際際滷

際際滷Share a Scribd company logo

Gearing Up For Growth

T
TKarlsson

The future for air travel is bright, and airlines hiring decisions increasingly reflect the competitive, globalized world.

1 of 5
gearing up for growth By Torbjorn Karlsson The future for air travel is bright, and airlines hiring decisions increasingly re鍖ect the competitive, globalized world. Globalization presents an unprecedented opportunity for the worlds airlines indeed, airlines play an irreplaceable role in the force of globalization itself. More people than ever are taking to the skies, and the rise of middle classes means there is a huge future market for the industry to build on. Globally, however, airlines have done a less-than-admirable job of reacting to the changing world, by either adjusting their business models accordingly and/or 鍖nding the right managers in complimentary 鍖elds with best-in-class talent. Finding and hiring this best-in-class talent is something airlines must begin to do if they are to capitalize on future opportunities. Today, most airlines have an executive workforce that has risen through the ranks and many have over 20 years of experience. While this experience and knowledge is of tremendous value, many airlines have started recruiting younger managers in order to cater to the new generation of travelers, such as startup businesspeople commuting between countries for work, and young leisure travelers with limited budgets. Traditional carriers are well aware of these new opportunities and have started to emulate low-cost carriers (LCCs), which have 鍖lled their commercial ranks with young, entrepreneurial leadership teams- although they prefer their senior operational leaders to be experienced industry veterans. While LCCs have tremendous growth potential, they will 鍖nd it increasingly di鍖cult to control/manage their costs. Just a few years ago aircraft, fuel and 1
spare parts were far cheaper and sta鍖 were readily available. At the same time, incumbent carriers were hampered by overcapacity and older 鍖eets, but these days incumbents are 鍖rmly on the growth path after better utilizing capacity and modernizing 鍖eets. Both types of airlines are beginning to see that the key to pro鍖table growth is the adoption of best practices from other industrial sectors such as retail, 鍖nance and automotive. keep them 鍖ying To be pro鍖table in the age of globalization, airlines must maximize the number of hours aircraft spend in the air as well as the e鍖ciency of resources on the ground. On the materials and logistics side, airlines can look at best practices in the automobile sector, where carmakers rely on just-in-time deliveries from suppliers, resulting in lower inventories (requiring less capital) and faster inventory turnaround (requiring less storage space) at expensive airport or adjacent locations. A recent study from Mercer Management Consulting found that airlines are increasingly outsourcing maintenance, repair and overhaul operations to external vendors. Perhaps the most high-pro鍖le example of the aviation sector hiring an automotive executive is European Aeronautic Defence and Space Cos (EADS) recent appointment of Jean J. Botti as Chief Technical O鍖cer. Prior to joining EADS, Botti was a technology chief with U.S. automotive components maker Delphi. At EADS he will oversee research & development- on which EADS spends about 2 billion Euros annually. We highly appreciate his excellent management, engineering and technology track record, as well as his international working experience, said EADS co-chief executives Thomas Enders and Noel Forgeard in Bottis appointment announcement. A recent study from Mercer Management Consulting found that airlines are increasingly outsourcing maintenance, repair and overhaul operations to external vendors. It concluded that this will have a big impact on airline leadership, which will need to go beyond managing contracts to managing supplier relationships. The move to outsourcing will require airlines to examine their organizational structures, skill sets, performance management systems, processes and technologies, said the report. The retail and fast-moving consumer goods (FMCG) businesses, for example, are extremely competitive and involve managing complex supply chains of 2 Gearing Up For Growth
goods that sometimes span the globe, while maintaining low or nearly virtual inventories. Given that airline seats are among the most perishable type of consumer goods (once it takes o鍖, you can no longer sell it), a retail/FMCG- style approach to making sure the correct number of seats is at the right location could be a key competitive edge for airlines-both traditional carriers and LCCs. Taking a page from the retail sectors supply chain management book, Virgin Atlantic recently implemented RFID (radio frequency identi鍖cation) to track critical, high-value assets moving through its logistics supply chain at Londons Heathrow Airport. Virgin sees the move as a way to increase e鍖ciency, control costs and expand its business. To acquire the skills to implement such best-in- class practices, airlines will need to hire leadership from outside the industry. branding conundrum Retail and FMCG companies are also quite adept at tailoring their brands toward pro鍖table, smaller sub-sectors, a key growth area for airlines. LCCs are starting to encroach on traditional carriers turf, increasingly marketing to cost- conscious business travelers; for their part, traditional carriers are increasingly marketing to leisure travelers. This creates a branding challenge for both: LCCs need to assure businesspeople that low cost does not equate to low quality and inconvenience. Traditional carriers need to maintain premium brands while also appealing to a more cost-conscious clientele. Retail and FMCG companies are also quite adept at tailoring their brands toward pro鍖table, smaller sub-sectors, a key growth area for airlines. Tony Davis, President and CEO of Singapore-based Tiger Airways, has this to say about the importance of branding: The key unique selling point for low cost airlines is cost. This, however, is an easy thing to match, undercut, or replicate, so price on its own is not enough to build a strong low cost airline brand. While price is clearly the core element, you also need to give the brand personality and manage the expectations of the consumer. Tiger itself o鍖ers a telling example of an LCC hiring an executive with a focus on branding. In January, it appointed a Chief Marketing O鍖cer, Rosalynn Tay, who was previously Deputy Managing Director in Singapore of advertising 鍖rm Leo Burnett. Part of the rationale for hiring Tay was her extensive marketing experience in the UK and Singapore with fast food giant KFC. Airlines are also looking outside the sector for chief 鍖nancial o鍖cers. In the past, lack of funding has played a big part in the problems su鍖ered by many startup 3 Gearing Up For Growth
airlines. As such, many airlines (particularly those in Asia) see the need to attract world class CFOs who have the skills to help them raise money through IPOs and other fundraising activities. the not-so-friendly skies Although airlines are open to new ideas, some have a mixed track record hiring outside the industry. In the late 90s, one major regional airline brought in two executives from the automobile sector, but 24 months later little had changed in internal processes or organizationally and the expected savings had not materialized. Due to the industrys evolution in a regulated market, Those outside aviation can o鍖er fresh, innovative ways of solving problems and taking advantage of opportunities. an incremental approach to change has taken root, and aviation executives sometimes are wary of new ways of doing things. This caution is even more deeply entrenched on the operational side in matters of maintenance, crew training and the like, but on the commercial side of the business more deregulated markets and globalization mean airlines will continue to look outside the sector for talent. Those outside aviation can o鍖er fresh, innovative ways of solving problems and taking advantage of opportunities. If an airline wishes to successfully assimilate these new outsiders while maintaining operational realism, it will need senior executive sponsorship as well as programs to orientate and retain this new talent, while working to create an environment open to new ideas and approaches. Those new to aviation need to be cognizant of the industrys preference for incremental change, and resist the temptation to try changing too much too soon. According to the International Civil Aviation Organization, in 2005 the number of passengers carried on scheduled air services passed two billion for the 鍖rst time, up 5.5 percent from 2004. Over the last century, commercial aviation has gone from strength to strength, with the introduction of turboprop aircraft in the 50s, to long-range jets in the 60s, and 鍖nally wide-bodied jets in the 70s, ushering in the modern age of low- cost travel. According to the International Civil Aviation Organization, in 2005 the number of passengers carried on scheduled air services passed two billion for the 鍖rst time, up 5.5 percent from 2004. Globalization, deregulation and new aircraft types guarantee aviations next century will be as promising as its 鍖rst. 4 Gearing Up For Growth
But to fully pro鍖t from the opportunities to come, it is critical that airlines take a new, innovative approach to senior leadership. Torbjorn Karlsson joined Heidrick & Struggles in 2006 to lead the Aviation, Aerospace and Defence practice in Asia. He is also involved in the transportation and supply chain sectors. Torbjorn has spent many years in the consulting, airport, aviation electronics and regional aircraft markets. Based in Singapore, he can be reached at tkarlsson@heidrick.com or +65 6332 5001. www.heidrick.com About Heidrick & Struggles International, Inc. Heidrick & Struggles International, Inc. is the worlds premier provider of senior-level executive search and leadership consulting services, including talent management, board building, executive on-boarding and M&A e鍖ectiveness. For more than 50 years, we have focused on quality service and built strong leadership teams through our relationships with clients and individuals worldwide. Today, Heidrick & Struggles leadership experts operate from principal business centers in North America, Latin America, Europe and Asia Paci鍖c. For more information about Heidrick & Struggles, please visit www.heidrick.com. 5 Gearing Up For Growth

More Related Content

Gearing Up For Growth

  • 1. gearing up for growth By Torbjorn Karlsson The future for air travel is bright, and airlines hiring decisions increasingly re鍖ect the competitive, globalized world. Globalization presents an unprecedented opportunity for the worlds airlines indeed, airlines play an irreplaceable role in the force of globalization itself. More people than ever are taking to the skies, and the rise of middle classes means there is a huge future market for the industry to build on. Globally, however, airlines have done a less-than-admirable job of reacting to the changing world, by either adjusting their business models accordingly and/or 鍖nding the right managers in complimentary 鍖elds with best-in-class talent. Finding and hiring this best-in-class talent is something airlines must begin to do if they are to capitalize on future opportunities. Today, most airlines have an executive workforce that has risen through the ranks and many have over 20 years of experience. While this experience and knowledge is of tremendous value, many airlines have started recruiting younger managers in order to cater to the new generation of travelers, such as startup businesspeople commuting between countries for work, and young leisure travelers with limited budgets. Traditional carriers are well aware of these new opportunities and have started to emulate low-cost carriers (LCCs), which have 鍖lled their commercial ranks with young, entrepreneurial leadership teams- although they prefer their senior operational leaders to be experienced industry veterans. While LCCs have tremendous growth potential, they will 鍖nd it increasingly di鍖cult to control/manage their costs. Just a few years ago aircraft, fuel and 1
  • 2. spare parts were far cheaper and sta鍖 were readily available. At the same time, incumbent carriers were hampered by overcapacity and older 鍖eets, but these days incumbents are 鍖rmly on the growth path after better utilizing capacity and modernizing 鍖eets. Both types of airlines are beginning to see that the key to pro鍖table growth is the adoption of best practices from other industrial sectors such as retail, 鍖nance and automotive. keep them 鍖ying To be pro鍖table in the age of globalization, airlines must maximize the number of hours aircraft spend in the air as well as the e鍖ciency of resources on the ground. On the materials and logistics side, airlines can look at best practices in the automobile sector, where carmakers rely on just-in-time deliveries from suppliers, resulting in lower inventories (requiring less capital) and faster inventory turnaround (requiring less storage space) at expensive airport or adjacent locations. A recent study from Mercer Management Consulting found that airlines are increasingly outsourcing maintenance, repair and overhaul operations to external vendors. Perhaps the most high-pro鍖le example of the aviation sector hiring an automotive executive is European Aeronautic Defence and Space Cos (EADS) recent appointment of Jean J. Botti as Chief Technical O鍖cer. Prior to joining EADS, Botti was a technology chief with U.S. automotive components maker Delphi. At EADS he will oversee research & development- on which EADS spends about 2 billion Euros annually. We highly appreciate his excellent management, engineering and technology track record, as well as his international working experience, said EADS co-chief executives Thomas Enders and Noel Forgeard in Bottis appointment announcement. A recent study from Mercer Management Consulting found that airlines are increasingly outsourcing maintenance, repair and overhaul operations to external vendors. It concluded that this will have a big impact on airline leadership, which will need to go beyond managing contracts to managing supplier relationships. The move to outsourcing will require airlines to examine their organizational structures, skill sets, performance management systems, processes and technologies, said the report. The retail and fast-moving consumer goods (FMCG) businesses, for example, are extremely competitive and involve managing complex supply chains of 2 Gearing Up For Growth
  • 3. goods that sometimes span the globe, while maintaining low or nearly virtual inventories. Given that airline seats are among the most perishable type of consumer goods (once it takes o鍖, you can no longer sell it), a retail/FMCG- style approach to making sure the correct number of seats is at the right location could be a key competitive edge for airlines-both traditional carriers and LCCs. Taking a page from the retail sectors supply chain management book, Virgin Atlantic recently implemented RFID (radio frequency identi鍖cation) to track critical, high-value assets moving through its logistics supply chain at Londons Heathrow Airport. Virgin sees the move as a way to increase e鍖ciency, control costs and expand its business. To acquire the skills to implement such best-in- class practices, airlines will need to hire leadership from outside the industry. branding conundrum Retail and FMCG companies are also quite adept at tailoring their brands toward pro鍖table, smaller sub-sectors, a key growth area for airlines. LCCs are starting to encroach on traditional carriers turf, increasingly marketing to cost- conscious business travelers; for their part, traditional carriers are increasingly marketing to leisure travelers. This creates a branding challenge for both: LCCs need to assure businesspeople that low cost does not equate to low quality and inconvenience. Traditional carriers need to maintain premium brands while also appealing to a more cost-conscious clientele. Retail and FMCG companies are also quite adept at tailoring their brands toward pro鍖table, smaller sub-sectors, a key growth area for airlines. Tony Davis, President and CEO of Singapore-based Tiger Airways, has this to say about the importance of branding: The key unique selling point for low cost airlines is cost. This, however, is an easy thing to match, undercut, or replicate, so price on its own is not enough to build a strong low cost airline brand. While price is clearly the core element, you also need to give the brand personality and manage the expectations of the consumer. Tiger itself o鍖ers a telling example of an LCC hiring an executive with a focus on branding. In January, it appointed a Chief Marketing O鍖cer, Rosalynn Tay, who was previously Deputy Managing Director in Singapore of advertising 鍖rm Leo Burnett. Part of the rationale for hiring Tay was her extensive marketing experience in the UK and Singapore with fast food giant KFC. Airlines are also looking outside the sector for chief 鍖nancial o鍖cers. In the past, lack of funding has played a big part in the problems su鍖ered by many startup 3 Gearing Up For Growth
  • 4. airlines. As such, many airlines (particularly those in Asia) see the need to attract world class CFOs who have the skills to help them raise money through IPOs and other fundraising activities. the not-so-friendly skies Although airlines are open to new ideas, some have a mixed track record hiring outside the industry. In the late 90s, one major regional airline brought in two executives from the automobile sector, but 24 months later little had changed in internal processes or organizationally and the expected savings had not materialized. Due to the industrys evolution in a regulated market, Those outside aviation can o鍖er fresh, innovative ways of solving problems and taking advantage of opportunities. an incremental approach to change has taken root, and aviation executives sometimes are wary of new ways of doing things. This caution is even more deeply entrenched on the operational side in matters of maintenance, crew training and the like, but on the commercial side of the business more deregulated markets and globalization mean airlines will continue to look outside the sector for talent. Those outside aviation can o鍖er fresh, innovative ways of solving problems and taking advantage of opportunities. If an airline wishes to successfully assimilate these new outsiders while maintaining operational realism, it will need senior executive sponsorship as well as programs to orientate and retain this new talent, while working to create an environment open to new ideas and approaches. Those new to aviation need to be cognizant of the industrys preference for incremental change, and resist the temptation to try changing too much too soon. According to the International Civil Aviation Organization, in 2005 the number of passengers carried on scheduled air services passed two billion for the 鍖rst time, up 5.5 percent from 2004. Over the last century, commercial aviation has gone from strength to strength, with the introduction of turboprop aircraft in the 50s, to long-range jets in the 60s, and 鍖nally wide-bodied jets in the 70s, ushering in the modern age of low- cost travel. According to the International Civil Aviation Organization, in 2005 the number of passengers carried on scheduled air services passed two billion for the 鍖rst time, up 5.5 percent from 2004. Globalization, deregulation and new aircraft types guarantee aviations next century will be as promising as its 鍖rst. 4 Gearing Up For Growth
  • 5. But to fully pro鍖t from the opportunities to come, it is critical that airlines take a new, innovative approach to senior leadership. Torbjorn Karlsson joined Heidrick & Struggles in 2006 to lead the Aviation, Aerospace and Defence practice in Asia. He is also involved in the transportation and supply chain sectors. Torbjorn has spent many years in the consulting, airport, aviation electronics and regional aircraft markets. Based in Singapore, he can be reached at tkarlsson@heidrick.com or +65 6332 5001. www.heidrick.com About Heidrick & Struggles International, Inc. Heidrick & Struggles International, Inc. is the worlds premier provider of senior-level executive search and leadership consulting services, including talent management, board building, executive on-boarding and M&A e鍖ectiveness. For more than 50 years, we have focused on quality service and built strong leadership teams through our relationships with clients and individuals worldwide. Today, Heidrick & Struggles leadership experts operate from principal business centers in North America, Latin America, Europe and Asia Paci鍖c. For more information about Heidrick & Struggles, please visit www.heidrick.com. 5 Gearing Up For Growth