Moncton Flight College, Case Study Example

Introduction

As the case study states, downturns in the aviation industry are so predictable that you can almost set a calendar by them in ten to twelve year intervals. So predictable are these downturns that no one was overly concerned by the beginning of one in mid-2001, but this time things did not go as predictably as they had in the past. The aviation related events of Sept. 11th, 2001 transformed an industry, and like all companies connected to this industry, Moncton Flight College was faced with significant business challenges which required strong and wise leadership. The decisions that were to be made after this event by the Board of Directors and by CEO Mike Doiron would have a profound impact on the college. These decisions would be made at a time when the institution was poised to make growth a priority, and to be achieved by focusing on international markets.

Problem Identification

In order to identify the issues that caused the college to lose profitability, it is important to pay careful attention to the facts, particularly to what transpired after 2001 when the college made some key business decisions. What we know is that through 2005, the events of Sept. 11th continue to have a profound influence on the aviation industry and Moncton College. We know that a primary reason for losing profitability has been the decision to expand into Europe, which has significantly added to expenses and has not met enrollment expectations. For example, initial projections over 2003-2004 in the business plan indicated the JAR FCL program would generate $388,801 in net income. Instead of this figure, the program recorded a $215,529 loss. This is a firm indication that the initial projections and logic proposed by the CEO in 2002 was overly optimistic and did not account for the full impact the events of September 11th would have both on the industry and the college’s profitability.

To fully understand that impact, one only has to review a 2003 report generated by the Air Transport Association of Canada (ATAC). In this report, the association revealed that the number of pilots being recruited by major carriers was expected to fall by significant amounts. In addition, a previous assumption that a large number of retiring pilots in the coming years would fuel demand for new pilots was refuted, with the report stating the there were already a sufficient number of pilots in the system to meet demand. Given that assumptions made by the college and its CEO did not take into account what this ATAC report stated is of concern. In fact, they made the assumption that there was going to be a strong increase in demand for pilots, and this belief contributed to a decision to expand into Europe during a severe industry economic downturn. These events further reinforce the belief that the college, and in particular its CEO, had an overly optimistic view of the prospects of expansion and that more caution should have been exercised prior to making such a significant investment in what has proven to be a risky business venture.

SWOT Explanation

Among many strengths, Moncton College is fortunate that it has a well earned reputation due to its history, it curriculum, its infrastructure and quality of product. Weaknesses tend to be recent, relating to the challenges faced by the aviation industry post 9/11 and also by the expansion decisions made shortly after. This has led to limited resources, an inability to meet financial targets, a shortage of students and significant cash flow issues. In order to return to profitability, the college needs to take advantage of new opportunities such as a chance to form a partnership with CANLink Global Inc. in a venture to expand into the China market. With the economic downturn came school closures, Presenting an additional opportunity to increase the student body domestically.

In closing, the college also needs to be wary of potential market threats while implementing strategies to go after opportunities. Globally, the effects of Sept. 11th are still having an impact on the industry. There are new restrictions to air travel and flight training schools, and potential for more in the future. There is an overall decrease in students domestically, and industry projections for future growth are murky and inconsistent. The board of directors and CEO of Moncton College need to take great care, and better precautions, on the next opportunity they pursue in light of the negative impact of the European expansion.