British Airways - Coursework Example

British Airways—Introduction and History British Airways is the largest air carrier of UK and third-largest of Europe. The operations of British Airways are chiefly centred on the two London airports, Gatwick and Heathrow. The BA fleet consists of different variants of Boeing aircraft some of them fitted with British made Rolls Royce engine. British Airways came into existence in 1974 after the merger of state-run internationally run British Overseas Air Corporation (BOAC) and a mainly European British European Airway. The BOAC originates in 1939. Two airlines British Airways and Imperial Airways were merged and nationalised to create the BOAC. The staff members of two organisations did not accept the merger and British Airlines management faced difficulties in checking their wayward ways. The slothful, confrontationist and inefficient attitude of staff-members took its toll and image of British Airways took severe beating at the international level. So strong was the anti-BA sentiment in public that a 1980 survey by International Airline Passengers Association put BA at the top of the list of airlines that had to be avoided at any cost (Blyton and Turbull, 1988 cited by Grugulis and Wilkinson). British Airways was privatised in 1987 and enlisted on the London stock exchange. Immediately after privatisation the share of BA in UK market jumped from 60 percent to 75 percent. In fact it was a series of management decisions beginning in early 1980s that changed the complexion of BA. Today BA a member of the ‘oneworld alliance’ BA offers a network of 700 and reaches 300 global destinations. Comair Pty Ltd, Loganair Ltd, Sun-Air are British Airways franchises. In the fiscal ending March 31, 08, the company achieved 10% operating margin raising the sales 3.1 percent to 8.75 billion pounds. BA carried 33.1 million passengers in the same period. A major portion of BA profits comes from premium seats on north-Atlantic routes. Situation had staged a complete turnaround by 1996 (Wilkinson and Grugulis, 2001). It was not only the most profit-making airline but also a preferred workplace (Financial Times 18th March, 2000 cited by Grugulis and Wilkinson.) and the most admired airline for travel. ( Financial Times 18th March, 2000 cited by Grugulis and Wilkinson). Lord King and Colin Marshall: The Golden Era Lord King was appointed the Chairman of British Airways in 1981. His brief was to restructure and resuscitate the ailing airline. Colin Marshall was appointed the CEO in 1983. Marshall without formal management education brought with him years of managerial experience in International business having worked in various capacities. Parhalad and Hamel (cited by Heller, 2006) attribute ‘reinvention and regeneration of BA’s’ strategy to Marshall. Much of what we see of BA today is owed to the cultural change that was brought about in the airlines in the 1990s era. It was the biggest transformation in airline industry. Marshall’s plan had hit out at the militaristic behaviour of the employees. “Putting People First” training programme was attended by 40000 staff members. The programme intended to bring more of a cultural, emotional and attitudinal change in the work force. Marshall had likened the course to designing an aircraft seat, or an-in flight entertainment programme ( cited in Barsoux and Manzoni). Marshall made BA a people’s organisation sensitive to the personal, familial and social needs of staff than being a money spinning, passenger ferrying company. The four factor menu guided the staff to set inter-personal standards of communication, define standards of excellence, help in decision-making, recognising each other’s achievements, noticing and appreciating extra-efforts of others. Respect for self, and fellow employee were the cornerstones of the cultural change in British Airways. The staff strength was reduced from 58000 to 38000. Besides, giving cohesion to the BA team, Colin and Marshall took a slew of measures for optimized use of or resources thus making, the British public carrier operationally efficiently. In process King, Marshall duo laid the foundation of privatisation of BA. Terminal 5 The history of British Airways is fraught with leadership and resource crisis of its own-making or that of changing global political situation. The most recent one has been the Terminal 5 of Heathrow crisis. Terminal 5 was erected at the Heathrow airport for the exclusive use of BA. It was a well-thought move to ease congestion at the airport. The planning and implementation of this move took 20 years. The new terminal was inaugurated on March 14th 2008. What was intended to ease traffic at the Heathrow airport ended up in the chaos of cancelled 600 flights and a backlog of 20000 items of luggage. The crisis cost directors Gareth Kirkwood and David Noyes their jobs (Alloway, 2008) and has put the management in a spot. The reasons of the fiasco are said to be poor training and baggage handling system breakdown. (Alloway, 2008). Realising the gravity of the situation, the CEO, Willie Walsh, while foregoing his bonus has predicted a ‘difficult quarter’ ahead. The Management Structure and its Goals The Top Management Martin Broughton is the Chairman, British Airways, Willie Walsh, The Chief Executive and Keith Williams the Chief Financial Official. Additionally, there are 11 non-executive directors including the Company Secretary. The Board is accountable to the company for good corporate governance. The chief governance structures are listed in the Combined Code of Corporate Governance available at Britishairways.com. The Nominations Committee meets at least once in a year for appointments, removal and recommends appointments. Key Management Policies The management policy is called the BA Way. ‘Being professional and responsible’ are the core values of BA Way. “Involving and Developing our People’ is also a key element of the management policy. The four Key Performance Indicators (KPIs) are Financial, Customer, Operational and Employee. The senior management’s performance in addition to the four KPIs is assessed and incentivised through Performance Share Plan, based upon a measure of Total Shareholder Return. The company’s TSR is benchmarked against a competitor group airlines. (Annual report, 2007). The Challenge The net income of BA has increased to 680 million pounds or 58.6 pence a share in the year ending on March 31st. Sales have increased by 3.1 percent to 8.75 billion pounds. Premium traffic grew by 4.4 percent. (Alloway, 2008) Despite these bold statistics, Walsh has predicted a 12-month challenge ahead. Amidst trying circumstance Walsh has been compelled to narrow down growth projection to 7 percent. The challenging situation arises out of rocketing fuel prices and competition increasing on the profit-making BA routes. Talks about possible tie-up with American Airlines are in progress. BA has planned to start operations of it subsidiary carrier “OpenSkies”. US Department of Transportation has allowed it to start operations between Paris and New York. Marshall Plan—A Retrospective Look Marshall enthused a fresh spirit into the degenerating British Airways by his work style. The story of BA’s resurgence is one of the most inspirational stories of modern day business. (Heller quoted by Wilkinson and Gruglis, 2001)Such strong were his convictions that he oversaw the management running the airline for almost a fortnight during the much hyped strike by British Airways staff. Going almost to the verge of rhetoric he gave BA the ‘dream’ to ‘Become World’s Favourite Airlines.’ (Heller, 2006). Hamel and Prahalad cited by Heller construe it as the ‘strategic intent’ Pascale. et.al (cited by Heller, 2006) interpret the leadership principle in service industry literally walking up to the customer to ask him/her needs. Marshall did exactly that by leading ‘British Airways down that road’. The other prong of ‘to the customer’ Marhsall’s strategy was ‘'Putting People First' and both work in conjuction to each other. Only a spirited-workforce that feels at home in an organisation will aspire for the ideal of total customer satisfaction. Such motivation heralds an organisation-wide change than merely changing individual perceptions. Only a change in organisational culture can change individual mindsets. Lane quoted by Heller (2008), emphasizes that managers have a customer care responsibility towards those who provide corporate income. Marshall (quoted by Heller) was unequivocal in this regard. He felt that the way staff treated each other was as important as how the staff treated the customer. (Heller, 2006 ). An outstanding example of change in organisational culture achieved in the engineering division of BA under Alistair Cumming. Cumming cited by Heller (2006) rightly felt that a determined management could only go to an extent of keep the company running in times of strike. The ideal of becoming world’s favourite airline required much more. A survey conducted during the tough times of oil crisis and Gulf war of 1990 was found to exist in man-manager relationship. (Heller, 2006). Heller (2006) states that the staff felt that they were a misunderstood lot, with much of their grievances going unheard. They relied on rumours for their information uptakes. All this had to be changed and divide had to be bridged. It needed a pro-active attitude towards improvement on part of the staff. The staff were encouraged and helped than being given directives to facilitate and understand. The managers were asked to spend more time on the shop-floor with the staff, listening to their grievances and taking down notes. The staff was allowed to give their suggestions and productivity increased by 40-45%. The engineering example was successfully replicated in areas, which involved direct customer interface thus transforming BA’s reputation and performance. (Heller, 2008). There is no end to enhancement in performance levels and quality. Quality and improvement help keep up the tempo of performance. Nothing is perfect. There always exists a scope for improvement. Cumming enabled it in past when BA was in dire straits. It can do it now and keep itself in a dynamic mode improvement. Today, once again British Airways is imperilled by rising fuel prices and slowing of economies (Alloway, 2008). Walsh has ordered a review of airline’s capacity, costs and network. It is being seriously deliberated if the company needs chop down some routes. To further add to the woes of British Airways, the “Open Skies” policy allows increase in the number of airlines to operate on Heathrow-US routes. Suggestions To begin with British Airways needs to put its Terminal 5 fiasco behind and take urgent steps that win back the customers. Terminal 5 has, in fact, done a massive damage to the reputation of British Airways. The BA management needs to come out of it. The BA management needs to isolate the event from its history and make it clear to the customer that the failure occurred due to its faulty planning with its Spanish collaborator Grupo Ferrovial SA. In fact, the problem has been tracked down to inadequate training to baggage handling to staff. BA has to display greater sensitivity to the training needs of the employees. The current work culture at BA is not conducive to an emotional and moral improvement programme. The crippling ‘sickness strike’ of 1997 had proved that the cultural ethos ushered in by Marshall had been given a burial. Militant posturing among employees was back, this time with greater vengeance. An undercover employee bulletin Chaos made suggestions to the BA employees about flight-delaying tactics including how to poison a captain. (The Guardian 8th November 1997). By 2000, the company announced losses to the tune of ₤ 244 million. The rest of the job was done by Ayling himself. Instead of emulating his own engineering side's later enlightenment inspired by Cummings, Ayling adopted the strong-arm methods of its former, unhappier days (Tate, 2007). The near rebellious attitude of the staff culminated in the exit of Bob Ayling as the chief executive. The dynamic ‘cultural change’ brought about in the work ethos of BA, in the times of Cummings, Marshall and King is no longer being practised. Rather BA looks up to comparator organisations to benchmark its standards. The annual report of BA, 2007-8, carries metrics of performance that are inspired by working of other organisations than from its own past achievements. Since the premium class travelling is sure to come under heavy competition, after the ‘Open Skies’ policy BA can get its act together by adding more quality to its services. The customer care and quality right from ticketing to delivery of baggage should be made flawless the customer retention rate keeps on increasing. Competition allows only the best to survive. For achieving this kind of perfection, BA needs to go back to basics and begin from where Cummings began the engineering revolution. But to treat the Cummings example as a miracle that happened out of nothing would make for the most specious argument. And nothing can be more utter disregard to his work, if BA sits up and starts looking for magic wand solutions (Grugulis and Wilkinson,2001) Similar quality practices should be adopted in evaluation of hospitality, catering, passenger comfort and conveniences. Regular audits and customer surveys can reveal areas that need improvement. BA should introduce more discounts and free miles for regular customers. It can work on cutting down on less profitable routes especially in other parts of the world where its operations are marginal. It is time that British Airways starts looking at itself from a global angle rather from a British perspective alone. As Europe and UK adopt the ‘open skies’ policy airlines from all parts of the world would come here to have their share of the pie. On the other hand, there are parts of the world, where a good airline service is still an unthinkable reality. British Airways can move into such areas that are really devoid of quality services. This is also coincident with Kaku’s third and fourth stage of globalism and partnerships with the governments. According to Kaku, (cited by Heller, 2006) companies at times are so engrossed in local and national problems that they neglect global problems. In the BA context, it can be interpreted in terms of its strong inclination towards London-US route. While focussing on this route, BA could ignoring lucrative Asian, South-east Asian, Japanese and trans-Pacific flights. British Airways also needs to adopt a proactive role in online of ticketing. In most parts of the world people have not taken to buying tickets online. BA should adopt a more active in selling tickets online where General Sales Agents hold sway. This could also include promotional campaign. Often, GSAs hold agencies of other airlines as well. They go in for selling those airline tickets that yield it more profits. Besides, decreasing overheads, this will help BA management to focus more on routes where it enjoys a dominating position. Kaku cited by Heller (2006) .suggests a five-stage journey for survival in tough times. According to Kaku merely keeping the cash registers ticking and economic survival shouldn’t be the goals of an organisation. BA should move onto constructive cooperation between staff and the management. The staff as in engineering experiment carried out under the leadership of Cummings should be involved in decision-making. Kaku cited by Heller (2000) argues that this stage is not enough - the company must move on to cooperation between management and labour to gain a sustainable competitive advantage in the market. Salaries, bonuses and training are all involved in this process: 'The two sides are in the same boat...sharing the same fate'. (Heller, 2006) Kaku experiences were gathered from the Japanese firm Canon’s evolution of a cooperative culture (Heller, 2006). At present this may be stage where BA is falling short. Even a minor gap between expectation and performance can deal a crushing blow to the business prospects of airlines. Heller doesn’t see financial resurgence and cooperative culture in isolation. The strategic exploitation of commercial assets and creation of a one-company, cooperative culture go hand-in-hand. (Heller, 2006). They cannot function independent of each other. It is the staff members who encounter real-life situations and they can best suggest on making improvement and cutting costs. The more the staff are made at home at BA, the more responsibly they handle their routine affairs. The staff have to be involved more in the decision-making process and empowered to handle tricky situations at their level. There is a clear possibility that if some member of the staff had reported in time about the ground situation at Terminal 5, the fiasco could be averted. It is the staff that always remains grounded to real-time situation and not the management. Even in the days of great revival of BA, Marshall had at times taken to directly dealing with the customer in order to have his or her ‘viewpoint’. Conclusion Times are changing fast. The terrorist attack on World Trade Center had dealt a crippling blow to the airline trade. Currently some other problems stares BA as well as its competitors at the face. Recession in world trade, increasing fuel prices, and growing competition is definitely going to bring a slowdown in the airlines trade once again. And then BA has its own problems as stated by Wheeldon (quoted by Alloway) `The heat won't be off Willie Walsh until Terminal 5 is absolutely through.'' “ He's got a long, long difficult road ahead, as has the airline.'' (Alloway, 2008). Walsh has to avoid the pitfalls of Ayling and cautiously work out a regenerative and reinventing path inspired by Marshall but more in tune with the globalised context of today. References: Heller, Robert (2006): SWOT: Assess the strengths, weaknesses, opportunities and threats of your business with SWOT analysis, www.thinkingmanagers The Thinking Managers Website, Accessed May 15th 2008, http://www.thinkingmanagers.com/management/strengths-weaknesses.php Tate, Bill (2007) Organisation development—the route to better management, www.thinkingmanagers, The Thinking Managers Website, Accessed May 15th 2008, http://www.thinkingmanagers.com/the-thinking-ceo/organisation-development. Heller, Robert, (2006) Strategic Planning: Setting the right goals and formulating a sound business strategy, Strategic Planning: Setting the right goals and formulating a sound business strategy, www.thinkingmanaers.com The Thinking Managers Website, Accessed May 15th 2008, http://www.thinkingmanagers.com/the-thinking-ceo/organisation-development The Corporate Social Responsibility at British Airways, The British Airways Website, www.batraveltrade.com, Accessed May 15th 2008, http://www.batraveltrade.com/travel/csr-corporate-responsibility/public/en_gb Heller, Robert (2006) Development Strategy: The reinvention and regeneration of British Airways, www.thinkingmanaers.com The Thinking Managers Website, Accessed May 15th 2008, http://www.thinkingmanagers.com/management/development-strategy.php Alloway, Tracy (2008) British Airways May Cut Routes to Safeguard Earnings, www.bloomberg.com, The Bloomberg News Website, Accessed May 15th 2008, http://www.bloomberg.com/apps/news?pid=20601102&sid=apaSf3iKltbY&refer=uk Gugurlis, I, and Wilkinson, A (2001) British Airways: Culture and Structure, Research Series Paper 2001: 4, The Loughborough University Website, Accessed May 15th 2008, http://www.lboro.ac.uk/departments/bs/research/2001-4.pdf The Annual Report (2007), The British Airways, Accessed 15th May, 2008, http://thomson.mobular.net/thomson/7/2433/2666/ Barsoux, J, and Manzoni, (1997) Remaining the World’s Favourite Airline: British Airways, 1993-97,:Bedford, European Case Clearing House Read More