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British Airways "Flying into a Storm"

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Introduction

British Airways "Flying into a Storm" Oct2002 Summary Introduction 3 1. A brand new company management 4 1.1- Major evolutions in the corporate strategy 4 a) Several breaking points in the policy statement 4 b) Actions implemented 5 1.2- A less "people-oriented" leadership 7 a) Before Ayling: a severe but participative management 7 b) After Ayling's coming: a management centred on administrative and financial objectives 7 2. A failure due to the negligence of three key factors: culture, leadership and structure 9 2.1- An unsuitable management to BA's culture and identity 9 2.2- Bob Ayling : an ambitious but self-centred leader 11 2.3- A structure which does not square enough with the company 12 3. What should be Eddington's main concerns for the future? 14 3.1- Increase the level of service thanks to structure and culture 14 3.2- Maintain and improve internal cohesion through a better communication 15 3.3- Go on improving rentability through organization and new values 15 Conclusion 16 Introduction London, March 2000. The reign of Bob Ayling as chief executive of the airline British Airways (BA) is over. The crisis reflects the economic difficulties the company has been experiencing for the last three years. In order to set the outlines of our study, let us define in a few words BA's field of activity. As airline, BA's basic function is to carry passengers. This is a customer service industry, which implies that BA also supplies in-flight services/products (various cabin classes, meal supplies, entertainment facilities...) and out-flight-services (luggage retrieval, e-sale of tickets...). This field of activity is characterized by a tough concurrence, a real sensitivity to economic cycles, thin margins available as well as increasingly demanding clients. In such a context, Bob Ayling didn't manage to reach his strategic objectives. As one of Ayling's predecessors puts it: "the airline's strategy remained the right one but Mr Ayling was the wrong man to execute it." ...read more.

Middle

In June 1997, Ayling praised a striking new visual identity supposed to be based on market research but that generated emotionally charged controversy. The change was radical; symbols were simply scrapped (new design, new colours, new motto, denial of the psychological national belonging) as if it was possible to start from scratch with new company identity and culture. As strikes immediately showed it, BA's culture was still one of a public sector company. Instead of trying to negotiate, Ayling harshly condemned strikers without taking in account this public sector company background. In spite of Ayling's desire to eradicate "Britishness" from BA, employees and people in general (customers, the press, Margaret Thatcher) were not ready to accept it. Strikes were also the result of incomprehension from employees: were the new salary scheme (part and parcel of the efforts to reduce area costs) and the �60 million identity change coherent? Was it possible for employees to stay motivated and involved in BA under those conditions? Furthermore, 160 planes stayed with the Union flag instead of the new design in 1999 because BA lacked time to repaint it. The identity change was as a consequence first of all badly accepted and in addition badly implemented. However, Ayling began to understand after the strikes the high necessity of human resources as part of cultural background in a customer-facing business. He launched a campaign to raise staff moral in October 1997 and started to think about focusing on people on the front-line through interviews and speeches praising communication between management and staff. He built a hotel and developed a new concept for BA's headquarter (no permanent desk-space). Again, in 1999, an opinion survey was sent to all employees, results were alarming, and Ayling introduced training and motivational programmes. We can not say if the improvement of BA's results in 1999-2000 was linked to those efforts from Ayling concerning people but there is no denying that it was a little late anyway... ...read more.

Conclusion

Thus, the challenge consists in finding new ways of saving money that would not injure service quality. - Here again, structure can be used: a new service could be created, that would immediately adapt tickets prices to demand: if many seats have been sold for a flight, then prices should maybe increase. However, if a little part of available seats has been sold, then the prices should decrease until all seats are sold. Such an initiative would avoid half-empty flights, and would eventually lead to savings. - Then a work could be done on internal culture: an "economy-awareness" could be implemented, encouraging everyone in the company to make savings. For instance, managers could show the example in booking middle-class hotels instead of four-stars ones when they have to travel. - At last, BA could go on focusing on rentable activities, providing higher margins, as for instance North Routes and First Class flights. Conclusion British Airways needed a charismatic leader; Bob Ayling was just an economic manager. He overestimated the ability of his people to change the way they considered their company and their implication in its evolution. Although he had got indisputable skills to deal with external constraints and to anticipate the environment evolutions, he forgot to take in account the importance of internal factors, such as the firm history and what it involved. Rod Eddington's first reaction as he came over was to express his respect and his will to make BA's employees happy. It is very likely that the new chief executive had drawn the lessons of his predecessor's experience, and that he wanted to start from new bases. Maybe he is the "right" man for the job... 2 British Airways ICN 3 Etude de cas BA Introduction Etude de cas BA 1. A brand new company management 2. A failure due to the negligence of three key factors Etude de cas BA 3. What should be Eddington's main concerns for the future? Etude de cas BA Conclusion ...read more.

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