Posted on 8th August 2010No Responses

The first recommendation is to slow the growth of the company as such rapid growth cannot be sustained. This view was shared by President Gerald Gitner and a few industry analysts. Because of its rapid growth, PE was not able to hire the best culturally suited people at later stages of its development. The exponential growth that PE saw in the early stages had its own limitations. Route selection was important for the initial success of PE. However, when PE ran out of routes where it had a competitive advantage, expansion had to be slowed down, and the expansion strategy had to be revised. Secondly, PE should not expand into markets where it does not have a competitive advantage. PE operated at a very low margin, so it could not afford to get into price wars on specific routes, as other companies did. Correspondingly, the decision to buy Frontier Airlines should not have been made. The reasons for this were not only because of a previous commitment not to purchase another airline, but also because of the substantial differences in the culture and business models. Frontier was unionized, had high operating costs and was not profitable. Thirdly, development of a defined hierarchy in the company is needed to achieve more stability and control. This actually had happened in 1985 when operational groups had been created. But this problem should have been addressed earlier. Fourthly, Burr’s absolute control over the employees should be reduced. Some sort of controlling mechanism has to be implemented in order to validate Burr’s strategy decisions. Even though “employees of the company could contribute to policy-level decision making through different councils and committees,” Burr still remained the ultimate decision maker.

By Ivan Denisevich

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