Management Practice BSS063-6

Report on Simulation

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Strategic decisions and the implications -

To : The Chairman

From : The Chief Executive Officer

Submission Date :

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 Executive Summary

Boomy Air is a regional airline catering to luxury airline market with its primary engagement
in to passenger transportation and a new management has taken over the company 11 quarters
before. Currently Boomy operates as the number 01 regional airline in the industry with its
overall best performance indexes.

Company was under a distressed situation in terms of financially and operationally when the
it had been taken in to the hands of new management. With the long-term vision of the
management and the extraordinary team effort of the organizational wide team members it
was converted into a profitable and well-established entity under the brand name “Boomy
Air”.

Strategic positioning of the company was well planned and based on the extensive analysis of
external and internal environment of the company. Porter’s five forces analysis, SWOT
analysis and the Value proposition canvas made a tight ground on it.

Eventually, Boomy Air became the number 01 regional airline while achieving most of its
objectives with its proper strategic planning process, focus on financial stability, extensive
employee development programmes, effective marketing strategy and the tactical game plan
of optimum flight scheduling.

Accordingly, this report provides the key insights, highlights of the strategic decision-making
process and the recommendations for future operations of “Your home in the blue skies”

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 Table of Content

Executive Summary...................................................................................................................2
Table of Content.........................................................................................................................3
1. Introduction.........................................................................................................................4
2. About Boomy Air...............................................................................................................5
2.1 Management Team......................................................................................................5
3. Vision, Mission and Core Values.......................................................................................7
4. Critical analysis of strategic decisions and impact.............................................................9
4.1 Identification and reasoning the strategic position......................................................9
4.2 Brand image...............................................................................................................10
4.3 Strategic Decision making.........................................................................................11
4.4 Operations..................................................................................................................11
4.5 Marketing..................................................................................................................13
4.6 Finance......................................................................................................................15
4.7 Human Resources......................................................................................................16
5. Conclusion........................................................................................................................18
6. Recommendations.............................................................................................................19
References................................................................................................................................20
Appendix A: Value Proposition Canvas..................................................................................22
Appendix B: SWOT Analysis..................................................................................................23
Appendix C: Porter’s Five Forces............................................................................................23

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 1. Introduction

Regional airlines play an inevitable role in the aviation system fulfilling the crucial areas of
air connectivity as they mostly operate in the less demand routes connecting small
communities. (Lufthansa Consulting, 2020) Boomy air, a regional airline currently operates
as number 01 among competitors focusing the luxury passenger market differentiating itself
through excellent service quality and at the moment serving for two regions namely R2 and
R4 utilizing its market penetration strategy.

Boomy was initiated three years back as a small regional carrier and once it has been
acquired by the new management and primarily engaged in the passenger transportation and
cargo operation in Region 2. Starting from the scratch, Boomy is currently the best regional
airline in the industry achieving highest cumulative net profit and number 01 quality rank.

The report covers the strategic decisions made during the 11 quarters in its operations and
their impact starting from the strategic positioning based on the environmental scanning
process to different functional decisions. Along with a list of plausible recommendations will
be made to succeed the future operation.

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 2. About Boomy Air
Boomy is currently the operating as the number 01 regional airline in the industry, with the
highest cumulative net profit of USD 3,619,618, Quality ranked number 01 in the industry
and with comparatively better overall performance indexes including strong financial
statements.

At the inception it was a small regional air carrier serving for five routes with a cumulative
net profit of $ 5283 when the new management takeover the Company three years ahead.
Boomy came a long way through the previous 12 quarters with a balanced development
under the guidance and the strategic vision of the current management team and our valued
and competent workforce by creating comfortable Boomy inflight experiences to its
passengers.

2.1 Management Team

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 3. Vision, Mission and Core Values

Organizational vision can be identified as the key notion of its strategic planning process and
it is a dream that the organization itself see as to how it would be in the future. Expression of
its vision in a clear way will encounter an effective strategic management process. Vision is
monitoring, guiding and directing impending business performances.

An effectively formulated vision statement may be explicit, guiding, attentive plus should be
simply communicable (Thompson et al., 2010). Considering the facts New management
decided the organizational vision as “To be the most desirable luxury airline in the country”
by focusing where do we go.

Mission is the detection of a goal which can be defined as distinctively attach to the particular
organization as a strong plus point compared to market competitors, finally will be a
competitive advantage. (Bowen, 2018). Accordingly, Boomy mission highlights its
prioritized strengths and values as “Contribute high quality and equal customer service while
building vigorous interactions among stakeholders and fulfilling social responsibility”
addressing the question as to why do we exist.

Corporate values are communicational mode of the way that company is functioning and
there are varied methods of articulating those considered values. (Williams, 2011). Boomy
Air’s values have been identified that its success depends on the four key factors and
communicate them simply as follows.

 Quality and safety

 Integrity and trust
 Empowered workforce
 Agile sustainability

Necessity of having SMART objectives to an organization determine is to help to make them

comprehensible to stakeholders in mutual manner and clearly stated goals and objectives may
direct collective team efforts in achieving them. (Mulvey, McGoey and Kupersmith, 2013)
Specific, measurable, attainable, relevant and time-bounded Boomy’s objectives will clarify
how the specific performances would be.

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 To position Homey Air as number one choice for luxury air travels in the industry
 To gain highest earning per share in the industry throughout the period
 To maintain highest quality and reliability index in the industry till Q12
 To maintain the Loading Factor above 60% till Q12
 To maintain the lowest employee turnover rate among the competitors till Q12
 To maintain the highest cumulative net profit among the competitor by end of Q12

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 4. Critical analysis of strategic decisions and impact

4.1 Identification and reasoning the strategic position

In deciding the strategic positioning of the company, new management carried out a
comprehensive environmental scanning process including a SWOT analysis and PESTEL
analysis to identify all the external as well as internal factors affecting the operations of
Boomy Air. Apart from a comprehensive Value proposition canvas has been drafted to ensure
that the service is positioned catering which customer values and needs.

External environment analysis plays a major role in identifying the threats and opportunities
prevailing in the industry to determine the most suitable corporate strategy for the business to
fit with its operating environment (Thompson et al., 2011). Strategy is identified as a key
organizational successive factor as it provides long-term path to the management to mount
and direct all the operational activities in achievement of a shared goal. (Whittington et al.,
2017)

Based on the analysis, management identified that the market has a potential for differentiate
strategy by catering to the high-end customers delivering the perceived value to their quality
expectations through generating perception of the value. Going along with the JetBlue
strategy, Boomy focused more on high quality brand image through brand new fleet, be the
technological plus infrastructure leader and to maintaining highest quality and safety ranks in
terms of performances. (Flouris and Oswald, 2006) Thus, there are contradictory arguments
as the best or most chosen competitive strategy for airlines in long-run is “cost leadership"
while companies may achieve qualitative rewards through differentiation strategy in the
short-run. (Kilinc et al., 2012)

In line with the market analysis, Boomy determined its corporate strategy as market
penetration focusing on expanding the market share remaining in the same markets. Thus,

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only in the initiation, during Q2 and Q3 two decisions have been made with a slight deviation
from the market penetration strategy. In fact, entering In to the Cargo business with product
development strategy and entering in to the Region 4 with market development strategy. Else,
management ensured the firm alignment to the market penetration strategy in business
decision making and targeted all three ways of increasing the market penetration as
increasing more sales to the existing customers, attract competitors’ customers and attract
non customers to the company. (Pidun, 2019) Also the market penetration strategic choice
was backed by its benefits as low risk due to focusing on known regions and the requirement
of less investment due to scale effect and utilization of existing fleet and other assets than
moving to new regions. (Pidun, 2019)

Figure 1: Ansoff Metrix

4.2 Brand image

As the company decided its strategic positioning, team collectively agreed to the name
“Boomy air” as the brand name of the company as the brand name touches its existing name
on customers mind and it is vital to select a meaningful name rather invented. (Batey, 2016)
We expected that “Boomy” will give our customers the Boomy and comfortable perception
as brand image is a reflection of the brand personality in customers’ minds (Shafiee, Sanayei,
Shahin and Dolatabadi, 2014)

Figure 2: Logo of the Homey Air

Going along with our competitive advantage of service quality, came up with the tagline of
“Your home in the blue skies” to firmly plant the comfortable feeling inside customers mind.
Slogans are significant components of a brand's identity reason why many of the brands using
slogans today. (Abdia and Irandoust, 2013)

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 4.3 Strategic Decision making
In transportation sector, Mergers and acquisitions are identified as the distinctive efforts in
gaining economies of scales enhancements with the mutual infrastructure and through other
cost-effective operational methods. But it is debatable that extended scope of the airline will
constantly efficient and sustainable among the airlines of all levels. (Nolan, Ritchie and
Rowcroft, 2014) When Boomy Air was offered with a dual designated offer for a merger with
another established airline, management rejected the offer considering such uncertainties and
highlighting the fact of management willingness in retaining our own name. As the company
was just started to operate in stable grounds management did not wanted to lose its autonomy.

As a group, Boomy’s senior management team displays a somewhat risk averse decision-
making style though some members are willing to accept the risk. As all the management
team members are prepared to keep the team cohesiveness and collective decision-making,
most of the time output decisions were delivered with risk aversion. Even though the risk
aversion perceived as protected and responsible there are instances it connected with some
failures and delays. (Walters and Ramiah, 2016) At the beginning of new company, there
was an option to enter into cargo operations along with passenger transfers. Similarly, there
were some new business opportunities as auto rental business in quarter 04, air ambulance
service in Quarter 10 and congressman flight trip offer during the quarter 11. Upon analyzing
the consequences and facts of those business opportunities management decided to enter to
the Cargo distribution from the following quarter onwards with the gained financial
steadiness, but to reject the other two offers considering the risk involvement and the less
availability of market data. Accordingly, it was identified that Boomy would have attained
increased opportunities if the management was more risk taking.

4.4 Operations
Following the Differentiation strategy of the company, Boomy entered in to the Luxury
market at a lower cost of 49 cents while attempting to get a customer attraction by offering
the luxury service by being in the lower level of the price range. Further, throughout all the
quarters offered Level3 Cabin/food service and have not charged any additional service fees
till Q6. Additional service fee for passengers with checked baggage and advanced seat
selection have been charged as to maintain the standards and to reduce no-shows. It is visible
with the in-hand fare details that Boomy managed the fare with minimum fluctuations to

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maintain customer integrity. Only during Q4 and Q5 fare has been increased up to 51 to
manage revenue targets with the seasonal demand variations.

Company name Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10 Q11

STAMA Air - - - - 51 48 - 40 49 48 48
FalconSky Airways PLC - - - - 50 50 - 48 50 50 51
Homey Air 49 49 49 51 51 49 49 49 49 49 48
Cloud Air - - - - 40 40 - 50 40 40 40
Luxe Homeland Airways - - - - 48 50 - 49 49 51 49
Pearl Azure Air - - - - 38 37 - 39 39 39 39
Onluck - - - - 31 31 - 28 28 28 28
TAGMA AIR - - - - 40 40 - 40 40 49 48
Figure 3: Fare details in USD Cent per mile

Airline scheduling is an ahead preparation on deciding the company operating patterns by

efficiently allocating its fleet and other resources in meeting a future expected demand
aligning with the long-term corporate goals. (Camilleri, 2017) Boomy’s scheduling
optimization has been aligned to the differentiating business strategy by mainly focusing on
the routes with possible attraction of high-end customers. Further, other factors as route
distance and special flying hour restrictions due to legal and maintenance factors and
seasonal variations have been considered in the scheduling process.

Passenger load factor which measures the efficiency considered as the mostly accepted
performance indicator of the airlines. (Jenatabadi and Ismail, 2007) During the 3 years period
Boomy air managed an average load factor of 57.57% with the optimum fleet utilization.
Thus, it was identified that the much optimum scheduling with due consideration of the
competitor sales details would have generated higher load factors than the existing.

Company initially started operations with 03 TP-300 flights where 02 flights were completely
owned by the company and 01 was leased out. Leasing out aircrafts is a common practice of
most of the airlines of outsourcing fleet. In recent past many airlines have vastly increased the
aircraft leases as to maintain the easiness in responding to market fluctuations in an effective
way. (Dožić and Krnić, 2020) Accordingly, considering the facts of high operational cost,
working capital issues arise with high investment on new flight acquisition and maintaining a
flexible fleet company gradually changed entire fleet under lease agreements. Also, it was
decided to maintain the fleet from RJ-350E flights as to acquire operational cost benefits with

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fuel efficiency plus less maintenance and introduce the product differentiation through
advanced technological and brand-new fleet. At the end of 11th quarter Boomy owned total of
06 flights and five of them were leased RJ-350E flights and only one is an owned TP-350E
which was purchased with the in-hand cash excess in the 10th quarter.

Hedging the fuel cost also has become a wide practice in the airline industry with expectation
of having unaffected long-run profits with fuel price variances in this highly volatile
environment. (Morrell and Swan, 2006) Also recognizing the impact of fuel cost on
operational expenses and the insignificant difference between the two prices, management
decided to continue with the contract fuel price through out the entire period

Figure 4: Indstry wide reliability index during

4.5 Marketing
Market segmentation is fragmenting the market in to minor potions mainly to address the
problem of catering in to an expanded and diversified customer base. Accordingly, market
can be divided based on the variables of geographic, demographic, psychographic and
behavioral and product related basis (Kotler et al., 2018) The general objective of
segmentation is to recognize better potential segments and the most profitable segment will
be the target market. Accordingly, Boomy air targeted on income based demographic
segmentation and the target group was chosen as higher income earing passengers.

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As the entire airline industry operates under very tight competition with the highly volatile
current external environment including influential passengers, existence of powerful media
and continuously increasing operational costs. To dilute the consequences, arise from said
forces towards the company image along with attracting and retaining customers, airlines
allocate more funds in marketing activities. (Adeniran, Egwuonwu & Egwuonwu, 2016)
Starting from the USD 36,000 of total marketing budget, Boomy air was spending USD
223,200 by the 11th quarter with a gradual increment based on the expansion of new routes
and new regions. Also, special attention has been given on promotional activities during
winter seasons. As the company started with zero sales personals in the carder, increased the
number of recruitments based on the sales capacity. Just as the new company started, direct
ticket sale through the company website was started while continuing the relationships with
some consortiums and managed the both channels in line considering the inadequacy of
internal sales force and the direct sales gaining from the intermediaries. With the lack of
information availability management team was unable to realize the positive correlation
between cargo marketing budget and the Cargo sales resulting a loss of cargo revenue by the
last quarter.

Social responsibility budget also gradually increased and utilized the funds in different causes
time to time in line with the special scenarios going on the environment.

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 Figure 5: Net profit and the marketing busget of Homey air

4.6 Finance
Boomy’s competent and experienced VP Finance was always keen on the financial aspect of
each individual decision-making point and senior management team continuously targeted on
maintaining healthy financial KPIs while increasing the profitability. Financial information
plays a significant role in evaluation of achievement of organizational mission. (Friães dos
Santos, Pires and Fernandes, 2018)

Figure 6: Net profit and Cumilative net profit – Homey Air

Increased the Gross revenue from USD 2.4mn to USD 8.4Mn by end of the 11 th quarter
marking the 5th industry ranking and the cumulative net profit was initially at a negative
balance and increased up to USD 3.6 million.

Boomy fleet consisted with 5 leased flights plus one own flight which we have acquired
during Q10 with the excess cash in hand. Thus, it is debatable that we made the right decision
there. Going along the industry practice, fleet was maintained under lease agreements as to
reduce the operational expenses to an extent and the strategy worked well.

Significant increase of the stock price from the initial amount of USD 20.00 to USD 43.22
during the period is highlightable. With the rising profitability and the Quality and reliability

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rating of the company stock price has been increased as shown. Continuous stock price
increment is positively effect on the company image.

Figure 7: Stock price during all the quarters – Homey Air

Company acquired 01 short term overdraft and a long-term loan to manage cashflow issues
thus both of them have been settled in advance securing the financial stability of the
company.

4.7 Human Resources

VP Human Resources along with her HR team, constantly focus on the continuous
development of our employee competencies and to maintain a well-trained and empowered
workforce resulting in generating the best quality service to our customers through the most
contented and competent workforce. Well competent and experienced work force is identified
as a major element determining the quality as well as the reliability factors of an airline.
(Gibbs et al., 2017).

Constant increment of the Quality and training budget based on the different incidents
happened resulted in achieving and maintaining the highest quality index in the industry
throughout the period. As the company believes the key operational success depends on the
satisfied workforce all the measures have been taken to make them fulfilled. Remuneration is
paid above the market prevailing wages starting from 3% to 7% by the end of 11 quarter. A
stock bonus was issued for employees once, as to offer employees a sense of ownership to the
company. As and when the collective actions formed though unionization requesting salary
hikes, company always act in positive manner along with negotiations.

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 Figure 8: Industry wide quality index during all the quarters

Human resources strategy always centered with employee empowerment and engagement,
internal recruitment and promotion has a prioritized opportunity in HR policy. Based on a
young ticket agent has been hired internally for an open station manager position which the
decision created positive thoughts among employees. Employee turnover was at the 11.1% at
the beginning which has been declined to 7.1% with the continuous improvement measures
taken by the Human resources division.

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Figure 9: Employee Turnover rate – Boomy Air

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 5. Conclusion
Collaborative approach established with the proper strategic planning process of the
management and the limitless effort of our qualified workforce has drove Boomy to the
current status. Starting from the scratch Boomy has become the best regional airline by
achieving most of its set objectives.

Figure 10: Overall industry performances at the 11th quarter

End of the period Boomy has hit the cumulative net profit of USD 3,619,615 marking the
rank 01 in the industry. Further the number 01 ranks in Net profit, earning per Share, Quality,
yield per ASM have been achieved. Number 01 Quality rank with the 99-index value
exhibits the achievement of company business strategy of differentiation through quality of
service. Boomy is consisted with very strong financial statements indicating a USD
1,624,524 of excess cash balance in hand with no short term or long-term loan payables.
Current stock price is at USD 43.22, an average increment of 116% from the start.

In terms of the employee satisfaction, employee turnover rate has been reduced to 7.1% from
11.1% which is a significant decline reveals the healthy employee practices.

Comparatively higher total operating expenses would have been managed with proper
analysis of the individual expense variables which could direct towards achieving much
higher profit level. Thus, the scheduling process was optimum to an extent, gathering exact
technical knowledge regarding the process would have been lead the team in achieving the
most optimum scheduling. Less market information and analysis led the company operate
with a blind eye some times. Management has second thoughts about the cash purchase
decision of a TP-300E flight, going against the industry norms and the usual Boomy
practices. Consequences of the decision are being evaluated at the moment and management
has an agreement in revising the decision in case of realizing negative effects.

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 6. Recommendations
 Market research is a highly important factor in effective management of any business
and due to unavailability of information most of the companies/entrepreneurs are
willing to pay for market researches. (Zuzaku, 2015) It is recommended to spend for
market research in future operation as it is undoubtedly difficult respond tight
competition.
 Companies introduce a customer loyalty programme as the competition grows so fast
and the customer retention is becoming a problem but this will gain loyalty of existing
customers and create addons (Hofman-Kohlmeyer, 2016). Introduce such loyalty
programme by announcing a free point system which customer will try to stick into
Boomy. Along with company may offer free additional services or meals etc…
 In the complex environment airlines operate business intelligence systems will
efficiently process related data in a way that the airline operates maximizing profits
and customer requirements. (Mihai, 2015) It is vital to retain existing customers
creating an impact on them. Adaptation of data science will capture all customer
specific details and processed for future operations and rendering a customized
customer centric service may ease through this.
 Intensify sustainability concerns as the airlines get a huge pressure from interested
parties regarding sustainability issues. Aviation industry is asking novel
breakthroughs in facing the sustainable growth challenge (Maria, 2014)

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Appendix A: Value Proposition Canvas

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Appendix B: SWOT Analysis

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Appendix C: Porter’s Five Forces

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