Analysis of Air France KLM

Analysis of piece of cake France KLM advertise France-KLM is an international wrinkleway comp any and a member of the Skyteam skyway federation. The Group was created on May 5, 2004, fol paltrying dividing line Frances combination with KLM Royal Dutch gentle windlines (KLM), thereby forming the beings largest airline classify by turnover and second largest worldwide despatch operator in terms of revenue-tonne kilometers. The Group organizes its ne cardinalrks round devil major hubs capital of France-CDG and Amsterdam-Schiphol. The Companys three main(prenominal) businesses be passenger impartation, cargo operations and industrial maintenance. The Group counts much than 100,000 employees throughout the world. Passenger transport is the Groups main business, with 74.8 million passengers carried (2007-08 pecuniary course of study), a fleet in operation of 607 aircraft on 31 March 2008 and 258 destinations worldwide. The majority of the employees are establish in Fran ce and the Netherlands. Both Air France and KLM continue to operate flights under their distinct brand names as subsidiaries of Air France-KLM.ContentsCHAPTER 1 IntroductionAIR FRANCE KLMAIR FRANCE KLM is the combination of two big airlines much(prenominal) as Air France and KLM. Since their jointure in 2004, KLM works closely with Air France in spite of appearance the AIR FRANCE KLM retention fraternity. In terms of financial turnover, AIR FRANCE KLM is the worlds largest airline partnership it also transports the most passengers and is the worlds second-largest cargo transporter. Air France and KLM carry more(prenominal) than than 71 million passengers per twelvemonth. They operate more than594 aircraft enabling them to fly to236 destinations worldwide with 2,500 periodic flights. The two airlines world networks can be combined, forming a vast network organized around the two major hubs of Amsterdam-Schiphol and Paris-CDG. The head offices are located at Amstelveen and Par is.AlitaliaIn January 2009 AIR FRANCE KLM and Alitalia reached an agreement to strengthen their partnership cemented by AIR FRANCE KLM taking a minority stake in Alitalia. This agreement will contact AIR FRANCE KLM greater access to the Italian market.SkyTeam AllianceAir France and KLM are members of the SkyTeam al nonpareiliance. SkyTeam is a spheric airline alliance which includes Aeroflot, Aeromxico, AirEuropa, Air France, Alitalia, China Southern Airlines,CSA Czech Airlines, Delta Air Lines, Kenya Airship canal, KLM, Korean Air (including Northwest Airlines), Tarom and Vietnam Airlines. through one of the worlds most extensive hub networks, SkyTeam offers its384 million annual passengers a worldwide system of more than 13,000 periodical flights to all major destinations.IncomeOver the fiscal year 2009-2010 the turnover of Air France-KLM was 20.9 billion euros. Together, the two airlines take aim over 107.000 employees. For more information on AIRFRANCE KLM Finance, please go to www.airfranceklm-finance.com.SharesThe Air France-KLM shares are listed in Amsterdam, Paris and New York.AimAir France-KLM comprises a holding company which controls two airlines, Air France and KLM, each of which retains its take in recite identity and brands. The group is the worlds largest air transport group in terms of revenue, second largest in terms of air vocation (in passenger-km) and cargo (ton freight-km), and third largest in terms of maintenance revenue. Both airlines hunting expedition their own operations from their respective hubs Paris-Charles de Gaulle and Amsterdam-Schiphol.PassengersPassenger transport is the largest of the groups three core businesses, generating around 80%of its revenues (as of 31 March 2008), with 74.8 million passengers carried.CargoCargo was the first fully-integrated commercial activity at Air France-KLM in 2005. Client companies now have a single point of entry, and a full, simplified offering with flights departing from two hub s and benefiting from some(prenominal)(prenominal) networks. Air France-KLM Cargo ranks first worldwide among air freight carriers (excluding integrators).MaintenanceThe combination of Air France Industries and KLM Engineering Maintenance allows the group to offer a comprehensive range of aircraft maintenance and overhaul serve with co-occurrenceary areas of specialization. Maintaining the two fleets accounts for two-thirds of the groups maintenance operations, further supplemented by maintenance repair and overall (MRO) operations for one hundred fifty third-party airlines.Company BackgroundAir FranceAccording to (KLM, 2010), the company was set up on 7 October 1933. Its record has been marked by several major milestones, including the holding acquired in the capital of UTA in January 1990 and the merger with Air Inter in 1997. In June 2000, Air France and Delta Air Lines joined constricts with Aeromxico and Korean Air to sling the Sky Team alliance. Air Frances main hub a t Paris-Charles de Gaulle is Europes number one in terms of connecting opportunities.KLMAs cited in (KLM, 2010), KLM was set up on 7 October 1919 and is the oldest airline close up operating under its true name. Its recent history has been characterized by the creation of a joint venture with Northwest Airlines (NWA) in 1989 and its scholarship of the holding of Kenya Airways in 1996. KLM has Amsterdam Airport Schiphol as its home base.Since May 2004, Air France and KLM Royal Dutch Airlines have become the largest European airline group one group, two airlines, and three businesses. Each airline has retained its individual identity, trade name and brand wad AnalysisMullins (2007) explained that, in order to gauge the nature of the business environment and its strategic capability an organization may undertake a SWOT analysis focuses on Strengths, Weaknesses, Opportunities and Threats facing the organization.STRENGTHSStrengths are those positive aspects or distinctive attributes or competencies which provide a strong market advantage or upon which the organization can build. Against a backdrop of increased relaxation behavior which serves to intensify competition, the profitable growth strategy plays to the groups strengths, the following are the air France KLM group strengths.A advance(a) fleet the groups party boss assetGuaranteeing energy and economic efficiency and greater rubber eraser levels, the groups aircraft fleet is its chief asset when it comes to meeting the challenges of sustainable development.The dual Roissy Schiphol hub and a balanced networkThe Air France and KLM route networks complement each other extremely well. The dual hub concept is central to group strategy and is designed to coiffe the most of this.The benefit of dual brand strategyAir France and KLM took an original approach to the merger, choosing to retain the two brands while underdeveloped a unified strategy. Air France and KLM each enjoy strong brand identities and are extremely complementary.Enhanced competitiveness thanks to cost controlTo maintain its competitiveness, the group launched Challenge 10,designed to present 1.4 billion euros by 2009-10, through a 3% cut in unit costs. The plan is four-pronged suffice optimization and productivity gainsFleet modernization, which will generate enkindle and maintenance cost savingsPurchasing, and optimizing group synergiesExternal distribution costs.The development of high growth areasThe groups ambition is to seize growth opportunities in countries impulsive global economic growth, mainly Brazil, Russia, India and China. In the long time ahead, the Air France-KLM group plans to grow by 4.7% per year in terms of obtainable merchant ship-km on its long-haul network.WEAKNESSESWeaknesses are those negative aspects or deficiencies in the present competencies or resources of the organization, or its image or reputation, which limit its effectiveness and needed to be corrected to minimize their effect. internationalist economic instabilityFaced with soaring oil prices, international economic instability, and signs of waning read, air transport has entered a period of great un accreditedty. Our Group can count on its strategic assets, the quality of its fuel hedging and its resolute policy of cost control to meet this challenging period of turbulence and low visibilityOPPORTUNITIESOpportunities are favorable conditions and usually arise from the nature of turns in the outer environment. The organization unavoidably to be sensitive to the problems of business strategy and responsive to transfers.Sustained demandsIn an increasingly global society, the demand for mobility is also increasing. Air transport is a key factor in a countrys economy. Over the hold up 20 years, air transport has grown twice as quickly as gross municipal product (GDP). In 2008, the rapid development of emerging countries is stimulating growth in Latin America, the warmheartedness East and Asia. This will compensate for the slowdown in the US economy. As for the future, IATA forecasts an increase in global capacity of around 5% per year by 2011.A key contribution to the economyAir transport carries over 2 billion passengers annually. Tons of cargo shipped by air each year represent 35% of the total value of export trade in manufactured goods. By connecting nation, businesses and goods around the world, air transport molds an essentialcontribution to global economic activity. Both directly and as a promoter of growth in other industries.THREATSThreats are the converse of opportunities and refer to unfavorable situations that arise from external developments likely to endanger the operations and effectiveness of the organization. Air France KLM like any other organizations is faced with a number of threats, these includesIncreased pressureGrowth in European low-cost carriers has been strong for some years and Middle Eastern carriers are planning considerable expansion Gulf carri ers plan 20% seat growth per year for the next three years. This represents stiff competition for European airlines on traffic in the midst of Europe and Asia or Australia.Development limited by infra anatomical structuresEurope is experiencing air traffic congestion, leading to world-shaking delays, increased costs and carbon dioxide emissions. This is partly a result of the fragmentation of airspace and of the air traffic control process. There is considerable room for improvement. For 10 million flights a year, it is estimated that the actual route flown is 5% longer than ideal. For some routes, such as Amsterdam-Zrich, it is even 20%. The annual cost of fragmented European skies is estimated at 3.4 billion euros.A sphere of influence subject to heavier taxationAir transport is subject to strict regulation, mainly regarding security, safety and infrastructure. The sector is also subject to high charges, among them drome or navigation charges, add-on dedicated fees to finan ce security. Moreover, air transport is the only means of transport to finance soundproofing measures, as it does in numerous European countries.Climate change awarenessGeneral awareness of the reality of climate change continued to increase in 2007. This was coupled with local environmental constraints that have always affected air transport activities. Air transport accounts for between 2 and 3% of all man-made CO2 emissions. In Europe, its relative contribution will increase due to growth in traffic and the expected lessening of emissions in other industries. In the past 40 years, the sector has made considerable progress, reducing CO2 emissions per passenger by more than 70%.SummaryIn spite of its merger Air France KLM is still operating under its identity and brand name with their home bases located at Amsterdam airport Schiphol for KLM and Paris-Charles de Gaulle for Air France. The main core duties of the airline are to transport passengers, cargo and engineering and mainten ance. As any other organization Air France KLM has the opportunities to grow much bigger and become the first largest airline company in the world. One group, two airlines, three businesses.CHAPTER 2 Organisational structureThe pattern of family between heterogeneous positions in the organization and among members of the organization is referred as structure. Organization is essentially a group of people with a common objective or goal to archive. The structure can either be formal i.e. put down or informal i.e. unofficial.Mullins (2007) defined, Organization Structure as the di raft of work among members of the organization, and the co ordination of their activities so they are directed towards the goals and objectives of the organization. It is the relationships among positions in the organization and among members of the organization. It makes possible the application of process of management and creates a mannikin of order and domination through which the activities of th e organization can be planned, organized, directed, and controlled. It defines tasks and responsibilities, work role and relationships, and channels of conference. essentially there are various types of organizational structures depending on the nature of organization, such as centralized, complex, stratified and declare structures. An effective structure is the one that coordinates various parts of the organization and different work areas. Meanwhile the structure of the organization can either be tall i.e. with a long hierarchical chain of command where the freedom and office of the subordinates is restricted or flat i.e. with a short chain of command, there is more effective between management and workers but employees may have more than one omnibus. However twain of two structures above are highly affected by the number of employees who reports direct to a certain manager that is Span of Control. Hellriegel et al (1998) explained that match of control refers to the number of employees reporting directly to one manager. When the span of control is broad, relatively few levels exists between the top and bottom of the organization. Conversely when the span of control is shockable, more levels are required for the same number of employees. Although there is no correct number of subordinates that a manager can supervise effectively, the competencies of both the manager and employees, the similarity of tasks being supervised and the extent of rules and operating standards all influence a managers span of control.Consider the Air France and KLM corporate and social responsibility (SCR) organization structureCHAPTER 3 Organisational cultureAccording to Hellriegel et al (1998), the organization itself has an invisible quality a certain style, a character, a way of doing things that may be more powerful than the dictates of any one person or any formal system. To understand the soul of the organization requires that we travel below the charts, rule books, m achines, and buildings into the underground world of corporate cultures. Indeed there are several ways in which organizational cultures are formed, keep and changed. Meanwhile there is a very possible relationship between organizational culture and performance, the relationship between organizational culture and ethical behavior, the challenge of managing a culturally diverse work force and finally how organizations socialize individuals to their particular cultures. There are several types of organization cultures, these includes labels of baseball team, club, academy and fortress. organizational culture represents a complex pattern of beliefs, expectations, ideas, values, attitudes and behaviors shared by the members of an organization. More specifically, organizational culture includes role behaviors, norms, and dominant values held by organization.CHAPTER 4 -Leadership and managementAs Hellriegel et al (1998), leadership is the process whereby a person influences others to ac hieve a goal, i.e. is a process of creating a vision for others and having the power to translate the vision into reality. The ways in which leaders attempt to influence others depend in part of the power available to them and in part on their competencies. Leaders draw on five sources of power to influence the actions of others legitimate, reward, coercive, denotative and expert. Vision, empowerment, meaning through communication and self understanding are the competencies that help leaders become more effective.CHAPTER 5 Team workingFor example, after KLM and Air France merged, management decided to create teams of people from both companies to exchange information about particular topics. The most valuable part is the intangible part, teaming up the computerized tomography from IT with the CRM guy from marketing, with the network planning guy, who normally dont speak together, explained Groeneveld.CHAPTER 6 ResourcingAir France-KLM rates as the sector leader on charitable re sources issues and actively addresses all of the challenges relevant to its business. The Groups reporting on social talks and the extent of collective bargaining illustrate a culture of interaction with trade unions on both working and employment conditions, all embedded in the Ethics and Social Rights Charter, signed with all of its European trade unions, and by a wide range of collective bargaining agreements. The group has also allocated significant means to limit the impacts of restructuring. In terms of career management, AF-KLM has put increased emphasis on developing careers for older employees. Extensive means are put in place to deal with health and safety issues, although key performance indicators are not disclosed on a group-wide basis, but separately for AF and KLM. AF-KLM is one of the few companies who show transparency on how to deal with atypical working hours. Overall, AF-KLMs performance on human resources issues remains stable (far above average) compared to the last rating. Against the backdrop of the recent combination, tough competition and tight margins, the main labour relations issues for the group are to develop employability and staff mobility, primarily through training and proactive social dialogue. Other major issues for the group involve promoting non discrimination, diversity, and equal opportunities, and safeguarding health and safety in the workplace.CHAPTER 7 Communication skillsCook et al (1997) describes that, communication begins when one person sends a message to another with the engrossed of evoking a response. The effective communication occurs when the receiver interprets the message exactly as the sender intended. Effective communication is essential for the functioning of any organization. Managers need to transmit orders, and polices, build cooperation and team spirit, and identify problems and their solutions.CHAPTER 8 proceeding and MotivationArmstrong M (2006) defined, a motive is a reason for doing somethi ng. Motivation is concerned with the factors that influence people to behave in certain ways. All organizations are concerned with what should be done to achieve keep up high levels of performance through people. Giving close attention to the individuals can best be prompt through such means as incentives, rewards, leadership and importantly, the work they do and the organization context within which they carry out that work. Essentially motivation can take place in two ways such as people can motivate themselves (intrinsic motivation) by seeking, finding and carrying out work that satisfies their inevitably and secondly people can be motivated by management (extrinsic motivation) through such methods as pay, praise, promotion and punishments such as disciplinary actionCHAPTER 9 Management systemsEarlier this year, Air France-KLM introduced a new combined executive management structure on a functional basis, replacing the separate management structures in Air France and KLM. In place of the Strategic Management Committee, which had supervised the development of Air France and KLM over 2004.2007, the business is being managed from 2007 through an Executive Committee whose members has a group level responsibility and can come from either Air France or KLM while retaining their responsibilities at a company level.The historic commitments of both companies, joint ambition and specific action plansCHAPTER 10 Management of changeHellriegel et al (1998) explained, numerous another(prenominal) sectors of the economy, organizations must have the capacity to adapt quickly and effectively in order to survive. To a certain extent all organizations exist in a changing environment and are themselves constantly changing. more and more organizations that emphasize bureaucratic or mechanistic system are ineffective. Organizations with rigid hierarchies, high degrees of functional specialization, narrow and limited job descriptions, inflexible rules and procedures, and impersonal management cant respond adequately to demands for change. Organizations need designs that are flexible and adaptive. They also need systems that both require and allow greater commitment and use of giving on the part of employees and managers.Organisational change can be difficult and costly. Despite the challenges, many organizations successfully make needed changes. Adaptive, flexible organizations have a competitive advantage over rigid ones. Thus managing change has become a central focus of effective organization worldwide. There are so many pressures for change, these includes global market, the spread of information technology and computer networks and changes in the nature of the workforce employed by organizations.