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Aerospace Industry Organization

Lekerova F.L

Discussion on the Organisational structure of ‘Air Astana’ airline in Kazakhstan

Introduction

Organisational structure is hierarchical relations where numerous activities are coordinated as a way of authority considered in order to achieve tasks inside certain organisations (Pirolo, 2012). Organisational structure also can be described as organization where cultural and environmental factors can match the organisations missions. (Mintsberg, 1989). The purpose of this paper is to explore organisational structure of Air Astana Airline which has been based in functional type of organization and evaluate the effectiveness of strategy in terms of internal and external factors and will analyse problems which might be arisen from implementation of this strategy. Today, Air Astana – is successful, young and dominated airline within Kazakhstan, which provides passenger air transportation in 60 domestic and international routes with the strong focus to Safety (AirAstana). This medium sized company was established in 2002, by two shareholders as Kazakhstan Government holding 51% and BAE (UK) system holding 49% with a requirement that local employers and organisational structure should be organised by standardised policy of EU. Also this company is a single company in Kazakhstan who can fly internationally because it can complete the certification audit by EASA regulation with zero findings (AirAstana).

Organisational structure of Air Astana airline

In order to identify why Air Astana Airline was structured in such way, it is important

to indicate three factors which influence for establishment such as industry size, market segment and environment. (Mintsberg, 1989) indicates that number of controlled elements is key aspect to identify company structure, while market segment reveal the driving force of company, finally environment can reorganise the structure depends on

external aspects. These factors was applied for the Air Astana which allowed using their resources in an effective way. This airline operates mainly in the 2 business divisions:

passenger transportation, engineering and maintenance As Figure1 shows, head of airline President/CEO is critical managing point in hierarchy which can lead company on its strategic moves and ensure a sustainable increase. He namely operates in 'Sales and Marketing Department' which is responsible for ticket booking and sales, and also for providing information about the company services to passengers. Moreover he is in charge for 'Corporate Communication

Aerospace Industry Organization

Lekerova F.L

department' which played key role in how investors, employees and general public perceive a company through identifying factors that impact for company.

Aerospace Industry Organization Lekerova F.L department' which played key role in how investors, employees and general

Figure 1.The organisational structure of Air Astana airlines

Passenger transportation

As we can understand from the chart the main attention is given for the Passenger

Transportation segments because company’s main revenue comes from this division. According to the Air Astana annual report (2007), they attempted to expand the number

of destination served for 18% by 2015. In order to obtain such good results company insert the number of departments such as 'Management accounts and Risk Management'

in

order

to

identify and analyze the financial impact of loss to the organization,

employees, the public. Moreover, 'IT and E-businesses department' also have been created, which can increase the number of selling tickets by creating electronic bonus

card 'Nomad' for passengers, and organising cheapest tourist flight through e-commerce. Consequently, in 2015, Air Astana won the prize as 'a major driving investor for Industry of E-commerce of Kazakhstan' (AirAstana). As a result, they could increase the flow of passengers for 12% by 2015. Therefore as we stressed above mostly this structure was adopted in order to increase efficiency of passenger transportation and satisfy customer needs.

Engineering & Maintenance

Engineering & Maintenance department is the second largest department of Air Astana which provide service for aircraft maintenance, engine and components services. The recent business’ strategy of company aims to reduce costs for the maintenance of

Aerospace Industry Organization

Lekerova F.L

airplane because the Repair and Overhaul tasks of aircraft are accomplished in other countries. This is highly inefficient for the company because the time for service is indicated by MRO countries (countries which have certificate to provide particular services), also it adds cost for delivery, for fuel and flying crew service (AirAstana). Therefore, Air Astana have decided to increase the number of certified workers according with EASA Part-66 requirement and solve this issue. Consequently, 'The Department of Training' have emerged to meet the training needs of company where the majority of employees were qualified by foreign experts. They also have training school for flight attendants and Pilot Preparation Program 'Ab-initio'. Hence, it is clear that internal factors such as deficit of qualified employers has led to the organisation of 'Department of Training', which raise the performance efficiency of Air Astana airline overall.

Potential fallout of organisational structure

As was demonstrated in previous chapter this functional structure allows to company's results to be better organised, to exploit highest efficiency through assembling main functions of each section. However, this structure may have issues in such complex environment (Mintsberg, 1989). High specialisation in each sector leads to an insufficient coordination among units of hierarchy, since a decision making process fixed for the top manager (ibid). Also, the implementation of this organisational structure might add cost for the administrative staff. However, to cut management level's employers in order to reduce administrative cost can lead to long term problem. For example, in 2008, Kazakhstan have economical crisis with inflation of currency, this affects for company performance significantly because of revenue comes from local currency 'tenge", whereas externals procurement carried out in dollar. The action that Air Astana made was cutting cost mainly in management level and short salary in order keep productivity of company. Those actions gave profits for short term, but it affected for the long term strategy of company due to decreasing relation, engagement and motivation of employers.

Conclusion

The decision about whether is effective to apply functional organisational structure is highly controversial one. With regard to operational efficiency, it is clear from the evidences that implementation of this structure is effective method. Because creation of essential departments allowed Air Astana airline increase passenger transportation volume, also departmentalisation assist to organise one particular activity and standardise it within the section. However, there is also evidence that functioning of this type organisation can add administrative cost, can decrease responsibility of workers and affect for decision making process.

Aerospace Industry Organization

Lekerova F.L

Overall, it appears that application of functional organisation for medium sized company AirAstana can be effective in increasing operational efficiency, but this may not be the most effective way if doing this due to long terms side effects, increasing size of organisation and market sections. Therefore, in the context of future goals of company, it would be recommended to company to apply more advanced organisational structure.

Aerospace Industry Organization

References

Lekerova F.L

  • 1. AirAstana. (б.д.). History. Получено 5 11 2016 r., из Air Astana: http://airastana.com/rus/en-US/

  • 2. IATA. (8 june 2015 r.). Press Release. Получено 7 November 2016 r., из IATA - Airline Profitability Strengthens Further: http://www.iata.org/pressroom/pr/Pages/2015-06-08-03.aspx

  • 3. Mintsberg, H. (1989). The structuring of Organizations. London: Macmillan Education UK.

  • 4. Pirolo, L. (2012). Organizational Structures. Focus on the Airline Indusrty; Air France and KLM. Dipartimento di Economia e Management .