Question

Choose best options and explain

Your airline has been offered the opportunity to partner with a major carrier at your regional hub. This carrier is a profitable company with a history of good passenger service and safety. As a dual-designated carrier, you would share your flight schedule codes with your partner so the codes could be listed in its computer reservation system and published schedules. You would thus become the spoke operation for smaller communities. Although a feeder carrier sacrifices some autonomy, sales increase.

Currently, you routinely hold your outgoing runs from your hub until the major carriers have brought passengers into the hub. However, they do not delay their departures for your connecting passengers. The major carrier you are discussing dual designation with has stated they will work closely with you on both departure and incoming flights. Examples of these types of agreements in the industry are numerous. They include Delta Connection, American Eagle, United Express, QantasLink, and Air Canada Express.

The vice president of marketing feels the move would be an excellent opportunity and one that would assure the future of the airline. The president knows some of the stockholders would prefer not to give up the image, name, and autonomous operation of the firm. The director of planning has expressed concern about the contractual ability of the major carrier to control scheduling and route structure. The VP of finance countered this objection with “I don’t think there’s a future for independent airlines without some type of connection with a major carrier. If we pass this up we may not get the same opportunity again with a carrier of this stature. I think we should accept or we will slowly be squeezed out by other carriers who have taken advantage of aligning with a major carrier.”

The carrier you are negotiating with asks that you repaint your fleet with their colors and insignias at a cost of $30,000 per aircraft. (This cost will be allocated over the next 10 quarters.) You may need to rename your airline to indicate your connection with the carrier. Your schedules will be dictated by the schedule of the major carrier. There may be some change in your routes. The options are:

1. Accept the offer. The successful firm(s) will be notified next quarter and any costs will be charged automatically at that time.

2. Make a counteroffer to become an informal feeder for the major carrier’s operation but retain your name and right to schedule routes. If another firm agrees to accept the offer (option 1), it is unlikely the major airline would accept this counteroffer.

3. Investigate the possibility of merging with another commuter airline to provide the financial and fleet strength to become a strong independent regional airline.

4. Continue as an independent operation using computer-aided scheduling techniques to optimize your ability to connect with major carrier flights.

Answer 1

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EXPLANATION:

According to me, the second option is the better one where you can ppen two things at once. If you present a counteroffer to become a major carrier's informal feeder but retain your name and the right to schedule routes and another major carrier accepts that you would win the negotiation but if they do not accept that you would then have the opportunity to look at other airlines to provide financial and fleet strength to become a strong , independent regional airline.If you accept the bid then the big carrier in company will risk you control and brand identity. You should try hard to convince the major carrier to accept the counteroffer, and you should also try to look at other airlines that can offer as many of the best deals as possible compared to this major airline.