Strategic Management In Aviation Sector: Research On Flight Training Organizations In Turkey

Abstract

The primary objective of our research was to establish a general framework for the strategic plans of the flight training organizations that have been training the pilots for Turkey’s rapidly growing aviation sector and to present a perspective on how Turkey has shaped its strategic plans in line with the objectives. In this way, it was intended to provide a perspective for FTO managers and to develop solution suggestions. Within this scope, our research model was based on two independent variables that are supposed to affect the strategic planning for flight training organizations: external factors and internal factors. We have completed our research with 81 executives working in flight training organizations. Regarding the internal factors, findings indicated that strategic planning is affected by know-how, management, human resource, physical assets and profit and cash flow. The SWOT analysis based on the responses from the FTOs shows that FTOs generally focus on issues related to the internal factors rather than the external factors. They are more interested in weaknesses and strengths rather than opportunities and threats. The findings revealed that external factors especially the political, economic and marketing dimensions are significantly useful in the strategic planning of flight training organizations.

Keywords: Strategic managementflight training organizationswot analyses

Introduction

This study investigated the effects of internal and external factors on flight training organization in Turkey. It aimed to evaluate the developments in flight training organizations in Turkish aviation industry and find out solutions to sort out the problems that organizations may face due to the recent political events in Turkey and affect their business target. At this point, this study provides an idea of how the strategies of flight training organizations can be developed and provide information on how strategic planning is being carried out by other actors in the sector. So far, there has not been a study in the aviation sector which focuses on flight training organizations. This study aims to reveal the actions that flight training organizations can take for their strategic management and planning. In the literature, there are not many studies about the critical field and strategic control conducted in the aviation field. The analysis of strategic management and planning in the rapidly developing aviation sector is very important for flight training organizations. The result of strategic planning and sectorial SWOT analysis of our research presents the current situation of FTOs. Therefore, it will guide the researchers and managers in their future research. Flight training organizations can benefit from this study to improve their strategic management and plans in the aviation sector. Thus, it may help the Turkish aviation industry to achieve its target as the first research study in this area.

Literature Review and Theoretical Framework

Aviation Sector and Strategic Management

In the last decade and despite the apparent downside risks in the global economy, the demand for air transport has witnessed a steady increase in passengers and revenue, and emerging markets have seen even faster growth than advanced economies. The aviation sector in the Middle East, for instance, grew by 11% from 2008 to 2013 in Revenue Passenger Kilometres (RPKs) in contrast to the overall industry which experienced a compound annual growth rate (CAGR) of 4.3% (IATA, 2014). Moreover, the Middle East is projected to lead the world‘s growth in international traffic for the coming decades. To capitalize on this growth, many governments and air service operators in developing economies have made significant investments to upgrade infrastructure. The Middle Eastern and African carriers have ordered more than 1,000 aircraft representing around 43% of the total number of aircraft in service in those territories (CAPA, 2014). Almost US$110 billion investment in airport projects in the Middle East, Africa, and Latin America will increase ‘the capacity by more than 600 million passengers annually by 2020 (ACI, 2011). Aircraft maker Boeing (BA) report on 2014 forecast that the high demand for commercial aircraft pilots and technicians will continue for the next 20 years, all airlines are expected to add 38,000 planes to the global fleet. Between 2015-2034, 558,000 new commercial airline pilots and 609,000 new commercial airline technicians will be needed worldwide. Accordingly, it is expected that the highest need will be in Asia Pacific (226,000 pilots and 238,000 technicians) and Europe (95,000 pilots and 101,000 technicians), while the lowest need will be in Russia (17,000 pilots and 22,000 technicians). Global economic growth is spreading the wealth and making travel possible for millions of new fliers around the world. Boeing declared that approximately 38,000 passenger planes, which are worth $5.6 trillion, will be needed in the next 20 years to meet surging travel demand. It's in line with rival Airbus' (EADSF) recent forecast for 32,600 new aircraft by 2034. A spokeswoman for Boeing said that bigger planes need larger pilot crews, while pilot attribution rates are coinciding with more modern fleets, increasing the demand for these jobs. In 2003, the Ministry of Transportation, Maritime Affairs and Communications used the slogan "Every Turkish citizen will fly at least once in his life." The "Aviation Liberalization Project" has shown its effect in a short period and has resulted in the rapid development and growth of the aviation sector in Turkey. Turkey is the world's most massive flight network country thanks to the Turkish Civil Aviation which set the goal of “There will be no points that we cannot reach in the world." In many developed countries, while the aviation sector was in crisis and the companies were shrinking, the aviation sector in Turkey continued to grow. By 2023, the number of aircraft in Turkey will exceed 700, and the number of pilots will exceed 10,000. Turkish airlines need around 500 new pilots every year. Flight training organizations that are similar to other aviation businesses are following the national and international regulations. These organizations have fragile constructions. Preparing the strategy plan according to strategy management will help the FTOs to develop in a higher level of education with high-tech facilities. FTOs engage in strategic management to ensure that they adapt to trends and external changes such as globalization. There are many studies in the literature on strategic management process and planning and evaluation. However, it has been observed that studies on strategic evaluation process are not sufficient in the Turkish aviation industry, which is primarily prominent with the increase of state and private sector support. External environment analysis is the process of identifying and understanding strategic issues in the external environment that will affect an organization and determine their effects on the organization. External auditing is aimed at finding hidden opportunities and mitigating future threats in a rapidly changing business environment. Like any other business, the aviation industry is impacted by changes in its external environment. The political, legal, economic, socio-cultural, demographic, technological, international and marketing factors are assessed as environmental factors. Most aviation industries are susceptible to changes in external factors. However, the elements are not controlled directly by the companies in the industry. Companies are forced to alter their business models, pricing, revenue, and cost structures to suit their customers' changing needs in different economic conditions. As a result, knowledge of the trends and the economic life cycle can help predict external opportunities. It can also predict risk factors of investing in the industry. Every aviation organization has various weaknesses and strengths. The critical point is that the firm can identify and analyze these weak and powerful aspects and use them by extracting the experiences and conclusions. These aspects will help the managers to make an accurate decision. A good strategy and planning system makes it necessary to correct existing activities. Influential elements in evaluating strengths and weaknesses are organizational culture, human resources, organization structure, physical assets, profit and cash flow, management and know-how. Strategic planning and general sectorial SWOT analysis have been examined within the rapidly changing business environment for FTOs. In this study, the relationships between the current situation and the variables were discussed. Our research questions are:

• What are the key external factors that have an influence on the strategic management plan of Flight Training Organizations?

• What are the key internal factors that have an influence on the strategic management plan of Flight Training Organizations?

• What is the SWOT analysis framework in Flight Training Organizational business? (Figure 01 )

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Research Method

Findings

The statistical findings of the study are discussed in four parts. The first part includes descriptive statistics of all the variables of the study. In the second part, correlations between variables are examined, and relations are revealed. In the third part, the researcher has determined which variables predicted dependent variables and what the predictive power is.

Descriptive statistics including minimum, maximum, mean values and standard deviations of all the variables used in the research are shown in Table-1:

Pearson correlations were calculated to reveal the relationship between dependent and independent variables. Correlation findings are shown in Table-2. Before estimating the associations, the average scores given to the items by the individuals on the scales were taken, and a variable score was created for each individual, and this score was taken into consideration.

As shown in the table, the strategic plan dimensions and external factor dimensions such as “socio-cultural/demographic” dimension with level of (r = 0,623; p <0,05), “international” dimension with level of (r = 0,636; p <0,05), “technological” dimension with level of (r = 0.850; p <0.05) and "marketing" dimension with level of (r = 0,663; p<0,05), "political" dimension with level of (r = 0.252, p <0.10) have a positive relationship with each other. There is no relationship found between strategic plan dimensions and “economics” dimension in external factor analysis.

As the relationship between the strategic plan dimension and internal factor dimensions is examined, it is seen that the strategic plan dimensions and internal factor dimensions such as "know-how" dimension with (r = 0,528, p <0,05) level, “human resource" dimension with (r = 0,749, p <0,05) level, "organization structure" dimension with (r = 0.297, p <0.05) level and "profit and cash flow" dimension with (r = 0,350, p <0,05) level have a positive relationship with each other. There is no any relationship between strategic plan dimensions and “management" and "organizational culture” dimensions in the internal factor analysis.

It has been determined that all the external factor dimensions are about each other. It is also observed that the outer factor dimensions are primarily related to internal factors.

A vast majority of the internal factor dimensions have a meaningful and positive relationship with each other. It is seen that the inner factor dimensions are in a significant and positive relationship with the external factor dimensions.

Significance level *** p <0.001 relationships are not determined by any dimensions but the correlations that occur in the general sense are predictable and at a sufficient level. In addition to correlation analysis, regression analyses were performed for testing hypotheses, and hypothesis evaluations were conducted. In regression analysis, the effects of external factors and internal factors on strategic planning were investigated.

As indicated in the table 3 , strategic planning is affected by external factors such as political dimension (β = 0,312, * p <0,10), economics dimension (β = -0,206, ** p <0,05), marketing dimension (β = P <0.001). Strategic planning is based on internal factor dimensions such as know-how (β = 0,133, * p <0,01), management (β = -0,354, ** p <0,05), human resources (** β = 0,274, p <0, 05), physical assets (β = -0,313, *** p <0,001) and profit and cash flow (β = -0,412, ** p <0,05) and it was found that 87.9% of the total variance was explained on strategic planning (p <0,01).

In regression analysis, the effect of internal factors on strategic planning was investigated. As the results of regression analysis indicated, the strategic planning was affected by know-how (β = 0,133, * p <0,01), management (β = -0,354, ** p <0,05), human resource (** β = P <0,05), physical assets (β = -0,313, *** p <0,001) and profit and cash flow (β = -0,412, ** p <0,05).

Management: Management is among the leading internal factors that affect the strategic planning of FTOs It can be through marketing strategies pursued by current managers to increase their market share in the framework of managing skills and necessary skills. Our study has already observed a process of institutionalization of the FTO, but have yet to complete this process. The capacity of existing managers has a significant impact on the overall performance of the FTO. The vision of the managers and the desire to go forward may have a positive/ adverse effect on the FTO's strategic planning. Collaborations (university/other FTOs/airlines etc.) that managers create within strategic planning offer different perspectives and strategic plans for FTO. It also has a significant place in the formulation and implementation of strategic planning with the support of top management or business owner. Our research shows that the manager is the present and future face of the FTO. Know-how: Knowing how and by which regulation a framework can be implemented or not is crucial to the creation of strategic plans for the FTO. The National Education-Civil Aviation General Directorate directly influences the strategic planning to be established. At the same time, international organizations may be decisive factors on the implementation of the strategic plans of EASA and ICAO. Human resources: The quantitative and qualitative nature of the human support is one of the significant factors that FTOs should take into account. This factor which is the source of intellectual capital is not easy to form and to flourish like other physical resources. Moreover, the fact that the human resource is effectively directed and determined to work in harmony is also a distinct problem. The number of pilot instructors and the competencies they have, the quantity and quality of theoretical knowledge of the instructors, information, and experience of the maintenance personnel we evaluated in terms of flight safety in the same way, education, and expertise of administrative staff are factors taken into account in the formation of strategic planning. In this sense, the selection, training, and keeping up with the current knowledge of human resources that provide the flight safety and the adaptation of these human resources to the procedures are the primary objectives of an FTO. Physical assets: Physical assets are the physical resources that the FTO has identified as a priority issue in the strategic planning. In this sense, the capacity and characteristics of the devices used for training, the size and features of the training facilities, the number of aircraft owned and the attributes of the planes are the factors that affect strategic planning. FTOs generally regard the strategy of increasing the number of students as increasing their physical resources in the growth trend. In this context, the physical resources possessed by the organization play an important role in determining the strategy. Profit and cash flow: The assets and financial resources, cash flow and annual profit margin of the FTO are essential for the strategic planning, especially when the industry is narrowing down for various reasons, to support the sustainability of the FTO. In this sense, FTOs have access to the capacity to make and apply decisions more efficiently. Non-potentially weak FTOs may lose their vulnerability if they cannot take economically right choices. Also, financial strength is significant regarding capturing and maintaining the necessary qualifications for sectoral competition. The dimensions of political, economics, marketing, know-how, management, human resources, physical assets and profit and cash flows significantly influence the aspects we have discussed and explained previously as external and internal factors in this paper and tell 87.9% of the total variance on strategic planning. It is necessary to explain how FTOs perceive and evaluate the elements that we have determined as external and internal factors beforehand. The primary purpose of the SWOT matrix is to identify the opportunities that the FTOs can benefit, the threats they can cause, and what the FTO regards as strength or weakness against its competitors. The matrix evaluation provides information on how and under which circumstances FTOs perceive regarding SWOT. Strengths: FTOs are aware of their strengths and weaknesses, especially in internal evaluations. They consider that they can make a difference in management, especially in the control of other FTOs. Management activities such as marketing, promotion, cooperation, granting of EASA licenses, knowing the needs of the sector and responding to its needs are among the strengths of the organization. Physical resources are significant. Especially in large cities, provision of education, those of flight schools that are providing the flight training in the airports with right meteorological conditions, hangar, aircraft, and simulator device are emphasized as physical resources. The financial strength of the FTO is among the strongest factors. It has been stated that as a source of resource management there is a potential for learning and flexibility in course fees. It is noted that the possible resources are student potential and flexibility in course fees. Human resources is another feature mentioned among the strengths. Giving a good quality education, having experienced pilots, organizational culture and know-how are among the titles mentioned in the article. The most outstanding issues among the strength are management, physical facilities, and human resources. Other factors are not regarded by FTOs as distinct properties. Especially the organizational structure or organizational culture is not mentioned as a strength. In fact, all of the points discussed above are comply with the results we obtained in the regression analysis. In this sense, it would be a correct approach to say that an FTO which can distinguish among the factors other than these three factors will come to the forefront. Weaknesses: The fact that the operator is disadvantageous to the operation against the other competitors in the market arising as a result of the internal environmental analysis and the FTO is evaluated as weak. In the following research, the FTO managers are generally concerned about lack of vision, student quality, number of teachers, lack of simulator, number of aircraft, high cost of training, lack of a hangar, recognition, variety of practices, outsourcing, in-house problems, inadequacy of cooperation, economic power and commercial concerns. Also, it is also essential to mention weaknesses that are identified as strengths. In this sense, the failings also converge in three factors (management, physical possibilities, and human resources). Know-how, organizational culture, and organizational structure are not mentioned among the weaknesses. Opportunities: We have seen that FTOs generally do not produce very significant alternatives within the scope of what is considered to be an opportunity for the operator to operate against other competitors who appear on the market as a result of the external environment analysis. Gathering students from abroad are expressed as an option, but this is not supported by other factors. The opportunities are the factors that are mostly evaluated by the internal elements. For example, eliminating a weakness of an organization is regarded as an opportunity by some FTOs. In general, political, economic, demographic, socio-cultural and technological prospects are not on the agenda of FTOs. When there is a contraction in the domestic market in the demand side, the students from abroad can be attracted to the national market. For such situations, FTOs can prepare for international cooperation and thus attract international students. Opportunities can be used to increase the market share of the organization through the analysis of external environment and international cooperation. FTOs have stated that there are no factors except these two factors that could create opportunities for them. Therefore, they did not specify any issues that could create opportunities for businesses in a technological, social, demographic and political sense. Threats: Factors that may arise as a result of the operator's external environment analysis that other competitors in the market may threatened to operate and that the operator may suffer are generally mentioned as the sectors that may affect the contraction in the industry, political relations, competition conditions, periodical reductions in pilot needs and the image of the FTO. It is seen that the issues referred to as the threat is related to the political, economic and market share in the analysis of the external environment. FTOs have stated that there are no factors that could harm them except these three factors. Therefore, they have not indicated any issues that could be threatened regarding their operations in technological, social, demographic and international factors. The SWOT analysis, based on the responses from FTOs, shows that FTOs generally focus on issues related to internal factors.

In this sense, when strategic planning is done, we can say that they are making strategic plans which take these issues into consideration that are related with internal factors. Short-term planning is done by determining the strengths and weaknesses.

Conclusion and Discussions

The primary objective of our research was to establish a general framework for the strategic plans of the flight training organizations that have been training pilots in the rapidly growing aviation sector of Turkey and to present a perspective on how FTO’s have shaped their strategic plans in line with the objectives. Internal planning of FTOs has been found to be more important than external factors regarding strategic planning. Therefore, it is essential to develop a strategic plan which includes improving human resources and increasing the substantial funds of FTOs to achieve targets of the aviation industry of Turkey. In this context, it may be a solution to create resources firstly by getting support from the state of origin and different institutions by building special projects. FTOs can pioneer aviation projects, promote aviation at the national level, arrange activities with the neighboring countries through cultural partnerships. Increasing the student capacity should be considered as a step towards achieving strategic objectives as well as improving the quality of training. Demographic and sociological factors can be examined carefully, and aviation-related initiatives can be made on a regional basis. Developing the relations with the surrounding countries, participating in the fairs held in those countries, communication with the agencies are among the actions that can be taken in this area. With the opening of the 3rd airport in the next years, Turkey is planning to be a training base as well as a hub for many flight networks in the world. In this context, it is necessary to revise FTO's 5-year strategic plans and to take action on the regional basis by evaluating appropriate opportunities. FTO associations can be established on a regional basis to create a standard cultural image in neighboring countries. According to the findings and conclusions of this study, the following suggestions were made by the researchers to prepare the ground for further research and direction: First of all, it is beneficial to expand the strategic planning of FTOs and to analyze it about airline operators in the aviation sector and compare it with FTOs. Variables can be developed regarding the external and internal factors. Also, various variables can be integrated into the work as an intermediary effect. Variables with possible regulatory effects among the independent and dependent variables may also be included in subsequent studies. The future research will be of qualitative, quantitative or mixed nature, and the differentiation of the universe and hence the sample regarding quality and quantity will provide significant contributions to the literature in generalizing the findings. In this context, changing the working universe may create a difference. Data can be collected from FTOs at home and abroad and then, the comparisons can be made.

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