Air Transport World

Managing across borders. (airlines)

World-spanning corporations do not exist in the international-airline world. Regional-airline groupings arise periodically: SAS, Air Afrique, the former East African Airways and the former Malaysia-Singapore Airlines. BWIA International, owned by the government of Trinidad and Tobago, is the airline of Barbados, too.

But none of these is a true multinational like Heinz, Unilever, Nabisco and IBM, who are as much part of the fabric in countries outside their original home base as within it. The British think Heinz baked beans and Nabisco shredded wheat are British-born and made by originally British companies.

Nor have alliances created the airline equivalent of a true multinational. Whatever the name, the alliances operate as interline arrangements. Each partner remains dominant in its traditional market. The outside partner remains outside. Airlines fly or link up internationally but they are not "global" in ownership due to national laws.

Yet, according to Paul Mifsud, KLM's general counsel-U.S.A., globalization requires concentration. "Otherwise, airlines are just extensions of domestic-based hubs. As long as that is the case, service patterns won't reflect local needs. The best global companies overcome ethnocentrism. Airlines are the most ethnocentric of all."

Despite current barriers and because of the desire or pressure to expand, airlines are rethinking management techniques. Even the snail-like steps toward int'l consolidation require some changes from current management principles. Discussions with airline and nonairline managers and analysts produce agreement in several areas of management theory. The biggest lesson seems to be: "Think global, act local."

Sir Colin Marshall, British Airways deputy chairman and chief executive, worked for two U.S. multinationals before joining BA in 1982. His last nonairline position was as president and CEO of Avis. He came to Avis from Hertz-Europe, where he was general manager, to develop a European operation.

Marshall is readying BA for what he hopes will be an int'l regulatory regime similar to the liberal trading world of the car-rental and other industries. Despite aviation's slow adaptation of such liberal concepts, Marshall has applied management techniques honed during his previous experience. Some have worked; some have not.

The BA chief believes that a true multinational can't "attempt to run the whole lot from headquarters. You must accept regional offices and give them a considerable degree of freedom. . . .Hertz tried to run [Europe] from the U.S. It's one of the reasons I left. I thought there should be an overall boss for Europe and a regional headquarters rather than eight fiefdoms," i.e., separate branches in each European country of operation. "That [set-up] created slow reaction time in an industry where competition was increasing. I joined Avis to put that structure in place [in Europe]." However, he explains, "proper reporting controls" are a must with this type of autonomy.

The concept worked at Avis. BA is a different matter. "It's extremely difficult to decentralize control. Gordon Dunlop [BA's former chief financial officer] and I spent hours talking about how to push down full profit-and-loss responsibility. With only limited exceptions--in Birmingham, Scotland and Berlin, which had aircraft based there--we couldn't. Assets are interchangeable and move across borders. You must maximize their utilization, so you must [centrally] control the use of them."

Marshall's multinational experience suggests that, to be successful abroad, integration into the local market is a must. …

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