furthermore, the company has also catered to the needs

of the business travelers by providing them with better flight schedules.

Technological. The last factor contained within the PEST framework is concerned with

the technological innovations employed by the company in order to render efficient customer

service. These technological advancements have been applied by Air France-KLM in order to

ensure that their customers gain a better travel experience with them.

4.2. Results

4.2.1. Marketing Mix

In order to determine how airline management concepts have been applied by Air France-

KLM in order to properly ensure their profitability and survival in the Gulf Region despite being

caught in the midst of intense competition, this section is then devoted to the presentation of their

strategies through the marketing mix framework. Wilmshurt and Mackay (2002), from their

researches, defined marketing mix as the tool that examines four Ps: product, price, place and

promotion in order to effectively analyze the operations of a certain company or organization.

Each factor shall then be discussed in the paragraphs to follow.

The product being sold by Air France-KLM has been continuously improved in order to

cater to the demands of their customers as dictated by a number of factors. In general, the

company continues to exert effort in order to provide their customers with the best experience in

Air Travel. On the other hand, with regard to price, Air France, as earlier mentioned were

showing considerable efforts in order to lower down their rates in order to efficiently compete

with the dominating low cost carriers. The place of operation meanwhile, is an advantage to Air

France-KLM considering their two large hubs. The possession of the said hubs allows them to

offer more destinations to and from the Gulf Region. The last factor, promotion, is perhaps the

weakest of all the components of the Marketing Mix. It was earlier stated by findings both of the

analysis of secondary data and that of the survey questionnaire that Air France was not able to

come up with effective promotion strategies that show their competitive culture that is important

to ensure their profitability. Thus, they cannot keep up with the competitive environment present

in the Airline Industry of the Gulf Region.

4.3. Discussions

4.3.1. Threats

The analysis and results presented by the researcher in the two previous sections reveal

the most common threats to Air France-KLM as a member of the airline industry in the Gulf

Region. The said threats arise from different factors earlier identified: the weaknesses of the

company as well as the external threats that the environment provides. As earlier established, the

inability of the said company to adopt strategies and policies relating to their competitiveness is

one of the factors that threaten its profitability. Aside from this, another threat identified was

concerned with the inability of the company to keep up with its competitors. One of the said

reasons were already mentioned – the inability of the company to promote a culture of

competitiveness. On the other hand, however, the current environment in the Gulf Region where

the said company is operating in tends to pose a number of negative factors that threaten Air

France-KLM. As discussed in the earlier parts of this paper, its competitors in that particular

region had been granted with aids and subsidies by the government that aid the latter in the

performance of their operations. Air France-KLM does not receive said subsidy thereby

preventing them from coping with the competition in the said region.

The analysis of the results obtained by the researcher also reveals that the continuous

increase in the price of oil has also been threatening the operations of Air France-KLM. Similar

to the other members of the airline industry, the continuous increase in the said price has thus

resulted to greater business cost operations thereby hampering their objective of maximizing

their profitability.

4.3.2. Opportunities

A number of opportunities have also been identified by the researcher following the

presentation of the results obtained by this study. The opportunities that Air France-KLM must

be taken advantage of are concerned with their characteristic as the largest European fleet arising

from the merger of the two component companies. Earlier pointed out was the fact that this

particular merger led to the following: (1) their status as the largest European fleet, (2) increased

access to a wider customer base; and (3) the capacity to provide new destinations to meet the

demands of their customers.

4.3.3. Strategic Positioning

Based on the discussion of the strengths, weaknesses, opportunities and threats of Air

France-KLM as well as the other factors that affect the environment which the said airline

company is operating in, it is evident that the strategic positioning of Air France-KLM in the

Gulf Region has not been efficiently established. In general, this is brought about by the fact that

competition amongst Air France-KLM and the Gulf Carriers are relatively strong thereby

hampering the operations of the former. Nonetheless, the airline company is devoted towards the

improvement and growth of its network and services in the said region by increasing their

frequencies to Tehran and Muscat. Furthermore, they also apply initiatives by which they could

ensure that the daily services to Abu Dhabi and Kuwait are more attractive to business travelers.

4.4. Strategic Planning

The last section of this chapter is devoted to the discussion of the manner by which Air

France-KLM carries out their initiatives concerning strategic planning. Discussions regarding

this particular subject matter shall be carried out in relation to the responses of the survey

participants to the questions contained in the fourth section of the survey. Majority of the

respondents (92%) reveal that Air France-KLM adopt concepts related to airline management

(Table 4, below). Of the one hundred respondents, eighty six (86%) noted that these concepts are

essential for they help the company in improving their services in order to gain profitability and

remain competitive (Table 5, below). In general, they claim that such services are of paramount

importance in order to attract customers and help them in retaining the old ones (66% affirmed

said statement, see Table 6, below). Table 7 then shows their responses with regard to the overall

effectiveness of the airline management concepts applied by the company. In general, the

respondents were relatively neutral with regard to the effectiveness of their initiatives pertaining

to airline management.

Table 4.

Frequency and Percentage Breakdown: Adoption of Airline Management Concepts

Frequency Percent
1.00 92 92.0
2.00 8 8.0
Total 100 100.0

Table 5.

Frequency and Percentage Breakdown: Profitability and Competitiveness through Airline
Management

Frequency Percent
1.00 86 86.0
2.00 14 14.0
Total 100 100.0

Table 6.

Frequency and Percentage Breakdown: Airline Management to Ensure Efficient Customer
Service

Frequency Percent
1.00 66 66.0
2.00 34 34.0
Total 100 100.0

Table 7.

Min, Max, Mean and Standard Deviation: Overall Effectiveness of Airline Management in Air
France-KLM
IV4 100 1.00 5.00 3.6500 1.20080

The foregoing sections of this chapter discussed the different strengths and weaknesses

being experienced by Air France-KLM. Through Pearson Correlation, the researcher linked each

with the overall effectiveness of the company’s airline management initiatives. Table 8 shows

that out of the four strengths earlier identified, only the enhanced European catchment area and

possession of a new fleet were significantly correlated with the overall effectiveness of Airline

management concepts of Air France-KLM at the 0.01 level (**).

Table 8.

Correlational Research: Strengths and Overall Effectiveness of Airline Management Concepts
Used by Air France-KLM
1. It is the leading European global airline
group with significant economies of scale

2. It has an enhanced European catchment area 0.350 (**)

3. It possesses a twin hub which focus on the
re-enforcement of the pricing marketing power

4. Possession of efficient new fleet 0.258 (**)

** Correlation is significant at the 0.01 level (2-tailed).

The researcher also performed the same correlation in order to determine how

weaknesses are related with the overall effectiveness of the airline management initiatives

adopted by Air France-KLM. Of the said threats, only unfair competition registered a positive

correlation at the 0.01 level (**) thus showing that there are strong efforts to improve the service

as competition becomes fiercer. All other threats do not seem to bear any significant influence on

the overall effectiveness of the airline.

Table 9.

Correlational Research: Threats and Overall Effectiveness of Airline Management Concepts
1. Unfair competition 0.421 (**)

2. No capacity to promote a competitive
culture

3. High fuel costs tend to result to higher
business costs

4. Promotional activities are insufficient

5. The promotion of the destination (in the
Gulf Region) of the airline company must be
improved

** Correlation is significant at the 0.01 level (2-tailed).

Chapter Five: Conclusions and Recommendations

This chapter is devoted to the concluding portion of the study as well as to the

presentation of recommendations by which Air France-KLM may adopt in order to ensure the

proper application of concepts pertaining to airline management and for future researchers who

wish to undergo a study with regard to the same topic at hand.

5.0. Conclusions

5.0.1. Air France-KLM and their Application of Concepts Related to Airline Management.

The results of the study proved that Air France-KLM has been relatively successful in

terms of applying concepts related to airline management in order to ensure their

competitiveness and profitability as they increase their presence in the Gulf Region In general,

the said airline management concepts are directed towards the improvement of services in order

to satisfy the demands and requests of their customers. Thus, it is through this that they were

somehow able to obtain new customers and retain the old ones. It is then in line with this that the

researcher rejects the first null hypothesis and accepts the alternative instead. Thus, Air France-

KLM applies the concepts related to airline management.

5.0.2. Programs Established by Air France-KLM in order to Ensure Proper Management of

Business Operations.

The results of the study showed that the programs established by Air France-KLM are of

paramount importance in ensuring the proper management of their business operations. In fact,

they carry out strategic planning in order to assure themselves of profitability by cutting down

costs. While there are a number of competitors that threaten the stability of the company, Air

France-KLM continues to adopt certain initiatives by which they can prevail over their former.

Furthermore, it was also revealed by the correlational research that the threats experienced by the

company with regard to unfair competition has encouraged them to ensure the better

management to improve their business operations. It is in line with this that the researcher rejects

the second null hypothesis and accepts the alternative counterpart; thus, the programs established

by Air France-KLM ensure the proper management of their business operations. In connection

with this, the researcher also rejects the third null hypothesis and accepts the alternative by

stating that airline management affects the operations of Air France-KLM.

5.0.3. Initiatives adopted by Air France-KLM in order to Ensure their Proper Operations in the

Gulf Region.

The researcher then looks into the initiatives adopted by Air France-KLM in the Gulf

Region in order to ensure their proper operation. Their operations in the said geographical area

are negatively affected by unfair competition. Nonetheless, the research found that this particular

threat has encouraged them to provide better services to their customers by satisfying their

demands and requests. It is then through this that they were able to remain stable despite being

subject to a number of threats. Hence, the researcher rejects the fourth null hypothesis and

accepts the alternative; Air France-KLM adopts initiatives in order to ensure their proper


5.0.4. Opportunities and Challenges faced by Air France-KLM in the Gulf Region.

Air France-KLM is faced with a number of opportunities and challenges in the Gulf

region. The results of this research reveal that opportunities for Air France-KLM in the Gulf

Region are often related to its status as the largest European airline. Hence, the company must

capitalize on the fact that they can offer many routes to and from the Gulf region in order to

ensure their profitability. On the other hand, unfair competition is the most visible threat that

hampers the profitability of the country. For this reason, they must show considerable efforts in

the improvement of their product, price, place and promotion in order to remain stable despite

competition. The researcher thus accepts the fifth alternative hypothesis: Air France-KLM

experiences opportunities and challenges in the Gulf Region that affect their operations.

5.1. Recommendations

To ensure the profitability and stability of Air France-KLM in the Gulf Region, the

researcher recommends the company to capitalize on their strengths in order to eliminate their

weaknesses. This can of course be achieved by focusing extensively on their application of

airline management. For future researchers on the other hand, study with regard to the topic at

hand can be strengthened through the conduction of interviews amongst members of the

administrative body of the company to efficiently determine how strategic management

principles are adopted.

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APPENDIX A. QUESTIONNAIRE FOR EMPLOYEES OF AIR FRANCE-KLM IN THE GULF
REGION

Demographic Information:

Name (optional): _____________________________________________________
Age:
Number of years in the company: _____

I. The Current Position of Air France-KLM in the Gulf Region

On a scale of 1-5, with 5 (strongly agree) and the lowest, 1 (strongly disagree), rate the following
statements with regard to the current position of Air France-KLM in the Gulf Region.

Legend: 5- Strongly Agree, 4- Agree, 3- Neutral, 2- Disagree, 1- Strongly Disagree

5 4 3 2 1
1. Air France-KLM currently dominates the airline industry
in the Gulf Region
2. Air France-KLM is facing unfair competition in the region
3. Air France-KLM was able to take advantage of the
growing market in the Gulf Region
4. Customers in the Gulf Region tend to prefer Air France-
KLM over other airlines in the said area

II. Strengths of Air France-KLM in the Gulf Region

statements with regard to the strengths of the company that they may take advantage of in the
improvement of their sales processes in the Gulf Region.


5 4 3 2 1
1. It is the leading European global airline group with
significant economies of scale
2. It has an enhanced European catchment area
3. It possesses a twin hub which focus on the re-enforcement
of the pricing marketing power
4. Possession of efficient new fleet
5. There is a growing proportions of long-haul flights
6. Its capacity to offer unique destinations from Europe
7. The service it provides to its customers
8. The wide margin for profits due to its membership in the
Sky Team

III. Threats to the Operations of Air France-KLM in the Gulf Region
statements with regard to the different barriers that may hamper the operations of Air France-KLM in the
Gulf Region


5 4 3 2 1
1. Unfair competition
2. No capacity to promote a competitive culture
3. High fuel costs tend to result to higher business costs
4. Promotional activities are insufficient
5. The promotion of the destination (in the Gulf Region) of
the airline company must be improved

IV. AIRLINE MANAGEMENT CONCEPTS

1. Does Air France-KLM adopt concepts related to airline management? ____ yes ____ no
2. Do concepts related to airline management help Air France-KLM in improving their services in order
to gain profitability and remain competitive? ____ yes ____no
3. Does Air France-KLM give importance to the provision of better services to their customers in order to
attract new ones and retain those that had been dealing with them over the past years? ____ yes ____no
4. On a scale of 1-5, with 5 (very effective) and 1 (very ineffective), rate the overall effectiveness of the
airline management concepts applied by Air France-KLM.

5- Very Effective 4- Effective 3- Neutral 2- Ineffective 1- Very Ineffective

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