A Critical Evaluation of BRITISH AIRWAYS

HISTORY & BACKGROUND OF BA

British Airways has been in operation since 1930s. During the start of the World War II, British Airways and Imperial Airlines merged together and started a new subsidiary company British Overseas Airways Corporation (BOAC). The aim was to provide the long distance international services and to cover the short distance services in Europe. The British European Airways (BEA) was in operation. (Papadogiannis, 2006). In 1974, BOAC and BEA merged together to operate under the brand name of “British Airways”. During the early 1980s, BA encountered some financial problems. Therefore, Sir John King was appointed to take control over the privatization project which successfully transformed the organization in the year 1987. (Datamonitor, 2005) http://thanabut.blogspot.com/2007/05/1-introduction-this-report-is-written.html

ORGANIZATION’S OVERVIEW

British Airways is the UK’s largest & one of the leading premium airlines of the world. It operates its flights to the finest airports around the globe.

The focal point of BA’s business is London with major operations at Heathrow, London City & Gatwick airport. Around 20 million people reside within the distance of these airports. Along with the passenger services, they also deal in worldwide air cargo business. They have one of the most extensive & busiest international air networks. In conjugation with their franchise partners they connect over 300 major destinations (airports) in the world. Records depict that BA carried around 32 million passengers all over the world in the year 2009/10.

BA contributes a significant share in the UK economy. They play a crucial role in trade, commerce, fulfilling needs for business & leisure travel. During the financial year 2009/10 they generated revenue of about 8 billion GBP, which was 11% less as compared with that of the previous financial year. Out of this total revenue 87% came from the passenger travel, while cargo transportation accounted for 7 per cent & the remaining 6% revenue was from other activities. They transported & delivered about 760,000 tones of cargo to several destinations in Europe, America, Asia & all over the world. By the end of the fiscal year in March, 2010 BA had a large fleet of 238 aircrafts in service, which comprises of Boeing 747s,737s,757s,767s, Airbus 318s, 319s, 320s, 321s, Avros & Embraers etc. BA has a huge manpower of over 40,000 employees. (Hoovers, 2006)

(www.britishairways.com)

MISSION & GOALS OF BRITISH AIRWAYS

Mission of British Airways

The slogan of British Airways is “The World’s Favourite Airline,” so the organization’s mission is to make this slogan a reality by providing world class & efficient services both in-flight and on the ground. (http://finance.mapsofworld.com)

The mission statement of British Airways is to be a leader in the international aviation sector & world travel industry. In order to successfully achieve this mission they follow certain principles:-

Honesty & a sense of responsibility towards their customers & company’s policies.

Safety & security of passengers & the employees.

Developing a strong feeling of innovativeness & team spirit among the staff members.

Developing a global approach by delivering high quality services worldwide.

It is the dream of every organization to achieve appreciation in the form of customer loyalty & long term relationship. The management aims at maximising profits by reducing the extra costs involved in the production process. Similarly, in the airline industry also customer satisfaction is given the first priority. Customers should get the value for their money. http://books.google.co.uk

Goals of British Airways

In order to achieve its mission, every organization has some goals & strategies. Similarly, BA has also established certain goals:-

To emerge as the customers first choice in the major markets, in other words to have an upper hand over the competitors.

To achieve maximum profitability & output in order to fulfil shareholders expectations & have a secured future.

To emerge as a global player in the market by a wide outlook & should be recognized for superior quality services.

To have a team of highly skilled & motivated employees, who are highly dedicated towards meeting organizational goals & objectives. This can help in meeting customer expectations efficiently.

http://books.google.co.uk

BUSINESS PLAN & STRATEGIES

CUSTOMER

The focal point for every organization in the world is customer. Organizations are always in the search of innovative ideas & concepts with which they can meet the customer requirements & satisfy them.

In the same way BA is also adopting new concepts such as modified first class cabin. BA is soon going to introduce the new age aircrafts Airbus A-380 & Boeing 787 to its fleet, in order to add luxury & comfort to the passengers’ journey. Terminal 5 at the London Heathrow & other international lounges would be modified for the extra comfort of premium passengers. In 2010 the long haul aircrafts Boeing 777-300ERs have been introduced with an innovative in-flight entertainment system. (www.britishairways.com)

PERFORMANCE:

BA is looking forward to improve its financial performance in order to satisfy its shareholders. If the performance & financial condition improves, then there won’t be any need to cut down the no. of flights during the off peak season. Strategies would be formulated to expand their holiday businesses & generate revenue from retailing & other partnerships. The new member of the BA fleet Boeing 777-300ERs will help in improving their financial condition because of its fuel efficiency & environmental performance. (www.britishairways.com)

EXCELLENCE:

By the means of improved services & quality, operational performance will increase. Foundations have been laid for such improvements starting with the development of a second satellite terminal 5C, which will be opened for public in 2011. Process to improve & develop the north terminal of Gatwick airport is in progress. A continuous development in the skills & organizational environment will result in an improvement across the whole business. (www.britishairways.com)

PARTNERSHIPS & COLLABORATIONS:-

BA has implemented an agreement of a joint business with American Airlines & Iberian airlines for future benefits. These mergers & joint business would help in expanding the business, flight connections, flight schedules would be improved. BA is looking forward to have more collaborations & partnerships in future such as an agreement with the India’s leading King Fisher airlines & the Russia’s S7. It will help in improving their position globally. (www.britishairways.com) .

ORGANIZATIONAL BEHAVIOUR

Organizations change or modify their functioning & policies, when their internal & external environments get altered. This change is necessary for the survival in the market.

External factors can be the advancements in the competitors’ production process, a shift in the customers’ requirements & likings, political & economical scenario of the country. Internal factors can be the introduction of a new product or a service, sometimes even the new appointments of managers or senior executives can affect the behaviour of the organization. (Buchanan D. & Huczynski A.,2004).

In the same way, when BA experienced these environmental changes, they implemented a privatization program. According to this program the company entered the private sector from the government or public sector. The main aim of this program is to improve the performance & survive in the competitive environment. As per the Lewin’s model of change, organizational changes occur in three steps.

UNFREEZING

In this step, the existing organizational behaviour pattern is changed. Similarly British Airways downsized their workforce from 52,000 to 35,000 in order to redesign the organizational structure. The outcome of this decision was that the autonomy of the operating people increased, & the work functions became more easy & efficient. It also improved the organizational performance. (Shibata., k.,1993). They also announced an early retirement policy in order to reduce staff. The changes & the fluctuations in the BA’s top management were also responsible for the organizational change. After Collin Marshall joined as the CEO of BA, the old culture was removed & was replaced by a new system which mainly emphasized marketing & customer services. A new training program was introduced in which organization’s employees (managers & workers) were given special importance in order to achieve the company’s goals & objectives in a better way. (Goodstein., D., L. & Burke, W., W., 1991).

MOVEMENT

In this step the organization takes action to turn the goals & vision into a reality. In order to make the vision of BA’s top management into reality, BA altered many of its systems & structures. They introduced a new bonus system & started a new terminal (Terminal 4) at the London Heathrow. Moreover, BA now owns Chartridge House which is a training centre to increase integration among the staff members. (Goodstein., D., L. & Burke, W., W., 1991).

REFREEZING

The last & the final step is refreezing. In this step the organization tries to establish the changes by introducing new systems that can create a behavioural environment in the organization. BA introduced a new appraisal system for behaviour to improve customer services. Other measures such as employees were given new uniforms, new corporate jackets with the slogan ‘We Fly To Serve’, reformed aircrafts etc. (Goodstein., D., L. & Burke, W., W., 1991).

H.R PRACTICES IN BA

During early days British Airways was very bureaucratic, odd & was considered inefficient. By adopting privatization, the corporate & organizational culture was transformed into service oriented & customer focused company, which helped in becoming efficient in the aviation industry. (Poole, R., 1988).

EMPLOYEE RECRUITMENT & PLACEMENT POLICY

As per the refreezing stage BA established new systems to create behavioural environment in the organization, so they had to design & modify new recruitment policies. These recruitment policies were formulated to employ new people who can mould themselves according to the new management style & policies. In order to achieve this BA highlighted the principles of equality & diversity in the employment policies.

In order to recruit the right candidate interviews are conducted to check the skills, knowledge & the attitude to fit into the organization’s culture. BA focuses on high levels of motivation, team building &leadership skills & a positive attitude towards customer services. BA has introduced assessment procedures in recruitment process for the candidates. It involves interviews, group activities, reasoning tests, psychometric tests, presentations etc. (British Airways, 2006).

TRAINING & DEVELOPMENT

Privatisation turned BA into a service oriented industry that emphasises more on customer services. As per the unfreezing process BA introduced a new culture in the organization, so there was a need to launch an efficient training program. In the new training program they highlighted two principles ‘Putting People First’ for the lower level employees & ‘Managing People First’ for the higher level management. The motive behind these training programs was to identify the organization’s management style & help in creating new styles that would be appropriate for BA’s new environment. (Goodstein., D., L. & Burke, W., W., 1991).

PUTTING PEOPLE FIRST

As per the organizational goals & objectives BA wanted to be the world’s favourite airline in the aviation industry. They modified their company into a market led company as compared to being a process driven company in the past (pre privatisation era). Therefore, in this training program employees were imparted knowledge about the competitive market sector. They were made aware about the importance of teamwork, customer needs & the individual contribution of each employee towards the organization. (Street, M., 1994).

MANAGING PEOPLE FIRST

According to the stage of movement, BA wanted to bring the vision of its top level management to the lower level employees. This program comprised of training, feedbacks participation of top level management. According to top level management, this program helped British Airways in availing a new leadership style. It aims at customer services & it has proved to be a crucial factor in achieving customer retention maximising revenue. (Tosti, T., D. & Jackson, F., S., 2006).

BA also adopted an employee promotion policy in order to provide strength to the new system. The top management promoted the employees on the basis of this policy. It was mainly used in the higher management levels in order to have a strong bonding & values in the organization. (Goodstein., D., L. & Burke, W., W., 1991).

ORGANIZATIONAL CULTURE

Organizational culture can be defined as the collection of values, organization’s policies, belief & traditions that combine to make a pervasive context for everything that is done & thought in an organization. (Mullins, 1999). Every organization has a different culture, values, traditions etc.

BA’s CULTURE BEFORE PRIVATISATION

Before the privatisation BA’s culture was very bureaucratic, authoritarian & there was impersonal relationship between the employees & management. The organizational environment was very formal, which kept management officials away from the rest of the staff members. There was a complete absence of participative management activities. The officials & managers were recruited from the Royal Air Force and were considered to be very arrogant. The customer oriented skills were not present in these people, so they only focused on the safety operations rather than concentrating on market factors. (Salama, A. & Easterby-Smith, M., 1994). Eventually the company suffered major financial crises & also completely failed in competing with the competitors, as they provided better services to the customers.

BA’s CULTURE AFTER PRIVATISATION

During this post privatisation era BA changed & modified its old values by the new culture & goals. They replaced the old culture by introducing new efficient training programs & appraisal systems to enhance the organizational performance. The new culture differs from the old culture in many ways such as innovative techniques & concepts, informal behaviour, customer oriented services & participative managerial activities etc. During the pre privatisation era the mission was ‘To be a safe airline’ but after privatisation it was replaced by ‘To be a competitive airline’. (Salama, A. & Easterby-Smith, M., 1994). In order to survive in the competitive market, the organizations must adapt themselves with the changing environment.

ORGANIZATIONAL STRUCTURE

The organizational structure of a company depicts the company’s management & leadership style & its operating environment. British Airways has a structure that is governed by the operational needs.

The organisational structure of British airways is flat type, as it has only one level of hierarchy which separates the Managing Directors at top management from the lower level employees. (Buchanan D. & Huczynski A., 2004). Mr. William M. Walsh is the head of the company. Currently, he is working as a Chief Executive in the organization. For other managers, the company has segmented management level positions into ten departments & every department has its own subordinates. The organisation’s departments include Planning, Commerce, Investment & Alliances, Ground services, Engineering & maintenance, Flight services, IT, Finance, Law & Human Resource.

There are over 40,000 employees working for the company. (Hoovers, 2006). Due to its large size & global recognition it has a very formal structure with prescribed rules & regulations. As a result of the employee cut downs in past years, the management layers have been reduced between the chief executive & the front line officials from about nine to five. Now it has small groups that work parallel to its formalised structure. (http://docs.google.com)

MANAGEMENT & LEADERSHIP STYLES IN BA

The old management style at British Airways (before Privatisation) was bureaucratic, highly impersonal & not customer or market oriented. The officials were highly arrogant 7 wanted to stay away from the rest of the staff.

Transformation took place when privatisation of BA was announced. The style & the culture were completely replaced by an environment where coaching, motivation & training were the main factors for the employee development & empowerment. Managers have started trusting the employees along with delegating them the responsibilities & authorities to develop a vision. Managers seek help from one another, outside their formal structure. Subordinates are made aware about the importance of individual contribution towards the organizational goals. Employee empowerment is given the first preference. Moreover, a soft approach towards management & leadership is followed. (http://docs.google.com)

CURRENT SCENARIO OF BRITISH AIRWAYS

BA had responded timely to the recession & the structural market change, which lowered down the revenues of the company tremendously. Though the company is still in loss, but they have managed to stabilise the financial performance. The recession had certain impacts on the business such as the high oil prices which resulted in the high fuel costs. The recession lowered down the revenue by about 11.1% to 7,994 million GBP. (britishairways.com a)

BA’s manpower has gone down by about 3,800 since March, 2009 to nearly 36,832 because of reduced overtime, increase part-time & unpaid leave. The decision to deploy one cabin crew on the long haul flights was implemented in November, 2009. These changes were needed to bring back the business profitability. These cost reductions in both short term & long term period will result in positive outcome. The merger of British Airways with Iberian airlines & a joint venture with American airlines are associated with a lot of expectations. Officials feel that this merger & joint venture will provide a new recognition & strength to the BA’s brand along with high revenues. (britishairways.com b)

According to Keith Williams,(the chief financial officer BA),during recession premium services fall first, but at the time of recovery they are first to rise. So, as the recovery will begin BA can expect high revenues because they mainly rely upon the premium travel. Company is confident to recover in a better way as they have handled many cost structures which created hurdles in the past. The interruption caused in the Northern Europe’s air space due to the volcanic eruption in Iceland, cost BA around 100 million GBP. The company has reduced the projected expenditure by about 150 million GBP by either cancelling or delaying some of its projects. While preparing the company’s accounts, the concept of going concern has been adopted, as directors feel that the company has sufficient resources to continue operating in the future. (britishairways.com c)

THREATS & CHALLENGES

(www.britishairways.com)

For every organization there are several factors which can spoil the organization’s culture & can have long term effects. Some of these factors are;

BRAND REPUTATION

BA has a global recognition & value. Therefore, even a small mistake or an unfavourable event can badly affect the company’s brand name. Such activities directly affect the customer relations & revenue. In order to monitor such activities management team conducts monthly surveys to minimise the risk.

COMPETITION

BA operates in a highly competitive market. There’s a risk from other airlines & even from other modes of transportation. Sometimes competitors offer their services at a lower price or they enjoy other competitive advantages such as government support. Sometimes, this affects the business as the customers get attracted by the low fares.

DEBT FUNDING

British Airways has enough debts that are still to be paid or financed. The plans of expanding the fleet are related to financial market scenario. Most of the future capital commitments of BA are asset related, but still there is no assurance that the business will provide security to the lenders in future.

ECONOMIC CONDITION

The revenues of BA are highly sensitive to the operating market’s economic condition. Downfall in the world economy may adversely affect the company’s financial status. The revenue forecast is reviewed by the revenue projection group on a regular basis. On the basis of the results management takes appropriate decisions.

LONG TERM DISRUPTIONS

There are several possibilities which can cause long term network disruptions. There can be a strike of the public transport, loss of the use of Heathrow Terminals, harsh climatic conditions such as heavy rains, snow, fog or even volcanic ash, a civil war, terrorist attacks etc. These disruptions directly affect the revenue & increase the extra costs.

IT SYSTEM FAILURES

These days every organization is dependent on IT systems. The failure of these systems can result in loss of valuable data & huge disruptions in the operation activities. It can directly affect the revenue of the company.

CURRENCY FLUCTUATIONS

BA’s consumption of jet fuel is around six million tonnes a year. Hike in fuel price can adversely affect the operations. Fluctuation in the currency can also affect the financial position. The foreign exchange exposure increases from the transaction in different currencies. BA’s treasury committee constantly reviews the company’s currency & fuel price situation.

FUEL SUPPLY

The jet fuel supply at the Heathrow is a critical aspect to the operational activities as jet fuel & bio fuel use the same pipeline system. With the excessive use of bio fuel, there might be some contamination that can take place in the pipe line. Under such a condition fuel cannot be supplied to London Heathrow, until rectifications have been done. It can also affect the financial position of the company.

ROLE OF GOVERNMENT

The aviation industry has become highly regulated. Therefore, it has become a challenge for BA to comply & influence the change in these regulatory acts. Government has planned to increase the environment tax on all flights. It will lower down the profit margin on each ticket. Competitors can take the advantage by cutting down the relative cost of operating from their hubs.

KEY SUPPLIER RISK

Every organization/ company has some key suppliers. Similarly BA is also dependant on these key suppliers. If these key suppliers fail in delivering the products & services, then it might result in a huge operational loss.

PANDEMIC

It is a major issue for every sector in the world. Due to the outbreak of any infectious disease, performance will get affected as staff absence will rise. In such cases people & especially the corporate class avoids travelling, which affects the sales & revenue. During the recent outbreak of swine flu, many airline companies got severely affected.

SAFETY & SECURITY

Safety of the passengers is the prime motive of BA. Failing to fulfil this motive can spoil the global reputation & reduce business significantly. Therefore airlines should implement & modify their security programmes on a regular basis.

RECOMMENDATIONS

British Airways after undergoing privatisation insisted more on participative management in the decision making process; but in case of a serious & confidential matter, it is not possible to involve every employee. BA adopted a soft approach towards the management, but sometimes it may not provide solution for every problem. Therefore, a combination of both hard & soft approach should be implemented, in order to have flexibility & efficient control.

In order to compete with the airline competitors, BA decided to reduce its manpower in the core areas, so as to reduce costs. To reimburse they recruited people at low salary. According to the officials, it was done for the betterment of the organization; but it might create a negative impression in the minds of the existing staff. They may develop a fear of job loss, which can adversely affect their performance. Therefore, to avoid such situation BA should try to modify their policies rather than creating conflicts in the minds of its employees.

At the time of crisis or any other problem BA makes changes in the organization. To overcome resistance they implemented HR policies such as planning, recruiting, coaching, appraisals etc. However, these HR tools are not always the solution for all problems. Therefore, they must hire a change agent who can be delegated the responsibility to manage changes in the organization.

They can introduce l9ow cost flights for short distances or domestic travel because for short distance travel, people prefer no frills airlines rather than a full service airline. This strategy can improve the business & profitability in the domestic sector.

Measures should be taken to improve employee morale & motivation, as this can inspire every employee to contribute towards organizational goals

Travelling with BA, (Our first intercontinental trip was a memorable and blissful one) In our personal experience we find each and every service of BA was really awesome which includes Hospitality, Customer service like Extra mile, Movies on the go, Food served (Different varieties of foods were served in-order to match their departure location), In addition to all these BA provides attractive offers specially for students. Leaving this part aside and focusing the areas to be improved, we would recommend BA to:

Increase their transit time in which the passengers had to wait and board another connecting flight.

Provide telecommunication and internet on the go as provided in Emirates as ICE entertainment (www.emirates.com).

Increase the cabin space for the hand luggage to be placed inside the flight.

CONCLUSION

British Airways is one of the world’s best & leading airlines, with a long & interesting story of its organizational change. The company has seen many ups & downs in past many years. BA changed its organizational culture & behaviour due to the internal & external pressures. They have adopted HR tools such as planning, recruiting, training etc. for the organizational change. In order to avoid situations like strike of 1990 etc. employee retention measures should be adopted by the means of employee empowerment. Though the organization has managed to change the organizational culture, but still there is a scope for further betterment.

The company should hire a ‘change agent’ in order to find a solution to all its problems. The training programs for the employees & the top management are really efficient, but they need to be monitored constantly.