Essay on Comparative Analysis of Southwest Air and EVA Air

I. Southwest Air

            In 1997, CNNMoney.com ranked Southwest Airlines Co. the number one in safety (Peter Keating, 1997, p.1).  With its continued emphasis on on-time flight arrivals and proper handing of bags and luggage and efficient service, Southwest Airlines continues to be one of the leaders in the Regional Airline Industry.  It is a domestic airline that provides comfortable air transportation service targeting both business and leisure travelers.  It boasts of having a profitable, highly efficient and high-quality airline with a schedule that fits the needs of its customers. 

            Southwest Airlines started in 1971 with just three Boeing 737 aircraft serving three Texas cities - Dallas, Houston, and San Antonio. Now, it is already the eighth largest carrier in the US famous for its frequent departures, low-cost and no-frills flights and operating 520 Boeing 737 aircrafts in 64 airports in 32 states across the United States.  It currently offers more than 3,400 flights per day all over the United States. 

            According to the Department of Transportation, Southwest Air remains to have the best cumulative Customer Satisfaction record among all carriers.  This is evident by the fact that Southwest Air continues to come up with ways to improve its service to its customers.  Recently, it changed its Customer boarding method which enhanced boarding process, improved customer experience giving the travelers opportunity to be more productive of their time while waiting for their flights without standing in line.  Moreover, Southwest has recently completed its Extreme Gate Makeover which includes innovations such as plusher seats, power stations for laptops, additional flat-screen TVs and other electronic equipment to improve its customer experience while traveling with Southwest Air.  Southwest also provides rewards to the frequent flyers consisting of automatic check in for their flights and inclusion in the A boarding group.  It does not therefore comes as a surprise that its customers increased by 5.8% from 2006 to 2007.  Below are the statistics passenger report from 2006 and 2007 indicating the number of paying passengers boarding Southwest Air as Appendix A: 

Appendix A

Consolidated Highlights (Dollars in Millions)	2007	2006	% change
Revenue Passengers Carried	88,713,472	83,814,823	5.8 %
Revenue Passenger Miles (RPM)s	72,318,812	67,691,289	6.8 %
Available seat miles	99,635,967	92,663,023	7.5 %
Passenger load factor	72.6 %	73.1 %	(0.5) pts.
Passenger revenue yield per RPM	13.08 ¢	12.93 ¢	1.2 %
Operating Revenue yield per ASM	9.90 ¢	9.81 ¢	0.9 %
Operating expenses per ASM	9.10 ¢	8.80 ¢	3.4 %
Size of Fleet at Yearend	520	481	8.1 %
Southwest Airline Co. Annual Report 2007

            Just like any other airline industry however, it experienced growth decline for the year 2000.  Among the reasons are the soaring prices of crude oil and increasing competition in the airline industry.  It must be stressed that the airline industry is a highly competitive industry where players have to compete in the following competitive factors: Fares; Customer Service; Costs; frequency and convenience of scheduling; Frequent flyer benefits; and Efficiency and productivity, including effective selection and use of aircraft.  Moreover competition is much stiffer considering that some major airlines have established extensive marketing or codesharing alliances including: including Northwest Airlines/Continental Airlines/Delta Air Lines; American Airlines/Alaska Airlines; and United Airlines/US Airways.  It bears stressing that these alliances among its competitors are more extensive that Southwest’s present arrangement with ATA airlines

            Below is the comparative data for Total Revenue, Gross Profit, Operating Income/Loss and Net Income for Southwest Air for the past 3 years as Appendix B.  It shows that there is substantial improvement on the part of Southwest Air for its operations from 2006 to 2007 as indicated in its income.  This could perhaps be attributed to the different ways it had come up to improve efficiency and performance

Appendix B

Fiscal Year	2007	2006	2005
Total Revenue	9,861,000	9,086,000	7,584,000
Gross Profit	2,780,000	2,775,000	2,493,000
Operating Income or Loss	791,000	934,000	820,000
Net Income	645,000	499,000	548,000

            Below is the comparative table of historical stock prices of both Southwest Air and EVA Air.  It shows that since the year 2001 until 2009, there is substantial decline in the value of stocks of Southwest Air from 31.33 in January of 2001 to 7.03 in January of 2009.

Appendix C

	January 2009	January 2008	January 2007	January 2006	January 2005	January 2004	January 2003	January 2002	January 2001
Southwest Air	7.03	11.72	15.10	16.46	14.48	14.95	13.05	18.94	31.33
Eva Air	6.26	15.65	14.30	13.45	15.05	16.83	14.58	Values not available	Values not available

II. EVA Airways Corporation
            EVA Airways Corporation, on the other hand, is principally engaged in the business of providing international air transport passenger and cargo services throughout Asia, Europe, America, New Zealand and Australia.  Its air transportation services include regular flights and regular and irregular charter flights. It also provides air cargo, mail and package transportation services.  It currently flies passengers and cargo to 45 cities around the world.  It operates a mix of 52 jets which includes the recent purchase of 15 Boeing 777s.  The composition of its aircraft fleet is as follows: B747-400 (4), B747-400 Combi (8), B747-400 Freighter (6), MD-11 Freighter (9), MD-90 (5), B777-300ER (8), A330-200 (11), A320-200 (1). 

            EVA Air was first founded in March 1989 and made its maiden flight on July 1, 1991.  Since then, Eva Air has grown into one of the most competitive airlines in the industry with various alliances with major carriers word-wide that helped EVA Air acquire a far-reaching service network that benefits both passenger and cargo customers.  It is a 100% privately owned and a sister company to Evergreen Marine Corporation. 

            Promotion of safe and punctual flights, providing friendly professional services and maintaining innovative and efficient operations remain its stated missions.  Moreover, flight safety remains its top priority as evident with the use of its technologically advanced flight analysis equipment such as Aircraft Condition Monitoring System (ACMS) and Aircraft Communications Addressing & Reporting Systems (ACARS) to track aircraft operations, engine conditions and flight performance. 

            Below as Appendix D is the comparative table showing the Operating Revenue, Gross Profit, Operating Income, and Net Income for EVA Air from 2004 to 2007.  It shows that for the past years, EVA Air has been operating on a loss brought about by its high operating expenses and the slow economic growth.

Appendix D

Fiscal Year	2007	2006	2005	2004
Operating Revenue	93,103,131	93,903,564	88,518,249	82,655,351
Gross Profit	4,584,231	3,568,916	7,659,750	11,540,859
Operating Income	(2,274,420)	(3,337,784)	851,000	4,715,357
Net Income	(1,871,918)	(1,686,585)	1,326,060	3,242,935
Source: Company Profile, http://www.evaair.com/html/b2c/english/eva/Investor_service/Company_Profile/

            Below as Appendix F are the Passenger Data of EVA Air for 2007.  While the aviation industry suffered a major setback in the past year in view of the soaring oil prices and slow global economic growth, EVA Air managed to stay afloat in the business through aggressive marketing strategies.  This has resulted in the increase in the total number of passengers to 5.6% due to demand on European and American routes and an improvement of more than 1% for its loan factor from 77.39% to 75.11%.

Appendix F

Passenger Data for 2007
Number of Passengers Flown	6,181,006
Revenue Passenger Kilometer	24,226,325,937
Available Seat Kilometer	29,785,040,020
Load Factor	81.34%
Revenue(NTD)	48,956,179,157
Source: Company Profile http://www.evaair.com/html/b2c/english/eva/Investor_service/Company_Profile/

           

            EVA Air estimates that for 2008 its passenger count shall reach 6.41 Million compared to the 6.18 Million for 2007 or a projected growth of 3.7%.  It hopes to achieve their target by introducing new aircrafts in the market which it projects will cause increase in the number of passengers and the strategic deployment of aircraft in key routes to meet market demand.  This strategy has been implemented in 2008 by extending its flight network to major cities in Europe, America and Asia.  Flights in these areas were also made more frequent and convenient to attract more customers. 

Conclusion

            Analysis of the foregoing data shows that both Southwest Air and EVA Air expect to rebound from a disappointing 2008 performance.  A comparison between the two companies show that they operate in different routes and provides different air transport services.  Southwest Air operates domestically while EVA Air operates both domestic and international.  Southwest Air only caters to passengers while EVA Air also provides cargo services.  They have one thing in common though.  They both suffered major setbacks in the past years as brought about by global economic slowdown and rising oil prices which severely affected their performance. Despite the economic difficulty, both companies have managed to weather the storm and remain in business.  However, I believe that EVA Air is expected to rebound faster because of its strategic alliance with key corporations.  As the economy is projected to improve in the coming years, it is to be expected that both companies will be able to recover in the coming years. 

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Change in the Corporate Philosophy of Wrigley

A great philosopher once said that there is only one thing that is constant in this world – that is change.  Change is a natural part of our life.  Human beings have to grow old and die.  Plants grow old and wither.  The same is true for every business organization.  The only difference is that for business organizations change is not only a necessity but is an ingredient for survival.  In this age of intense competition brought about by globalization, corporations find change as indispensable for their continued existence. 

This does not only hold true for companies selling products as big as a washing machine or a refrigerator, or heavy equipment.  This principle applies even to companies selling chewing gum – Wrigley.  The Wm. Wrigley Jr. Company is the world’s largest manufacturer and marketer of chewing gum.  Among its well-known products are Juicy Fruit and Doublemint.  Its products are famous all over the world such that its global sales at one point reached $5.4 billion.  Aside from chewing gum, Wrigley also offers mints, candies, and chocolate. 

In 2005, Wm Wrigley Jr. Co. announced that it opened a “Global Innovation Center in Chicago’s Goose Island.  (PR Newswire 4)  This business move was as an affirmation of the company’s commitment to long term growth and strategic innovation.  Wrigley hoped achieve its goal of being able to come up with several new products and launched them into the market.    Specifically, Wrigley planned to release eight (8) new flavors into the market by January of 2006.  (Eric Herman 2)  Among these new products are: a new flavor of double mint called “Cool Watermelon”, two (2) new flavors of Eclipse gum called the “cinnamon inferno” and “midnight cool”, a new flavor of Orbit White gum called “Wintermint”, one new flavor each of Crème Savers and Lifesaver Gummies and mango our which is a new flavor of Altoid Mints (Eric Herman 1). 

This announcement represented a significant change from the old philosophy of the previous management.  Under the leadership of Bill Wrigley Sr. as CEO, the company adopted a conservative tactic focusing mainly on its two products: the juicy fruit and the doublemint.  William Wrigley Jr., however, adopted an aggressive growth strategy for the company.  He emphasized on innovation arguing that while there are risks in adopting an aggressive corporate strategy it is better than the status quo, to wit:  “There are risks and costs to any program of actions, but they are far less than the long-range risk and costs of comfortable inaction.” 

Apart from purchasing the Global Innovation Center, its owners also hoped to expand its operations by considering acquisitions of smaller companies.  This plan soon became a reality when the company announced on October 6, 2008 that Mars, Incorporated has successfully completed its acquisition of Wm Wrigley Jr. Company.  (Matt Fleming 3)  Mars purchased all the shares of Wrigley for $80 per share in cash or a total of $23 billion.  (Fleming 3)  Under the terms of the acquisition, the Wrigley Company shall become a subsidiary of Mars but will retain its current headquarters in Chicago and will operate as a separate business segment alongside Mars’ other products such as Chocolate, Pet Care, Food, and drinks.  (Fleming 3)

While change is something that is desirable for some employees, the majority may think that they are better off without the change.  Most employees may not only have serious doubts and concerns about the change but they may also resist and fight the change.  Resistance to the proposed changes of the company is something that every company hopes to avoid because it distracts the management away from its most important concern which is to ensure that after the change is implemented the company will be in a much better financial situation than it was before the change.

At the outset, it is important to emphasize that resistance to change is normal occurrence in any business environment.  This is actually a good sign since it affirms that the company is a dynamic organization.  While resistance to change is normal, there must come a point, however, where the employees will realize that the change is beneficial not only for the company but for the employees as well. 

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There are several reasons why people resist change.  The first is self-interest.  The reality is that people are more concerned about the implication of change to their position, their chances for promotion, and their salary and their security of tenure.  The second reason why people resist change is because of misunderstanding.  When news of launch of new products or merger is circulated, it is expected that most employees may think that they may be replaced by new employees or their department may be abolished.  Inadequate information and communication problems contribute to the misunderstanding between the management and the employees.  The third reason is the low tolerance for change.  Even if the employees were properly informed about the proposed changes of the company, they still resist change because they have low sense of security.  Another possible reason is the disagreement between the advantages and the disadvantages of the effect of the proposed changes on the company and on the employees. 

It must be stressed that even members of the Wrigley family, especially William Wrigley Jr., the fourth generation owner of this company will have to deal with resistance coming from the managers down to the level of rank and file employees.  His philosophy will be compared to his father’s business philosophy and how different their policies are.  However, it is even more difficult if the persons responsible for implementing these changes are those who are not members of the Wrigley family.  Their intentions will be questioned by employees who have probably stayed with the company longer than these change agents.

An example of the difficulty in introducing changes in the workplace is the assignment of personnel to the new department assigned to manufacture the new products.  For the management, they have a choice whether new personnel will be hired to the new department or whether they will simply reassign existing personnel and transfer them to the new department.  Either decision may create difficulty for the management.  If new employees will be hired, it might create unrest on the part of the existing personnel who may think that these new employees will eventually replace them.  On the other hand, if the employees will be taken from other departments, it may also happen that the old employees may not perform efficiently considering that they may get the ire of their co-workers for accepting their new position. 

As previously mentioned, resistance to change is part of the dynamics of every business organization.  It is strong evidence that the company is a dynamic and living organization.  While resistance at the time these changes are being made is normal, it is very unusual for the resistance to continue until the time when these changes are already being implemented.  The task of the management, therefore, is to intervene so that the employees will have to accept that these changes are part of the company’s growth.  The management has to explain that they are doing what is best for the company and for all the employees.    

One element of change that could cause the members of the business organization to experience stress is the issue of the company’s readiness.   Readiness can be related to the capacity of the company and its employees to implement the proposed changes, or the capacity of the company to sustain these changes and whether the company shall profit from the changes. 

Some employees and managers may think that they are not ready to implement the level of innovation the management expects from them.  For example, the company’s goal of producing and releasing into the market eight (8) different products at the same time require increase not only in company personnel but also in equipment.  If ever the company is able to come up and release into the product the eight products, employees are doubtful whether the company will be able to sustain their production considering the changes in the economy, changes in the purchasing power of the people and the entry into the market of new competitors. 

Most important is the issue of profitability.  Wrigley for many years has been known for its Juicy fruit and Doublemint products.  While these products have been very successful in the past, the company cannot expect the same kind of appreciation for its new products.  After all the planning and purchase of new equipment and hiring of new personnel, it would be such a waste of time and money if the company will eventually discontinue production of its new products.  This has happened before when the company released Surpass, the chewing gum formulated to fight antacid which was not patronized by Wrigley’s customers.  As a result, the company stopped its production. 

The stress brought by the issue of the company’s readiness to implement the changes can be reduced or even eradicated.  This can be done through efficient and effective communication with the employees.  This can be done by informing the employees that a specific department of the company has undertaken a very thorough and diligent case study on the acceptability of new products in the market and that it has found a positive response from the client on all the eight new products.  The company should also communicate to its employees that a well-prepared business plan is ready that will enable the company to implement the proposed changes and sustain the same.  

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Essay on Management Strategies of Cary Fiorina - Hew-lett Packard CEO

            As one of the biggest companies, Hewlett-Packard has always been the center of attention.  Two years ago, Hewlett-Packard was once the center of a major scandal as it admitted conducting pretexting spy techniques to investigate allegations that its own Board of Directors leaked information to the media about its future strategic plans.          What made bigger news for HP was its firing of its flamboyant Chairwoman and Chief Executive Officer Carleton (Carly) Fiorina. 

            When she accepted the position in 1999, some stockholders, directors and analysts questioned the decision as she was not only an outsider from HP but she was also a marketing specialist, unlike the company’s founders who were engineers.  In her book Tough Choices, Carly Fiorina revealed that she was actually surprised and confused by her dismissal.  She acknowledged that the stock price was down, HP missed on its target and that Wall Street was not so excited about the future of HP.  In an interview, however, she defended herself and reminded the public to look into the environment at the time she accepted the post and at the time of her dismissal, to wit:

“Remember where we were. Of course, it's not good to miss a quarter. Of course, it's better when the stock price is up. But remember the context. We'd just come through a massive merger, a tech recession, a bear market and an economic downturn. Despite that, we had gone from losing $900 million in 2002 on a GAAP basis, to a profit of $3.5 billion in 2004 on a GAAP basis. Every one of our businesses was profitable.”  (Sharon Gaudin, 2006, p.1)

            A review of the past actions of Carly Fiorina reveals Carly Fiorina’s actions should not be judged solely on the basis of the merger with Compaq that she spearheaded.  She made some tough but great decisions even before the merger.  Her actions should be evaluated objectively and based on the totality of her strategies, management style and decisions. 

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            One of these decisions was the change in company priority from the nurturing of employees to financial performance (Johnson Craig, 2008, p.1).  This marked a dramatic shift from the company’s values, aptly called the “HP Way,” which is based on the principles that the success of the company depends on a high level of commitment and loyalty from its employees.  Under Carly Fiorina’s leadership, she did away with profit sharing, flex time, catastrophic insurance and tuition assistance to employees focusing instead on financial results, sales, revenues and growth.  From her point of view, the HP way was a major contributing factor for mediocrity in HP’s performance.  As a result, those executives and managers who resisted the change were terminated.  At first glance, this may seem to be a decisive move.  However, the swift and sweeping change in company policy within a span few months is too much for every employee to take.  Transitions are always not easy and employees and executives needed time to adjust to the new environment.  The strategy of immediate expectations of producing good numbers will later on be used against Carly Fiorina as the board quickly became impatient in waiting for the results that she promised she will deliver. 

            The second strategy is when she replaced the company’s profit sharing plan with an incentive program that rewarded employees with a bonus if the company reaches its financial targets (Johnson Craig, 2008, p.6).  As a result, employees who formerly received salaries earned commissions based on their sales.  While Carly Fiorina reached its target of reducing overhead costs of the company, this however substantially affected the morale and productivity of the employees (Dean Takahashi, 2005, p.1).  More employees resisted the changes she implemented even calling her as a witch. 

            The third strategy is its focus on organizational structure (Johnson Craig, 2008, p.7).  Before Carly Fiorina’s assumption, there were several divisions in HP’s operation which acted as independently in the development and sale of different products.   Carly Fiorina changed this structure by cutting down the divisions from eighty three (83) to four (4).  She emphasized the need for front office customer interface, which targeted consumers and corporations, and back office, which concentrated on R&D.  (“Online Extra: Q&A with Carly Fiorina,” 2001, p.1) Customers however will say that they noticed no improvement with HP’s new organizational structure.  For some employees, it even created more disorder and confusion and less financial control.  

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