Question

AIRLINE HOPES TO CUT COSTS, REGAIN MARKET SHARE

Air Canada unveiled its long awaited discount carrier yesterday, but warned that customers shouldn’t expect fares to immediately be lower than those already offered by Air Canada. Steve Smith, president and chief executive officer of Zip Air Inc., said the new airline is being created to cut Air Canada’s costs – not to reduce fares. ‘Right now, the price is already low, particularly in this market,’ he said, adding that prices could fall over time as the new airline reduced expenses.

Observers see the wholly owned subsidiary as a way for Air Canada to lower labor costs and win back market share it has lost in recent years to Calgary-based WestJet Airlines Ltd. Mr. Smith said a new business model is emerging in the airline market – as it has in retailing – where lower-cost, no-frills service becomes the norm. He said the full-service model for short flights is ‘going the way of the dinosaur.’ Zip is aimed at meeting that challenge in the low end of the market, he said.

Zip’s costs will be at least 20 per cent lower than those at Air Canada’s comparable mainline flights, in part because Zip’s employees will be making less money than their counterparts at Air Canada. Mr. Smith said wages will be competitive with Zip’s competitors in the low-cost market. ‘For the employees, they have to understand that they will be working for zip,’ he joked. Pamela Sachs, president of Air Canada component of the Canadian Union of Public Employees, said the union will mount a legal challenge to Air Canada’s attempts to pay so-called B-scale wages to Zip employees. ‘Air Canada gives zip by zapping its employees. They are hurting the very people who have worked so hard for them and for so long,’ she said.

Other cost-cutting measures at Zip include offering snacks instead of meals, providing no in-flight entertainment and operating only one kind of plane. There will also be less room between seats – 32 inches or 33 inches – although the seats will still have more leg room than the smallest seats at WestJet. The reduction, along with the elimination of business-class seats, will allow Zip to add 17 seats to the 100 seats in the Boeing 737-200. (WestJet has 120 seats in its Boeing 737-200s). The company will operate independently of Air Canada, although it will buy maintenance services from its parent, as well as using the larger company’s pilots.

Based upon your own work experience, or upon your studies of organizations, answer the following with respect to the case.

1. (a) Do you think the organization has realized the importance of human capital? Justify your answer

   (b) As an employee what are the sources through which you can add value to the organization. (CLO: 1)

Answer 1

Yes, company do realize that their human capital is their human resource. The employees are the best and most reliable resource the company has. In the case when the cost cutting was planned, the wages of the employees were about to cut. To make ZIP profitable, the wages were compromised. Soon the company realized that the employees are the intangible resource and if the union of public employees sues the company in court, it will be very difficult for the company to fight a legal battle. Afterall, these are the people who supported and worked for long to establish the name of the organization.

The organizations have realized that employees are not liability, they are asset as now companies have started taking care of the employees by providing them

• good organizational culture, secure jobs, challenging roles and responsibility.
• leadership opportunity and connect for personal touch.

The companies have now started taking initiatives for the employee satisfaction giving them ownership to get the best out of employees. Like many companies launch health care program for the employees and their families.

2) How can employee add to the value of the organization

Employees can add value to the organization by

• adopting optimum utilization of given resource.
• Enrich the culture of the organization by aligning with the mission and vision of the company.
• Mindfulness and also commitment towards work and company.
• By working towards the goal of the organization.
• Being empathetic and interactive.
• Be the part of internal branding of the organization.
• Support the cause of the company and provide good loyal services to the employer organization.