Aerospace Industry Organization Lekerova F.

Discussion on the Organisational structure of Air Astana airline in Kazakhstan

Introduction
Organisational structure is hierarchical relations where numerous activities are
coordinated as a way of authority considered in order to achieve tasks inside certain
organisations (Pirolo, 2012). Organisational structure also can be described as
organization where cultural and environmental factors can match the organisations
missions. (Mintsberg, 1989). The purpose of this paper is to explore organisational
structure of Air Astana Airline which has been based in functional type of organization
and evaluate the effectiveness of strategy in terms of internal and external factors and
will analyse problems which might be arisen from implementation of this strategy.
Today, Air Astana is successful, young and dominated airline within Kazakhstan,
which provides passenger air transportation in 60 domestic and international routes with
the strong focus to Safety (AirAstana). This medium sized company was established in
2002, by two shareholders as Kazakhstan Government holding 51% and BAE (UK)
system holding 49% with a requirement that local employers and organisational
structure should be organised by standardised policy of EU. Also this company is a single
company in Kazakhstan who can fly internationally because it can complete the
certification audit by EASA regulation with zero findings (AirAstana).

Organisational structure of Air Astana airline

In order to identify why Air Astana Airline was structured in such way, it is important
to indicate three factors which influence for establishment such as industry size, market
segment and environment. (Mintsberg, 1989) indicates that number of controlled
elements is key aspect to identify company structure, while market segment reveal the
driving force of company, finally environment can reorganise the structure depends on
external aspects. These factors was applied for the Air Astana which allowed using their
resources in an effective way.
This airline operates mainly in the 2 business divisions:
passenger transportation,
engineering and maintenance
As Figure1 shows, head of airline President/CEO is critical managing point in
hierarchy which can lead company on its strategic moves and ensure a sustainable
increase. He namely operates in 'Sales and Marketing Department' which is responsible
for ticket booking and sales, and also for providing information about the company
services to passengers. Moreover he is in charge for 'Corporate Communication
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department' which played key role in how investors, employees and general public
perceive a company through identifying factors that impact for company.

Figure 1.The organisational structure of Air Astana airlines

Passenger transportation
As we can understand from the chart the main attention is given for the Passenger
Transportation segments because companys main revenue comes from this division.
According to the Air Astana annual report (2007), they attempted to expand the number
of destination served for 18% by 2015. In order to obtain such good results company
insert the number of departments such as 'Management accounts and Risk Management'
in order to identify and analyze the financial impact of loss to the organization,
employees, the public. Moreover, 'IT and E-businesses department' also have been
created, which can increase the number of selling tickets by creating electronic bonus
card 'Nomad' for passengers, and organising cheapest tourist flight through e-commerce.
Consequently, in 2015, Air Astana won the prize as 'a major driving investor for Industry
of E-commerce of Kazakhstan' (AirAstana). As a result, they could increase the flow of
passengers for 12% by 2015. Therefore as we stressed above mostly this structure was
adopted in order to increase efficiency of passenger transportation and satisfy customer
needs.
Engineering & Maintenance
Engineering & Maintenance department is the second largest department of Air
Astana which provide service for aircraft maintenance, engine and components services.
The recent business strategy of company aims to reduce costs for the maintenance of
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airplane because the Repair and Overhaul tasks of aircraft are accomplished in other
countries. This is highly inefficient for the company because the time for service is
indicated by MRO countries (countries which have certificate to provide particular
services), also it adds cost for delivery, for fuel and flying crew service (AirAstana).
Therefore, Air Astana have decided to increase the number of certified workers according
with EASA Part-66 requirement and solve this issue. Consequently, 'The Department of
Training' have emerged to meet the training needs of company where the majority of
employees were qualified by foreign experts. They also have training school for flight
attendants and Pilot Preparation Program 'Ab-initio'. Hence, it is clear that internal
factors such as deficit of qualified employers has led to the organisation of 'Department
of Training', which raise the performance efficiency of Air Astana airline overall.

Potential fallout of organisational structure

As was demonstrated in previous chapter this functional structure allows to company's
results to be better organised, to exploit highest efficiency through assembling main
functions of each section. However, this structure may have issues in such complex
environment (Mintsberg, 1989). High specialisation in each sector leads to an insufficient
coordination among units of hierarchy, since a decision making process fixed for the top
manager (ibid). Also, the implementation of this organisational structure might add cost
for the administrative staff.
However, to cut management level's employers in order to reduce administrative
cost can lead to long term problem. For example, in 2008, Kazakhstan have economical
crisis with inflation of currency, this affects for company performance significantly
because of revenue comes from local currency 'tenge", whereas externals procurement
carried out in dollar. The action that Air Astana made was cutting cost mainly in
management level and short salary in order keep productivity of company. Those actions
gave profits for short term, but it affected for the long term strategy of company due to
decreasing relation, engagement and motivation of employers.

Conclusion
The decision about whether is effective to apply functional organisational structure is
highly controversial one. With regard to operational efficiency, it is clear from the
evidences that implementation of this structure is effective method. Because creation of
essential departments allowed Air Astana airline increase passenger transportation
volume, also departmentalisation assist to organise one particular activity and
standardise it within the section. However, there is also evidence that functioning of
this type organisation can add administrative cost, can decrease responsibility of workers
and affect for decision making process.
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Overall, it appears that application of functional organisation for medium sized

company AirAstana can be effective in increasing operational efficiency, but this may not
be the most effective way if doing this due to long terms side effects, increasing size of
organisation and market sections. Therefore, in the context of future goals of company,
it would be recommended to company to apply more advanced organisational structure.
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References
1. AirAstana. (..). History. 5 11 2016 r., Air Astana:
http://airastana.com/rus/en-US/
2. IATA. (8 june 2015 r.). Press Release. 7 November 2016 r., IATA -
Airline Profitability Strengthens Further:
http://www.iata.org/pressroom/pr/Pages/2015-06-08-03.aspx
3. Mintsberg, H. (1989). The structuring of Organizations. London: Macmillan
Education UK.
4. Pirolo, L. (2012). Organizational Structures. Focus on the Airline Indusrty; Air
France and KLM. Dipartimento di Economia e Management .