Reference no: EM132186765

CASE STUDY : AIR AMERICA

Herbert Manning, general manager of Air America's Qamran office, has been with the company for twelve years. Manning had an undergraduate degree in economics and business and had worked for a leading travel agency in San Francisco before joining Air America as a sales executive.

With his earlier experience and his enthusiasm and energy on the job, Manning made a favorable impression very quickly. Within two years he was promoted to the rank of area sales manager and elected vice president of Air America's worldwide sales club, having had the second highest level of sales among all of Air America's sales executives worldwide.

Manning continued to perform well as area sales manager, and three years later he was moved to the company's corporate headquarters in Dallas, Texas, as vice president of international marketing and sales with responsibility for planning and implementing the company's marketing and sales strategies in the Middle East, Africa, and southern Asia.

Air America, though a major international airline, was not very strong in these markets, which it perceived would become increasingly important in the future. Manning took up the challenge with his well-known drive and energy, and during the next three years, Air America succeeded in negotiating air route agreements with four countries in North Africa, three in the Middle East, and three in southern Asia.

Qamran, a small sheikdom in the Middle East, was designated as the regional base for this area and as a hub location for the airline. In these three years, Manning's region became an important source of revenue from international operations for Air America. Apart from an aggressive and well-targeted sales policy, overall increase in passenger traffic arising out of the oil price boom helped to boost ticket sales.

Toward the end of the third year, however, Air America, like many other airlines operating in the region, was suddenly hit with a sharp decline in demand as oil prices rose sharply and the world economy went into a deep recession. As the market shrank, competition intensified, and it became increasingly difficult to hold on to market share. Air America's share of the Persian Gulf market dropped by 7 percent.

Combined with a sharp decline in overall market size, the drop led to a steep reduction in total revenues.

Concerned with the difficult situation in the region, Air America's senior management decided that an aggressive strategy had to be adopted to recapture market share and rebuild the airline's image as a dominant force in the region. A key element of the strategy was to appoint Manning as the regional manager of the Middle East and North Africa.

It was a big promotion for Manning. Regional managers were considered senior management in the company and were responsible for participating in the formulation of global strategy. Moreover, Air America's corporate policy emphasized considerable delegation and decentralization. Regional managers were, therefore, almost completely independent in their local operations and were primarily responsible for their own results. Manning was elated when his boss told him the news.

He had wanted to go back to the field for some time now, and the position apparently offered all that he was looking for. In addition, relocation as a regional manager in Qamran meant that he would have several liberal fringe benefits given to Air America's expatriate managers: a large, furnished company house, a chauffeur-driven car, at least four servants, and additional allowances, including a large entertainment budget.

Manning's first year was extremely successful. His drive and enthusiasm were infused throughout the local office, because he set a good example by his own untiring efforts. His years in the marketing division had provided him with considerable background knowledge of the operations, and he used that knowledge to seek and implement new ways to fight off Air America's competitors.

Market share began to inch back upward and the revenue drop was reversed. Although the revenues were helped by a slight improvement in market conditions, there was no doubt that Manning's arrival was a key factor in the reversal of Air America's fortunes in the region.

The second year was good, too, although not as good as the first. Market share increased, as did the revenues by smaller degrees. One significant explanation for the slowing of increases offered by Manning was that other airlines had initiated equally aggressive counterstrategies, and it was not possible to improve the rate of Air America's gains without seriously compromising profitability.

Results started to decline in the third year, however. Market share gains slid back by 2 percent and revenues showed a slight decline. Manning seemed to have lost the drive and initiative that had characterized his work just a few months before, and some of Manning's subordinates seemed unhappy with his behavior and left the company. Gilbert Wyles, Air America's senior vice president of human resources, was quick to guess that the problem was Manning himself. Wyles decided that a meeting at corporate headquarters would be useful to discuss the whole issue. Manning was, after all, a star performer, and if he was facing any problems the company was fully prepared to help him.

The meeting lasted three hours. Initially hesitant to state the real problem, Manning finally admitted that his wife, Sandra, was having difficulties in adjusting to life in Qamran. Back in the United States, she had been a client relations executive in a small advertising company.

It was not a very high position, but it allowed her to use her skills at dealing with people constructively. She had developed a fairly close network of good friends and a large circle of pleasant acquaintances through her job. Her decision to leave the job and accompany Manning to Qamran had not been easy, but she had decided to make the best of a new lifestyle that awaited her in their new overseas home. She did make a sincere effort at adjustment, but Qamran's society was governed by strict Islamic tenets, which meant that social freedoms for women were severely restricted.

Although the Mannings enjoyed various social activities with diplomats and other expatriates, Mrs. Manning had little to do during the day. Women were not allowed to work in Qamran unless they were granted special work permits under exceptional circumstances. Even then women had to dress in a particular fashion prescribed by the authorities.

After the first year, Mrs. Manning grew increasingly restless about her new situation. Her problems were accentuated by the long absences of her husband, who went on frequent business trips that were essential to the success of his assignment.

Mrs. Manning thought of various solutions and different ways in which her life could be made more interesting, but nothing worked, and her mental discomfort continued to increase. In the past few months, she had suffered long periods of depression and was not responding very well to treatment, which caused Mr. Manning tremendous anxiety and had adversely affected his professional performance.

Gilbert Wyles suggested that the Mannings take a vacation immediately, at the place of their choice, and that by the time they returned the company would have an answer to the problem. Manning was relieved, but at the same time he was skeptical of the company's intentions. As he walked out of the corporate headquarters to catch a cab for his hotel, he wondered whether he had done the right thing.

Meanwhile, Wyles, in his well-appointed office, put together a confidential memo to the international human resources policy group, a small set of top Air America executives in charge of framing company policies in international human resources management. The memo explained the background and circumstances of the situation and placed three options before the members:

1. The option suggested by Manning, to give his wife a job in his office in Qamran as a public relations officer. This would be possible if the company modified its personnel policy on employment of spouses and if enough pressure was exerted on the Qamran government.

2. Replace Manning with another expatriate executive, which could be easily done, but might lead to similar problems for the replacement.

3. Appoint a local national as regional manager or bring in a third-country national from Air America's other overseas offices.

DISCUSSION QUESTIONS

1. Which of the three options would you recommend to Air America and why? What would be the problems with the other options?

2. Is there a need for Air America to change its international staffing policies to avoid sending expatriate managers to overseas locations?