The airline industry is a challenging business and is quite unique compared to most others. It's a highly regulated business requiring an emphasis on safety, speed and exceptional customer service, all while keeping costs as competitive as possible, and none of these priorities can come at the expense of another. Examining the organizational structure of airlines gives you some insight on how successful airline companies are able to achieve this balance with a maximum thrust and minimum drag.
Most airline companies use a pyramid-shaped, functional organizational structure with a rigid hierarchy.
Typical Structure of an Airline Industry Company
If you look at an airline organizational chart, you will most likely find it is using a functional organizational structure, in that management is organized from the top down, more or less resembling a pyramid with airline departments or divisions based on the different functions of the company.
Typically, the airline would have a president or CEO reporting to a board of directors, with executives below her for the different divisions. A large airline with international flights and offices in multiple companies, for example, could have eight C-level executives reporting to the CEO, each with three to eight vice presidents below them, including:
- Chief Human Resources Officer: personnel, human resources, training, administrative affairs
- Chief Financial Officer: finance, accounting, purchasing
- Chief Investment Officer: investment management, international relations, corporate innovation
- Chief Development and IT Officer: customer solutions, IT strategy and governance, strategic projects
- Chief Flight Operations Officer: flight operations, cabin crews, operations control, crew planning
- Chief Commercial Officer: ground operations, regional flights, catering and inflight products
- Chief Marketing Officer: corporate marketing, corporate communications, marketing, domestic sales, regional sales
- Chief Cargo Officer: cargo maintenance, cargo sales, cargo operations
Corporate Structure and Chains of Command
Each of these divisions represent diverse specialization, many unique to the airline industry. The chief flight operations officer and the flight operations VP below him, for example, do not need to concern themselves with the intricacies of investment management, catering or the sale of cargo space.
If the airline organizational structure was based on geography instead of function, which would involve having top executives overseeing different regions or countries, their authority and responsibility would cross multiple functions. Each region would have a different culture and a different flavor in its marketing and customer service, even if they used the same procedures.
Without a functional structure, each region would also be duplicating many tasks and processes. Six different regional directors, for example, would each have different catering contracts and different marketing initiatives, and it would be more difficult to ensure they were all using the same IT policies and procedures. This would increase costs and make it difficult for the company to compete in what has always been a competitive market.
Corporate Structure of Southwest Airlines
In 2019, the Panmore Institute conducted an extensive evaluation of Southwest Airlines, which illustrates its use of a functional corporate structure and centralized control of all operations by executives in the head office. As an international, low-cost airline today, Southwest still uses what is essentially the same structure it used when it was a small local carrier in Texas.
Southwest has used this structure successfully while competing with other major carriers like American, Delta and United. Rigid chains of command all lead to a central authority, which benefits the company in four ways:
- Southwest can respond to changes in the industry and adopt new initiatives very quickly.
- The company can efficiently control costs, an essential part of its business model as a low-cost airline.
- It minimizes redundancies among different airline departments.
- Its business functions are run by experts in their fields. The VPs of ground operations, in-flight operations and maintenance operations, for example, all report to the executive VP for daily operations.
Limitations of Functional Structures
A functional organizational structure is by definition rigid, and it does have a few drawbacks that don't only affect Southwest Airlines but any airline using this structure. Of particular note are two major weaknesses.
First, strong centralized control of all operations reduces the autonomy of individual departments, including local managers and supervisors. This can make it difficult for them to make changes or adjust strategies based on shifts in daily circumstances, which can be numerous in the airline industry.
Second, a functional structure doesn't naturally align itself to a sense of teamwork in corporate culture. Unless this is carefully managed, a company risks employees and customers feeling as if they are cogs in a machine.
Digging Deeper Into Operational Control
Airlines share many of the functions and divisions used by most other companies, like finance and marketing. What makes this industry unique is the management and orchestration required to ensure that flights across the world are properly scheduled, filled with passengers, staffed, fueled and maintained. This is done by the airline operational control center.
The AOCC is usually made up of a small group of experts supervised by an operational control manager. Its role is to monitor all of the disparate activities required to keep flights running smoothly. When there is a problem, like an aircraft malfunction, a sick crew member or a flight delayed due to weather, the AOCC is responsible for restoring operations as quickly as possible at a minimum cost.
There are usually five distinct roles within the AOCC:
- Flight Dispatch: Responsible for preparing flight plans and requesting new flight slots from air traffic control entities, like the FAA in North America and EUROCONTROL in Europe
- Aircraft Control: Responsible for managing aircraft and is the central coordinator in operational controls
- Crew Control: Manages crew resources, monitors crew check-ins and check-outs and updates crew rosters as needed
- Maintenance Services: Responsible for short-term maintenance scheduling and unplanned service requirements
- Passenger Services: Responsible for ensuring that decisions and changes minimize any impact on passengers
The number of people working in these roles depends on the size of the airline and how the AOCC is organized.
There are three main AOCC organizations:
- Decision Center: Aircraft controllers work in the same room, while other team members, like crew control and maintenance services, work in different places.
- Integrated Center: All team members work in the same physical space, reporting to a supervisor.
- Hub Control Center: Most roles are at different airports, where they can work in conjunction with airport operations.
Most airlines use a combination of these organizations, specifically a decision center with hubs or an integrated center with hubs.
Small Airlines and Organizational Structure
It may be tempting to think that a smaller airline may have a more relaxed organizational structure, but as the Panmore Institute noted, Southwest Airlines used a hierarchical functional structure even in its early days.
Looking at the structure of smaller, regional airlines today, like Alaska Airlines and Air Wisconsin Airlines, reveals that while they have fewer positions than their larger competitors, the divisions are quite similar. Air Wisconsin Airlines, for example, has a CEO and president followed by three senior VPs in charge of operations, finances and technology and business analysis. Below them are five VPs:
- Vice President of Tech Ops
- Vice President of In-flight and Customer Service
- Vice President of Information Technology and Business Intelligence
- Vice President of Flight Operations
- Vice President of Safety and Security
This is not to say that smaller companies can't have more of a team-based culture than their larger competitors — they often do. However, the primary objective of companies using functional organizational structure is to ensure efficiency in a competitive, cost-conscious aviation industry.