British Airways Strategy Making - Research Paper Example

A Critical Evaluation Of British Airways Strategy Making Introduction: Strategy making for any organization may be defined as a process of constant adaptation to coupe up with the shifting conditions, which may be internal or external and dominated by uncertainties. (Murray, Knox, Bernstein, 1996, p. 1) The term strategy on a whole refers to the entire enterprise, but if one talks about business-strategy, it is a narrower term referring to the choice of product service mix and the market on which it would work. (Wit, 2004, p. 71) Thus for any organization to run its operation over a long period it is important to adapt strategies which are dynamic and is capable to deal with the unstable conditions in which the company works. In a long-term perspective Strategic Planning ensures the growth and stability of a firm, and even helps in coping up with competition. Thus for any industry where there are major players operating, having a focused strategy is now becoming more essential and airlines industry cannot be an exception. The report focuses on analyzing the current strategies that are prevalent in the airline industry and also suggesting ways that will enable them to handle certain issues. The airline company, which has been chosen to structure this report, is the British Airways. It is one of the world’s leading scheduled international passenger and cargo airlines catering to about 300 destinations across the world. (“Annual Report of British Airways”, 2008) British Airways can be considered to be the first scheduled airlines to run internationally by Aircraft Transport and Travel Limited, operating from the August of 1919. (Peck, 1999, p. 454) Then a series of alliances took place, which resulted in the formation of Imperial Airlines and British Airways. (Peck, 1999, p. 454) These two companies merged and formed the British Overseas Airways Corporation (BOAC) in the year 1939. (Peck, 1999, p. 454) But privatization and the commercial existence of the company were initiated from the year 1981, under the chairmanship of Sir John King, who was later known as Lord King. (Peck, 1999, p.454) Initially the company being established was under several crisis and problems. But the decade of 1980 marked as decade of turnaround for the company, the fruits of which it enjoyed over the next decade as it was recognized as one of the largest airlines to rule the industry. With his introduction Lord King concentrated on giving this airline a new identity. Prior to that all the advertisements were tactical in nature, purely adhering to the promotion of product features, scheduling etc. But in the turnaround program the airline focused on the relationship marketing, to increase customers level of satisfaction and side by side emphasized on building a brand value, trying to establish itself as the “ World’s Favorite Airlines”. (Peck, 1999, p.454) These two factors was the key strength of the company during its days of operation. It strictly banked on its world wide recognition backed by the customer centric services they provided. Based on their expansion and growth plan the company also focused on a strong network to able itself to cater to a huge range of customers through out the world. This venture on the part of them was astonishing as there growth trend was prominent over years. But in the recent years, with the saturated industry situation, and economic downfall the company started showing few negative results. The company saw a decline in 8.6 percent in premium traffic and 4.1 percent in non-premium traffics. (“Lucrative Business class air travel hit by crisis”, 2009) This has been a major issue in this scenario for the company. British airways having ten flights operating daily between London and New York is among the worst hit. (“Lucrative Business class air travel hit by crisis”, 2009) The airline industry faced some crucial and significant changes in 2008, with high fuel prices hitting large, and overcapacity in the market being another issue of concern. (“World Airlines Directory”, 2009) The situation became even worse, in the second half of the year with sub prime crisis affecting the financial markets, which led to global recession. This resulted in the stock market decline, which ultimately washed away billions of capital value of the airlines, with this company being no exception. (“World Airline Directory”, 2009) This report will give a detailed analysis of the different strategic perspectives of the company. It will cover the collaboration and co-operative strategy the company has adapted over years and what is their impact on the operation of the company. Also the report analyzes the impact of various factors on the strategy making of the company, determining whether the company is industry driven or makes out strategy in isolation considering its internal strength.  Lastly, the report tries to find out the fitness, of the business model that similar companies follow, with the industry standards.   Collaboration and Co-operation perspective: Deregulation in the airline industry certainly made way to the trend of alliances and co-operation between the various airlines companies. (“Current issues arising with airline alliances”, 1999) This is may be due to the reason the companies try to achieve cost reduction by economies of scale, also getting access to a greater network side by side. These alliances help the airlines to obtain efficiencies, which are normally associated with merger and acquisition. (“Current issues arising with airline alliances”, 1999) From the customer’s point of view even these alliances are beneficial as they get access to larger route coverage and beneficial aspects of both the allied companies. Though the background and the type of the alliances, which have taken place are different but a tendency is being observed towards a more complete and integral alliance which incorporates almost all the aspects of an airline business. (“Current issue arising with airline alliances”, 1999) These alliances works in the favor of reducing competition even, as many smaller players merges with a larger company, distinct competitive powers comes into the scenario. Thus it is better in this way. Competition among the players even pushes up the cost factor in many ways. British Airways can be considered as one of the major players along with many others who are visibly serving the same market, like in the case of Singapore Airlines and Ryan air. (Wit, 2004, p. 233) So such alliances may reduce this competition at least at the national and regional levels. It will give mutual benefit to both the parties. The smaller airlines only operating in the national or regional levels will get an access to a larger network and a bigger international brand name, while the larger companies on the other hand will get access to the local market and network. It seems like a win-win situation for both the segments. Also alliances between companies operating hub-and-spoke network will enhance market power of the network they are operating in (“Current issues arising with airline alliances”, 1999). Even international alliances will have a greater impact on the way each airline operates, which may ultimately result in emergence of more dominant players within the market. Thus the European Union and United State airline Commissions monitors each alliance carefully to assess each alliance so that no dominant player arrives in a route niche. (“Current issues arising out of airline alliances”, 1999) The competitive market is distinctly divided into type- the time sensitive passengers and the leisure or holiday travelers. It is being observed that the competition is fierce in the time-sensitive passenger segment, so mostly the alliances are focused on targeting this market segment mostly. (“Current issues arising out of airline alliances”, 1999) So the commission is more focused on structuring and restructuring the rules and regulation for the mergers happening in this segment. This is mainly due to prevention of a monopoly in certain routes. But still it can be admitted that the co-operation between various airlines both on the international and domestic ground will facilitate healthy structuring of the entire air transport, will ensure improvement in the customer service quality and most importantly it will bring down the cost of operation of the airlines. Also transnational alliances may be viewed as an important tool for full liberalization of air travel across nations. These issues become clearer when we look at the major factors arising out of the alliance between British Airways (BA) and American Airlines. (AA). It was in august 2001, when the two giant airlines announced their willingness for an alliance and side-by-side they asked for immunity from the laws imposed by the United States and Europe. (“ Proposed alliance Between American Airlines and British Airways Raises Competition Concerns and public Interest issues”, 2001). This case is very essential for the study of the nature and dynamics of collaborative issues that concerns the company. The report will incorporate a detailed study of all the issues arising out of the proposed alliance. According to the proposed alliance, they wanted to share their revenues on some specific centers of operation like London and nine cities of US. These nine cities include major cities like, New York, Chicago, San Francisco, etc. AA and BA also applied for sharing of codes on routes connecting between 31 cities in US and 61 cities, which included cities of Europe, Africa, Middle East and Asia. . (“Proposed alliance Between American Airlines and British Airways Raises Competition Concerns and public Interest issues”, 2001). This proposal on the part of the airlines is being carefully observed and analyzed by DOT, so that there is no negative effect on the issue of public interest. DOT can approve an agreement that will reduce the competition substantially and also will generate a measurable amount of public interest. . (“Proposed alliance Between American Airlines and British Airways Raises Competition Concerns and public Interest issues”, 2001). This may be due to the fact that both the airlines are large corporate and they can create a monopoly, which will definitely affect the consumer interest. This is due to the fact that independent competitors which in this case are British Airways and American Airlines, when merged their capacity would definitely be lessen due to the same route selection and air fares would be higher as a result of that. Again there may be barriers like capacity constraints in the airports they are operating in and also the presence of a huge alliance will result in the stoppage of any new entrants in the market. Now if we look into the positive side of the matter we may see that the proposed alliance will result in more on-line access to non-hub cities, will increase frequency of non-stop flights between the smaller airports. This expansion of the network will definitely benefit the frequent business class travelers. Again for the contract customers it will become easier and cheap to buy air tickets from larger network airlines. The facts that justifies and supports their alliance is that UK and US covers up almost 37 percent of all the North-Atlantic passengers. . (“Proposed alliance Between American Airlines and British Airways Raises Competition Concerns and public Interest issues”, 2001). So this alliance was certainly targeting the right mass. Other facts reveal that the scheduled flight operation in London was as large as other three major cities combined. . (“Proposed alliance Between American Airlines and British Airways Raises Competition Concerns and public Interest issues”, 2001). According to an analysis made by GAO, the potential harm to this merger would certainly dominate some major markets, which will create a sort of monopoly, where other alliances or individual airlines may fall back. Other drawbacks pointed out by the analysis was that AA/BA alliance called “one-world”, would dominate most of the routes and a significant amount of passenger traffic. So the collaboration strategy undertaken by British Airways was mainly focused on attaining greater market share and making their consumer base stronger. But major issues are being overlooked in this strategy planned to be executed. As the two airlines are not integrated corporations, they cannot gain on the operational efficiency; rather redundant processes may increase the overall operational costs. According to some analyst the focus on international market may make their domestic market limited. . (“Proposed alliance Between American Airlines and British Airways Raises Competition Concerns and public Interest issues”, 2001). Also the focus of the alliance is on getting more corporate connection there by the importance of the frequent fliers may diminish, so the bargaining power of the buyers will decrease furthermore as a result of the alliance. So if we analyze the main objective and motive of the company while planning out collaboration strategies we can find out that the main concentration of the company is in capturing more market share. There focus lacks on the operational parts as the company with which it planned to collaborate is not integrated. So operational superiority cannot be obtained from this alliance. This alliance is used by both the companies in funneling passengers to one another’s network aiming to gain efficiencies by making extensive route plans, price setting and marketing and promotion.(“ EU to probe major airline alliances”, 2009). They want to jointly manage schedule to reduce redundancy, aiming at proper utilization of capacity and revenue. (“EU to probe major airline alliances”, 2009) Thus we can see that in recent times the “one world” alliance have successfully incorporated their operational aspects in the alliance thereby making it stronger and productive. Outside-in or Inside-out logic: According to the theory of Outside-in logic, any organization or corporation is affected by the international or the global aspects. (Miller, 2007) That any decision-making or strategy implementation on the part of the firm is driven by the factors affecting global scenario on a whole. On the other hand an inside-out strategy depicts the importance of local or internal stimulus in the decision making of any firm. (Miller, 2007) According to this theory a company’s decision depends mainly on the parameters, which are in direct contact. The report will try to identify the effect of the international aspects on the operation of the company as well as the internal inside-out capabilities of the organization. According to the International Air Transport Association the airline industry, lost up to $8 billion in the year 2008 which surpassed previously forecasted amount. The marketing environment is constantly changing and with every change the industry gets affected. The demand for airline industry is highly income elastic (“An analysis of British Airways Marketing Environment”, 2008). Thus the rise in fuel price last year and the recent economic turmoil has affected the airlines industry in a huge way as passengers are avoiding more expensive travels. According to a report by Air Transport Association (ATA), the revenue generated from passenger travels for all airlines fell by 19% during the month of February, 2009 when compared to February 2008. This was the fourth consecutive month recording loss. The business sector after being hit badly by the economic crunch is cutting back of expensive airline trips. British Airways having ten flights operating daily between London and New York is among the worst hit (“Lucrative Business class air travel hit by crisis”, 2009).  The company saw a decline in 8.6 percent in premium traffic and 4.1 percent in non-premium. (“Lucrative Business class air travel hit by crisis”, 2009) Among the other factors, which are affecting the industry, terrorist attacks linked with airline traveling are also a parameter to be considered. This assumption is based on the fact that these events lead to the introduction of strict security norms and regulation from the EU and US, affecting from summer 2006 resulting in a fall of customer traveling confidence. (“An analysis of British Airways Marketing Environment”, 2008) Also a great deal of government rules and regulation present in the international and domestic front, which affects the industry. The regulations are present in the areas of controlling the place of flight, the pricing policy, and restrictions in alliances as we have seen in the above segment and also the capacity utilization in airports. One of the major contributions from the part of the government, which has changed the face of the industry in a huge way, is the deregulation. The deregulation in the Airlines Industry has initiated the lower fares as government intervenes in the pricing policies, and also resulted in the emergence of low fare airlines which ultimately effected the industry in a negative way.(“ The Case of Re-Regulation the Airlines Industry”, 2008). The government has act in various ways from establishing labor act and also controlling the size of the aircrafts that plough. A legal factor that affects British Airways is the power of trade unions. BA has suffered many strikes from August 2004 and August 2005. (“An analysis of British Airways marketing regulations”, 2008) The other outside-in logic that the airline should consider is the environmental and climatic changes. The operation of the company to some extent depends on the climatic factors like snowfall, rainfall, fog etc. There are certain industry specific factors, which any airlines operating in the industry should maintain. These are Air Traffic Liability( ATL) and Load Factor which is an indicator checked monthly by Air Transport Association, which measure the percentage of capacity which is actually being filled by passengers. According to the analysts, this load factor should always be above the break-even that is an airline should target for any aircraft to fill its maximum number of seats before take off. These are in general terms certain parameters, which an airlines company should keep in mind while developing its strategy. These are the outside aspects that control how the industry works. Now if we look into more specific parameters and the problems that the company facing it will be easier to determine at what level and extent the operation of British Airways is driven by the outside-in logic. If we analyze the possibilities of entry of new players in the market we will see that with the recent loss the industry has faced and the market being saturated it is a rare possibility. (“The Industry Handbook: The Airline Industry”, 2009). Also with the brand image and the huge customer base, the threat to British Airways is not a matter of concern. (“Annual report of British Airways”, 2008) The major suppliers of aircraft are Boeing and Airbus. (“The Industry Handbook: The Airline Industry”, 2009). So the bargaining power of the plane buyers is low as there is only two aircraft manufactures in the market.( See Porter’s Five forces model in Appendix B). So long as there are no other substitutes available in the market the airline operators have to coupe up with the situation. Likewise as mentioned above the recent fluctuation in the crude oil price controls the industry in a huge way. On the other hand the buyers or the passengers of the airlines do not determine the price. .( See Porter’s Five forces model in Appendix B).. Buyers may bargain on the comfort and availability issues, but they do not regulate the price. (“The Industry Handbook: The Airline Industry”, 2009). The power of the buyer is due to the presence of huge options within the industry itself. They can switch to any brand they like, as the competition is available at all the segments. Also as mentioned earlier, consumers are price sensitive, so though the bargaining power of buyers are low, the airlines have to price sensibly or otherwise they will lose out in competition. The availability of substitute for airlines is low for an international airline like British Airways. So there is no pressure on the part of substitute determining the price and the operation of the company. Due to the highly competitive market, airline companies generally operate in lower margins. That is why the cost of competition is high. Also there are hardly any differentiating factors within the services offered by the companies. The industry is in its maturity stage and thus the growth is low. (“The Industry Handbook: The Airline Industry”, 2009). The two specific segments on which an airlines industry works on is the price and route. (“Airline Company Business Plan”, 2009) The competition is mainly on the basis of providing less costly or more convenient and superior means of traveling between any two heavily traveled destination.  This is the range of service difference that is prominent in the industry. Price singularly does not becomes a determining factors as after de regularization of the industry low fare airlines are now a common practice. So in this context the market segment can be differentiated on the basis of three parameters, like service mix, price and route selection. An airline company must match the price and service mix with the length of the route. These are the major determining factors that control the operation of British Airways. If we look into company performance we will see that it prominently reflects the industry downward trend. According to a report by Bangalore Aviation, of February 2009, British Airways’ performance indicator Available Seat Kilometers (ASKs), of January 2009 was 2.6 per cent below January 2008. Also Traffic measured in Revenue passengers kilometers (RPKs) fell by 1.3 per cent resulting in load factor to increase to 73.2 per cent.( “ British Airways performance reflects global meltdown in manufacturing output”, 2009). The financial performance of the company also states an 88 per cent low in operating profit, loss before being 70 million pound as on December 2008. (“Annual Report of British airways”, 2008) This performance in turn reflects the industry condition mentioned above. This resulted in the announcement made by British Airways chief executive of stiff pay cuts of the employees in 2009. (“British Airways freezes Staff pay”, 2009). He points out the general economic turmoil and the collapse of the service and financial sectors as the main culprit. So we can see that the company is driven by the outside-in logic that is it is the industry condition plays the main role in determining the performance of the company to a large extent. But this situation is not new for this particular company. It has adapted to market conditions for several years and structured its revival plans based on the market situation and extracting the best out of it. The year 1980 is marked as a year of turnaround for British Airways. The profits and market share rose in that year, which continued its trend in the 1990s, making British Airways on of the most successful British privatization program (Cox, 1999, p. 168). During the profit-making phase, the organization slowly became more market driven in nature. The four pillars of growth were focused on giving excellent customer services, getting into important strategic alliances with companies which allowed extensive market coverage and finally making establishments for fully computerized reservation systems.( Cox, 1999, p.169).At that time reforms were made in the purchasing and logistic department with an aim to reduce cost. It was during that time that the company earned a tremendous brand image, which is still the major core competency of the company. Its’ industry wise recognition is the major strength that lies with the company. British Airways, during the 1980s conducted a wide range of plans to attain the success it earned during the next two decades. So mostly their plans and restructuring activities are market responsive in nature. The industrial aspects contribute a lot in the strategy making of the company. Business model on which the company works: Network management is the key element of a business model of any airline company. (“The Airline Business Model”, n.d, p.1). According to the thesis of Laurence Bomhof, in network management on of the key issue is the difficulties faced by an airline while obtaining the right slots at airports. The challenge is increasing day by day with the increased amount of competition in the market and the situation is getting more complex. As we have seen in the previous sections that how BA while planning to merge with AA was facing trouble on getting appropriate slots in the airports. British Airways adopts a hub-and-spoke network. This type of network selection gives advantage in certain parameters like code sharing helps the company to make frequent flyer programs and global distribution systems. (“The Airline Business Model”, n.d, p.1). Now with the changing face of business and the market scenario it is certain that any organization should structure its business model meeting the current demand. As the market gets matured, the dominant players make their development sophisticated and more complex. Thus the company faces difficulties in cost reduction with a more complicated business model. (“Flight for Survival: A New Business Model for the Airline Industry”, 2003). This might be the problem with British Airways. Questions are now being asked about the sustainability of the hub-and-spoke model adopted by the organizations. Though this type of network management, aimed at catering all the customers of the world, was indeed a great innovation, but in this economic crunch period the complexity rises. (“Flight for Survival: A New Business Model for the Airline Industry”, 2003). On the other hand the low-cost carriers with their simpler form network management systems may become the price leaders in the market. The threat of the LCC in the UK market was slowly increasing and this threat was more prominent on the major Airline like British Airways. (Wit, 2004, p.684). While the major airlines face trouble in this market, the low-cost carriers like Southwest Airlines, JetBlue Airways are enjoying huge cost of operation advantage. (“Flight for Survival: A New Business Model for the Airline Industry”, 2003). Analysis revealed that the average cost per seat of any low cost carrier is less than the half of any hub-and-spoke network airlines like British Airways. (“Flight for Survival: A New Business Model for the Airline Industry”, 2003). As a result of which these low cost carriers gain advantage even if the passenger traveling is lower in number. For British Airways the business model is built targeting larger segment of customers, reaching out to more destinations along with the additional customer relationship programs they offer. (“Flight for Survival: A New Business Model for the Airline Industry”, 2003). Apart from all these hub-and-spoke network has to be backed by a highly sophisticated information system and developed infrastructure to compliment the complexity of their operations. According a study the low cost carriers reduce their prices by paying lower salaries to employees, using cheaper pilots side by side they are leveraging all their resources efficiently to attain cost leadership. (“Flight for Survival: A New Business Model for the Airline Industry”, 2003). According to the study conducted by Tom Hansson, Jurgen Ringbeck and Franke, only 5 percent of the cost gap is explained by the extra services the hub-and-spoke network offers. (“Flight for Survival: A New Business Model for the Airline Industry”, 2003). The major difference is contributed by the production model choice. It attributes to about 65 percent of the cost gap. (“Flight for Survival: A New Business Model for the Airline Industry”, 2003). Thus the relative levels of complexity, makes the difference between the two segments. But companies like British Airways are constantly trying to cut down on cost on the labor and employee segment, by announcing stiff pay cuts and sacking of employees. (“British Airways freezes Staff pay”, 2009). But hardly has it seemed to solve the problems for them. To compete in long term they have to look at other aspects, like to focus on the fundamental structural differences. To make their business model competitive British Airways have to focus on some key parameters. Though it is an industry driven company but certain level of adjustment is required to adapt to the situation. These changes are required in their core business structure only. In their present form of operation, the hub-and –spoke airlines schedule flights in a wave system, according to which departures and arrivals are more concentrated during the peak hours to cater to maximum number of customers at a time. (“Flight for Survival: A New Business Model for the Airline Industry”, 2003). This system affects negatively, resulting in longer aircraft turnaround, traffic congestions and aircraft downtime at the hub cities. (“Flight for Survival: A New Business Model for the Airline Industry”, 2003). This will certainly result in lower resource utilization. The common strategy observed among the major airlines is to concentrate on the frequent fliers connecting to shorter destination. This is done mainly with an aim to fill up the empty seats that would have otherwise been empty. But the study made by Hansson shows that this process results in the complications in the logistic system, which ultimately raises the cost of the airlines. Thus the airline should carefully trade-off between the effectiveness of operation and connectivity. The solution could involve “continuous” or “rolling” hubs, allowing both operational efficiency and connectivity at the same time. (“Flight for Survival: A New Business Model for the Airline Industry”, 2003). This approach brings in the idea of “mega-hubs” or the “central-hub”, which have a local direct connecting sufficiently large to some frequent flights more often. This approach seems to simplify the baggage handling operations also cost reduction on the top of it. (“Flight for Survival: A New Business Model for the Airline Industry”, 2003). Airlines industry can address to various industries that have successfully reduced the amount of complexity. For instance the manufacturing industry has reduced the level of complexity in their operation by applying a Tailored Business Stream (TBS), approach. (“Flight for Survival: A New Business Model for the Airline Industry”, 2003). The underlying principle of this approach is to segment the various complex operations under different business streams. That means to address separate complex activities, separate processes have to created and each complexity in the process should be addressed on the amount of money a customer is paying for that added benefit provided. This breaking down of the work helps in identifying the areas where most costs are being incurred without much perceived benefits. But currently the business model of British Airways along with other hub-and-spoke model of airlines is following the exact opposite practice. (“Flight for Survival: A New Business Model for the Airline Industry”, 2003). They have concentrated in applying the same standard of sophisticated process in almost all the situations. These added on to the unnecessary costs on to their process. Such processes may not also be flexible enough to coupe up with the changes, as huge restructuring is to be done. If the airlines adapt TBS, it will simplify their strategies, and by streamlining their core processes they can reduce a number of activities done at the airport. (“Flight for Survival: A New Business Model for the Airline Industry”, 2003). A company, which is having large divisions, has the tendency to drain a huge amount of cash, until its operations are fully discounted. (Wit, 2004, p. 72) It will again save a huge amount of both time as well as money. The breaking up of processes can result in the formation of many customer centric units which will resolve the problems faced by the customers in much lesser time and it would not be necessary to implement all the processes in every situation. At airports, processing staffs can be appointed who will deal with customers needing changes and iterations. (“Flight for Survival: A New Business Model for the Airline Industry”, 2003). In this way the customers would also be served quickly, which will thereby increase customer service quality and the service delivery will also be improved. These changes should be implemented across the system to implement a more efficient business model. But during simplifying their processes British Airways should also keep in mind the quality of customer service they are delivering. They can gain customer loyalty by providing differential services to their frequent fliers. (“Flight for Survival: A New Business Model for the Airline Industry”, 2003). They can separate both the services given to a customer on airport and onboard, keeping in mind the type of customer. To implement strategy at the business or operational level, the firm has to integrate its functional and operational domain to provide particular product and services for a specific set of customers. (Wit, 2004, p. 8) This would be done with an aim of giving more valuable services to that segment of customer who will generate more profit in the long run. So here segmenting the customers would reduce cost of giving same service quality to all the customers. This process may help in the formation of purer and more profitable business, delivering service quality to different segments of customers at their perceived level. The large carriers like British Airways can never compromise with the service quality they provide to the customers. Here in how they are different from the other low cost carriers. This approach would certainly give much more product distinction than that is present. (“Flight for Survival: A New Business Model for the Airline Industry”, 2003). It is likely that these changes in the business model would help the larger airlines like British Airways to fulfill dual purposes. It will cut down on the cost and time that the company is incurring now as well as it would maintain the level of customer satisfaction against the amount that they (customers) are paying. It is clear that the restructuring in the business model is highly interdependent in nature. If the coordination of these changes in the business model is present, it will definitely change the pace of the airline operation, reduce the complexity that these kinds of airlines are dealing with currently, the redundancy of operations and will make service delivery more accurate and targeted to specific segments. (“Flight for Survival: A New Business Model for the Airline Industry”, 2003). It can be said with certainty that implementing such changes would not be easy for the company, especially in the period of economic crisis. The fear is that after implementing the change, which will involve a great amount of revenue the cost, will certainly not fall a great deal immediately. (“Flight for Survival: A New Business Model for the Airline Industry”, 2003). Though the revenue may fall down in the connecting market, the airlines could make up this loss by the lower cost structure. But while implementing this model a company should make sure that system matches the restructure designing, otherwise a bad fit would spoil the entire operation. Any company should make sure to take the optimal path, after thoroughly studying the alternatives. (Wit, 2004, p.125)  Leadership Style: British Airways following the intensive leadership style which led to its downfall during the year 1996 to 2000. (Thomas, 2006, p.15) In an organization which is by tendency of it, is industry driven single leadership is always applicable. This is due to the reason that with the change of industry dynamics the performance of the company also changes. Moreover the company is huge and to incorporate every aspect successfully it is important that there is one central authority that will check all the proceedings. Saying this one should also keep in mind that the organization being huge communication between different departments is also very important. Dynamicity in the decision making is also becoming a crucial factor. Moreover with the competition increasing the situation is becoming even more challenging. But for decades British Airways have shown only organizational leadership style. In such kind of industry where the competition is high and the growth prospect is low, more organizational centric plans are needed to be sorted out. As mentioned earlier in the first phase of operation British Airways was not performing well, so a turnaround program was initiated under the leadership qualities of Sir John King, who was later known as Lord King. (Peck, 1999, p.454). Since then several managers have applied only applied organizational leadership style in British Airways. This may be due to the reason that the company is huge and there must be visible differences between the people who work their. So to unite them and to make them work under the same brand name it is very important to have a leader who is strong in his will. The report will focus on the important leadership changes that should take place within the company during its course. Primarily King and Marshall focused on resolving the issued of difference. This was a major challenge on their part because for a company so huge, it is really essential to generate the belief among the employees about the unanimous nature of British Airways. It is only in this way the company can produce the service quality they used to do during the turnaround in 1981. Once the company successfully creates a united workforce the next step can be to inspire the work force to achieve excellence. These are more important than creating brand images as it is the employees who will deliver the values to the customers and if they are not well inspired or motivated there will certainly be a gap. The company’s value statement should be to the most extent tangible, so that employees get a clear focus what is expected out of them. The report has already suggested the need for segmenting the operations of the company into minute units. So now the company should shift its focus from autocratic leadership to more dynamic leadership policies where it can incorporate inputs from various departments for the growth of the firm. Conclusion: Thus from the entire study we can see that British Airways is a company whose strategy making is mostly dependent on the industry behavior. But it is typical for any large airline company for the situation of the industry. This may be due to the dual effect of market saturation and the downward trend of the economy, backed by the fluctuation of the crude oil prices during the last year. Also as mentioned above also, the market looked congested as every possible profit making routes are being now flocked by several airlines. For instance British Airways and Air France operating on the same route was serving the same market, with other smaller competitors to follow. (Wit, 2004, p. 235) With so many parameters in mind these companies were visibly confused about the decision of cutting down on costs and generating extra revenue. It was evident from the studies that this company lacked a concrete plan to coupe up with the sudden drastic changes in the macro environment. The airline companies like British Airways whose main focus was on creating brand recognition and delivering quality customer service is suffering more due to the revenue crunch. They are somehow failing to identify key cost cutting measures and strategies to come out of the downfall. But it is about time that they should change their course. If they are able to achieve a lower cost structure the larger airlines would be far better of than the companies who are considered as low cost airlines. The findings show that the company in order to achieve higher market share has made alliances, and designed their network according to that. But this approaches by the company only made their operations more complex and there are serious underutilization of resources as mentioned earlier. So huge cost carrying centers are still exposed and the company needs to address them as early as possible. The study reveals that by making operations simpler and segmenting their customers the company can not only get itself out from the crisis situation but even can surpass other competitors in the same and other networks. This transformation though should be carried out, if and only if it matches with the company structure. It should be though kept in mind that the company should not consider this downturn as a cyclic economic downturn. It should be kept in mind that low cost carriers are doing well in their respective markets. So the pressure is not only from the economy but the competition is also fierce. The problem therefore is not only with the economy or industrial factors but also in the operational aspects. It would be wise for the company to address the operational aspects and make a more focused strategy so that the company performance surpasses the competitors when the economy goes up. The risk of inaction is perceived to be greater than the risk involved in adapting a structural change. (“Flight for Survival: A New Business Model for the Airline Industry”, 2003). British Airways should now focus on bringing in the change concentrating not only to reduce operational costs but also becoming the market leaders as they were.                                                                                        References: 1. “An analysis of British Airways Marketing Environment”, 2008. University: Business Studies, available at < http://www.coursework.biz/Essays/University/Business_Studies/115/> (accessed on 19 May 19, 2009) 2. “British Airways performance reflects global meltdown in manufacturing output”, 6 February 2009, Bangalore Aviation, accessed on 19 May 2009, available at http://www.bangaloreaviation.com/2009/02/british-airways-performance-reflects.html 3. Bomhof L, n.d.The Airline Business Model, accessed on May 21, 2009, available at  4. British Airways, 2009. Annual Report, available at: http://www.britishairways.com/cms/global/microsites/ba_reports/pdfs/BA_Report_2007_08.pdf (accessed on May 20, 2009) 5. 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H, 1996, The making of strategy: rules, states and war, Cambridge University Press, Massachusetts 17. Peck, H, Payne, A, Clark, M 1999, Relationship Marketing, Oxford: Butterworth-Heinemann, 18. Thomas M.A, 2006, Gurus of Leadership, London: Thorogood Publishing 19. Wit D, Meyer, 2004, Strategy Process, Content Context, Andover: Thomson Learning.   Appendix: A. SWOT Analysis of British Airways Strength High Brand Image Huge Network Large customer base Tactful strategic alliances Weakness Cost incurring processes Complicated network making it difficult Low employee moral due to stiff pay cuts Weakening in operations and resource utilization. Opportunity If economy rises the large airlines will do well Opportunity is there to reduce costs by simplifying operations With presence in almost every market the chances are more to respond quickly with improving conditions of economy. Threat. Huge competition from both low cost and larger airlines. Even if economy goes up the competition would be there as the company is not a cost leader Fluctuating crude oil prices determining the future. B. Porters Five Forces Model of Airlines Industry C. TOWS matrix. Analysis British Airways External Opportunities Slow but steady recovery of the economy, the unavailability of substitute for international market. External Threats Fluctuating crude oil prices, huge competition both in international and domestic market, huge fixed costs Internal Strengths Huge network strength catering to a large customer base all over the world along side with the brand name and recognition the company carries. When economy will go up this airline with its huge network strength can tap in the opportunity and can become the market leader once more. The company should focus on reducing costs in operation by segmenting customers, side by side maintaining the huge network. Internal Weakness Resources are not properly managed and the operations are weak. The processes are cost incurring and complicated enough. As there are no other substitute in the market and if economy goes up the revenue will start coming which will suppress the problems which are visible otherwise. The company cannot avoid the external threats as the company is industry driven in nature. These threats are common for any company operating in the industry. D. PESTEL Analysis Read More