Business Ethics : Air France

Finance and competitiveness are today the two words at the heart of preoccupations for all Air France executives.

Air France is the main French airline company. Founded in 1933, it provides transportation of passengers, cargo, maintenance, and maintains aircraft around the world.

It joined with the Dutch company named KLM in 2004 and became together the fifth air carrier in the world.

Air France KLM has about 77.3 million passengers each year, more than 95,000 employees and 25.5 billion turnover in 2013, so it must implement a very specific organization in order to better manage its business.

With the rise of low cost airline and the economic crisis raging, Air France KLM must pay close attention to the management of his company.
Many stakeholders are involved in the good functionment of Air France KLM, that’s why they have an important place in the company.

In recent weeks, Air France KLM has been affected by several strikes of its employees which caused Air France to lose a lot of money (until 500 million euros) and created lowers credibility to its loyal customers.

How Air France KLM has to face all these threats and what solutions could be put in place to prevent these risks ?

First of all, we will see the main stakeholders present in this company and the actions to take in place to manage them. Finally, we will find different preventions to avoid any strikes and minimize risk.

Company’s stake holders identification. Can you establish a list of the main categories of primary and secondary SH + provide some more details inside each category?

Many other parties, persons, communities or organizations are involved directly or indirectly in Air France KLM. They are affected by the business and they can affect the business.
Key stakeholders are those who have a significant influence upon the organization or a significant importance within the organization

2 levels of stakeholders :

Primary ultimately and directly affected negatively or positively

The primary Stakeholders in Air France KLM are :

* The employees : thanks to the employees, and especially the pilotes, the company can correctly function. If the employees don’t want to work, do strike or another thing, the company will have some consequences : loss of money and maybe goes bankrupt. We had do include the employees in the company’s decisions. They have a lot of advantages in this company but also a lot of power.

* The customers : Air France KLM has to satisfy the clients. Indeed, if the customer is not satisfying by the proposition of Air France (prices, services, advantages…) he will not come to its company and will go to its competitors. Air France KLM will loss a lot of money. It has to be the best with its loyal customer and offers the best quality of services. If a loyal client stop using Air France, it can have a lot of economic consequences for the company. They have to do the best to keep him Without Customer, we can not have a company

* Shareholders : the most we have shareholders, the most the company will be good. They are very important inside the company because they are at the beguining of the operation of Air France. Without them, we can not create the company. They have an important role in the different decisions.

* Suppliers : Air France benefits their suppliers through purchasing goods and services from them. Without suppliers, Air France KLM can not exist. It needs suppliers for everything, raw materials, meal tray, magazines, comfort product…Suppliers can be negatively impacted by doing business with companies if its doesn’t respond correctly to their needs.

* Medias : media are very important in the company. They have an influence on customer. A lot of person are on the social networkds, tv, radio … And they believe on what they hear. If the medias made a bad reputations on the company, this can have serious consequences for Air France. We still have the balance of power: The media can threaten to destroy Air France but also Air France can do the same on the media (stop advertising…). The media can destroy Air France & misquote. They have a very powerful place in the company.

All this stakeholders are very important. The company can not function without any of them.

Secondary indirectly affected

The secondary stakeholders in Air France KLM are :

Government : the government can help Air France and doesn’t want to harm to Air France’s reputation

Sponsor : Air france sponsoring some sports events for examples.
It’s a good point for them to sponsor some events.
Futhermore, some company can also sponsor the company.

Partners : Air France has some partners to manage correctly its company : for examples : magazines partners, company meal trays …

ONG : Air France is a partner in “Acting for life”, “Aviation sans frontieres” … for example. They are really invested also in the environment.
It is a good thing to invest the company in charity. It shows a good images of Air France.

Air France has to be the best with his stakeholder for the good operations in its company.

Focusing on 3 categories – employees, customers and medias – can you find a way to score each sub-category in order to select among them the KEY Stakeholder?

First of all, it is to say that the three categories named are used in two different models:
On the one hand the employees are analyzed through the Input-/Output-Model, so their “achievements” and performances are converted into outputs, e.g. the company’s products or services, in the end. The consumers are as well regarded at the end of the same model, because they are kept through products, the named output, that meet or exceed their quality and value expectations. So customer’s satisfaction plays a big role in a company’s success. So the whole Input-/Output-Model is focused on the consumer's satisfaction.
On the other hand, the media are regarded by the Stakeholder’s theory. This means that they have kind of a direct positive or negative influence on the company. The whole impact can be directed by the use of different types of media, e.g. advertising in printed and broadcasted media or good or bad news in the media about the whole action of the company.
In case of Air France, the employees, first of all, create a service to satisfy the customers and give them a pleasant experience before, during and after their flight. So in total, there is not any physical product created, simply a service whose aim it is to reach and satisfy the customer’s needs the best way possible. So the whole success of Air France is connected to the customer’s satisfaction, because they will not make any good business when their clients are unsatisfied. So, the key stakeholders when talking about Air France’s stakeholder’s management are the customers, because the whole success grows and falls with the satisfaction of their customers. The employees are the fundament to this, because they are responsible to enable and lead to this satisfaction by their work-performance
To talk about the role of the media, on the one hand the most important use is advertising for Air France, which is not that wide, because everybody knows Air France as the country’s biggest airline and through their decades-long history. On the other hand, the media are responsible for Air France’s image in public, because they broadcast news about every good and bad thing that happens connected to the airline.

What actions can be implanted to manage closely these key SH ?

Recruitment : * Face to face * Via computer system as a questionnaire * Meeting via video system as Skype or something else * By learning principles linked to the job and after a test checking the performance of the employee.

Clients : * Informing the client when delays or cancellations happen * Informing the eventual reduction of customers on some flights * Provide commercial advantages to regular customers (miles)
Media :
Passing agreement with the media as "the world" to make positives advertising company and in return guarantee him the paper's distribution throughout the Air France lounge in the world

Do you think that a better SH management would have been able to prevent this strike or to minimize its consequences? How and why?

The National Union of Airline Pilots on strike for several reasons. But it is true that this is probably due to poor stakeholder management. Indeed, there have among other communication problems. Such as a lack of clarity, on the part of leaders. He trying to pass certain measures that are not pleasing, following the establishment of Transavia Europe, giving false information like the fact that the companies Air France is in danger when it is not. Certainly there is a huge debt, but the latter is being reduced significantly due to the increase in turnover.

The first question to ask in these cases is: "Who is affected by the strike of Air France"? To manage stakeholders must learn to identify them. We must therefore recognize firstly stakeholders on strike and the other stakeholders who are the cause of the strike. Then you have to identify the opportunities and threats of this one.
For example here are the most striking Air France employees, belonging to the National Union of Airline Pilots. They question the actions of the managers and in particular Alexandre De Juniac.

Secondly it is very important to measure the extent of the risk. And prioritize them according to their profitability and their impact.
In this case, one must ask what are the main revandications unions in order of importance. Then you have to think about how to develop a compromise that would allow one hand to stop the strike (which can be very costly in the long term). And secondly not affect the operation of the company which is also a question of turnover.
It should also improve the internal communication of Air France which is apparently critical.

And finally, we must minimize the risk. Ie need to know as much as possible about the stakeholders in order to establish the best relations possible, this one. This prevents too much discontent and thus minimizing the strikes that have a huge impact in terms of profitability. There needs to be a communication plan.

Proper management of the parties involved greatly facilitates project management. This is why we must be able to identify, analyze and manage the risks associated with stakeholders. This also helps to take advantage of different situations complicated eg by transforming threats into opportunities.
The challenge is to prevent problems before they occur. And there, for the case of Air France, management of stakeholders has not been adequately prepared. While the officer knew they would necessarily strong reaction against the establishment of Transavia Europe.

To conclude, we must build sustainable ralations with stakeholders.

The customer is at the heart of the proper functioning of Air France KLM. Influential business, it has many stakeholder that it must maintains the best she can and should do everything to keep his reputation.
Air France KLM has had many problems in recent years: at the economic level, the customer satisfaction and loyalty and at the staff level.
This has significantly affected the company which nowadays needs to put everything in place to prevent future strikes that could make Air France KLM bankrupt.