Case: Star Alliance 2020

I. Major Problem (CLAIM) Identified: The problem is how the member airlines will survive the COVID-19 pandemic crisis and regain their pre-pandemic financial stability.

            A. Justifications for problem statement (FACTS with WARRANTS)

                        1. why is this the problem?  what in the case suggests that this is the problem?                                                                    2. Flights got canceled in 2020 only, and many planes got grounded.

            B. Justifications for problem statement

                        1. why is this the problem?  what in the case suggests that this is the problem?                                                                    2. Passenger travels are not expected to recover to pre-pandemic levels until 2025.

II. Alternatives (possible solutions to the problem identified)

            A. Alternative 1: The first alternative is innovating for crisis-specific and longer term.

                        1. Advantages to alternative 1

                                    a. advantage a: It can help both in short-term and long-term survival.

                                    b. advantage b: Better strategic position in the long term e.g. entering new markets.

                        2. Disadvantages to alternative 1

                                    a. disadvantage a: May be costly.

                                    b. disadvantage b: Time consuming.

            B. Alternative 2: Safeguarding the status (Persevering).

                        1. Advantages to alternative 2

                                    a. advantage a: No or minor changes to assets, strategy and structures.

                                    b. advantage b: Provides a competitive advantage post-crisis.

                        2. Disadvantages to alternative 2

                                    a. disadvantage a: Survival in the short-term is limited.

                                    b. disadvantage b: Lose its competitive advantage to innovative alliances/airlines.

            C. Alternative 3 (you must list at least three alternatives)

                        1. Advantages to alternative 3: Retrenchment or substantial cost/asset reduction.

                                    a. advantage a: Short-term survival through the crisis.

                                    b. advantage b: Improved competitiveness and efficiency.

                        2. Disadvantages to alternative 3

                                    a. disadvantage a: Long-term effects of this response may be ambiguous.

                                    b. disadvantage b: Reduced profits and growth decline.               

III. Recommendation (Alternative Chosen) (CLAIM): Star Alliance should innovate for crisis-specific (COVID-19 pandemic, and longer-term.

            A. Major Justifications (FACTS with WARRANTS)

                        1. Justify your chosen alternative: This alternative provides Star Alliance with many opportunities that can help it retain pre-pandemic status, including adopting a hybrid solution of all other solutions.

                        2. Use as many statements as necessary in your justification

                        3. Part of your justification must be a comparison of your chosen alternative with alternatives not chosen.

  • It is hard for Star Alliance members to get sustained by financial support from third parties and still compete effectively.
  • Grants can cause eventual dissolution in the long term.
  • Star Alliance consists of Major Airlines, some of which face stiff competition from non-member airlines. Therefore, it may be hard to convince all members to adopt retrenchment or perseverance alternatives.
  • Member airlines consider sustainability as paramount, and they already have seen the potential of innovation shown by Star Alliance.
  • Innovation implies there is an option to get financial support from sponsors in a more sustainable manner.

            B. Minor Justifications

                        1.  what in the case suggests that this recommendation is the best alternative?

                        2. Star Alliance has experience in innovative measures pre-pandemic, such as the introduction of connecting partners, a hub-and-spoke system, and loyalty programs. Innovation is easily a culture that could offer the Alliance a way out of the crisis.

IV. Implementation

            A.  List of issues that are important for the implementation of your chosen alternative (i.e., what will the company have to do to make your recommendation happen?)

                        1.   The innovative measures should be easy to change after the economic recovery or a future crisis.

                        2.   The innovative measures must be coupled with effective training programs for all stakeholders.                   

            B.  List other problems that your recommendation does not remedy

                         1. Innovation intended to address the COVID-19 pandemic crisis will not make the Star Alliance immune to disruptions in the future.

                         2. There is no immunity to the situations that may arise during and after the pandemic, including but not limited to change in policies and regulations in different countries.

Final

Problem Statement: The main problem is how the member airlines will regain their pre-pandemic financial stability because of the impact of canceled flights and the decrease in passenger travels.

Analysis: Star Alliance was founded in 1997, managing a network of global airlines in an effective manner such that its growth led to the formation of similar alliances. The aim was to shift the industry away to a comprehensive network of multilateral agreements between members. Even though Star Alliance was a new organizational structure, it became common within a short time. The benefits of Star Alliance were evident. Member airlines could access destinations outside of their home base. The hub-and-spoke innovation made it possible to connect different passenger destinations using more than one airline. There were savings and improved passenger service in various other international hubs.

In early 2020, the outbreak of the COVID-19 pandemic caused significant impacts on Star Alliance and other airline alliances. Revenue from its operations reduced significantly. It became vital for Star Many member airlines sought financial support from the governments, but such aid was not enough to prevent mass layoffs. The management wanted to allow its members to operate more freely and bring changes to services offered to its loyal customers. The concern was whether the powerful frameworks Star Alliance had created would help its member airlines survive the crisis and regain their pre-pandemic financial stability.

Alternatives

Alternative 1: The first alternative is to develop innovative measures specific to the COVID-19 pandemic crisis and for the longer term.

Pros (or Benefits): The benefits of this alternative are:

  1. Innovation can be a proactive and reactive approach at the same time, helping the organization to develop measures that not only stabilize its member airlines but also develop strategies for risk management.
  2. Star Alliance can get a competitive advantage through innovation, enabling member airlines to stabilize faster than non-member airlines.

Cons (or Costs/Challenges): The cons of this alternative are:

  1. Even though innovation is crucial for sustainability in management, it can be costly to the member airlines’ financial status that is already at stake.
  2. Innovation may be time-consuming hence may not effectively be approached during the crisis compared to when an organization is innovating as a form of reactive risk management.

Alternative 2: The second alternative is safeguarding the status quo (persevering) while seeking grants and aids from sponsors.

Pros (or Benefits): The benefits of this alternative are:

  1. There may be minor to no changes to structures and assets hence less cost and less loss.
  2. The few changes in assets and structures can serve as a competitive advantage post-pandemic as the member airlines will be ready for the return to normalcy.

Cons (or Challenges/Costs): The cons of this alternative are:

  1. Survival in the short term – during the COVID-19 pandemic – is limited because it may require more finances than available with grants and aids.
  2. Star Alliance may end up losing its current leading position to competitors who innovate and come up with better strategies.

Recommendation: The best solution to the problem is developing innovative measures in response to the COVID-19 pandemic as both a reactive and proactive approach. With innovation, Star Alliance and its member airlines will have more options to deal with a similar crisis in the future and be competitively advantaged against alliances that are scaling down their operations without innovating.

Implementation: Star Alliance will execute the plan as follows:

Month 1: Preparation: During this period, Star Alliance makes known to its members what it desires to achieve as a corporation, its intended impact, and how it will achieve it. This process can involve forming a task force of representatives from member airlines to focus solely on innovation for the current pandemic crisis and post-pandemic. By the end of the first month, the alliance should have an established team ready to begin working on innovative measures.

Month 2: This month should involve managing changes in the affected aspects of the alliance, whether in how aircraft are purchased, connecting airlines, and ensuring the identified changes get implemented accordingly. Once member airlines have received communication from the task force on strategic measures such as transforming certain passenger planes to cargo planes, the task force should focus on tracking performance. It may run beyond one month.

Month 3: From the third month, the focus should be sustaining the outcomes. It may involve reviewing performance and activating sustainment. There will be different results from different member airlines on specific measures. Thus, actions may depend on the suitability of each case. This process may also run for longer than a month, but generally, a month is sufficient to track and review the impact of a given measure before moving on to the next strategy.