British Airways Essay

I remember going to parties in the late 1970s, and, if you wanted to shake off a civilized conversation, you didnt actu exclusivelyy say that you worked for British Airways, because it got you talking about the great unwasheds last travel experience, which was usually an unpleasant one. Its c aren how much the air lanes image has changed since then, and, in comparison, how proud provide are of working for BA today. British Airways employee, Spring 1990I recently flew moving in class on British Airways for the archetypical time in about 10 old age. What has happened over that time is amazing. I cant tell you how my depot of British Airways as a company and the experience I had 10 course of instructions ago contrasts with today. The improvement in do is truly remarkable. British Airways customer, pin 1989In June of 1990, British Airways reported its third consecutive year of record profits, 345 meg in the first place taxes, firmly establishing the rejuvenated carrier as on e of the worlds most profitable airlines. The impressive monetary results were one indication that BA had convincingly shed its historic bloody awful image. In October of 1989, one view American publication referred to them as bloody awe round, a description most would not have thought possible after pre-tax losses totalling more than 240 million in the years 1981 and 1982. Productivity had risen more than 67 percent over the course of the 1980s. Passengers reacted highly favorably to the changes. After suffering by means of and through years of poor market perception during the 1970s and in the beginning, BA garnered four Airline of the Year awards during the 1980s, as voted by the readers of First Executive Travel.In 1990, the leading American aviation magazine, Air Transport World, selected BA as the winner of its Passenger Service award. In the span of a decade, British Airways had radically improved its monetary strength, convinced its work force of the paramount importance of customer utility, and dramatically improved its perception in the market. Culminating in the privatization of 1987, the carrier had undergone fundamental change through a series of chief(prenominal) messages and events. With unprecedented success under its belt, guidance faced an increasingly perplexing problem how to maintain impulse and recapture the focalization that would allow them to meet cutting challenges.Crisis of 1981Record profits must have seemed distant in 1981. On September 10 of that year, then chief administrator Roy Watts issued a special bulletin to British Airways provideBritish Airways is facing the worst crisis in its history . . . un little we take swift and remedial action we are heading for a loss of at least 100 million in the present financial year. We face the prospect that by next April we shall have piled up losses of blotto to 250 million in two years. Even as I write to you, our money is draining at the rate of just about 200 a minute. No business can hold up losses on this scale. Unless we take decisive action now, there is a real initiative that British Airways will go out of business for lack of money. We have to cut our costs sharply, and we have to cut them fast. We have no more choice, and no more time .Just two years earlier, an optimistic British government had announced its plan to privatize British Airways through a barter of shares to the investing public. Although airline management recognized that the 58,000 staff was too large, they expected increased passenger volumes and improved staff productivity to help them avoid complex and costly employee reductions. While the 1978-79 plan forecasted passenger traffic growth at 8 to 10 percent, an unexpected recession left BA struggling to survive on volumes, which, instead, decreased by more that 4 percent. A diverse and aging fleet, increased fuel costs, and the high staffing costs forced the government and BA to congeal privatization on hold indefinitely . With the airline technically bankrupt, BA management and the government would have to wait in the beginning the public would be ready to adopt the ailing airline.The BA Culture, 1960-1980British Airways stumbled into its 1979 state of inefficiency in large part because of its history and culture. In August 1971, the Civil Aviation Act became law, setting the breaker point for the British Airways Board to assume control of two state-run airlines, British European Airways (BEA) and British Overseas Airways Corporation (BOAC), under the name British Airways. In theory, the wag was to control policy over British Airways but, in practice, BEA and BOAC remained autonomous, each with its own chairman, board, and chief executive. In 1974, BOAC and BEA finally issued one consolidated financial report. In 1976, Sir discourteous (later Lord) McFadzean replaced the group division with a structure based on functional divisions to officially integrate the divisions into one airline. Still, a distinct split within British Airways persisted throughout the 1970s and into the mid-1980s.After the Second World War, BEA helped pioneer European civil aviation. As a pioneer, it concerned itself more with building an airline bag than it did with profit. As a 20-year veteran and company director historied The BEA culture was very much driven by building something that did not exist. They had built that in 15 years, up until 1960. Almost single-handedly they opened up air transport in Europe after the war. That had been about getting the thing established. The marketplace was taking care of itself. They wanted to get the network to work, to get stations opened up.BOAC had also done its share of pioneering, making history on may 2, 1952, by sending its first jet airliner on a trip from London to Johannesburg, officially initiating jet passenger service. Such innovation was not without cost, however, and BOAC name itself mired in financial woes throughout the two decades follow ing the war. As chairman Sir Matthew Slattery explained in 1962 The Corporation has had to pay a heavy price for pioneering advance(a) technologies.Success to most involved with BEA and BOAC in the 1950s and 1960s had less to do with net income and more to do with flying the British flag. Having inherited legion(predicate) war veterans, both airlines had been injected with a military mentality. These values combined with the years BEA and BOAC existed as government agencies to shape the way British Airways would view profit through the 1970s. As former director of human resources Nick Georgiades said of the military and civil service history Put those two together and you had an organization that desired its line of credit was simply to get an aircraft into the air on time and to get it down on time.While government support reinforced the operational culture, a deceiving range of mountains of profitable years in the 1970s made it even easier for British Airways to neglect its i ncreasing inefficiencies. Between 1972 and 1980, BA earned a profit before interest and tax in each year except for one. This was significant, not least because as long as the airline was returning profits, it was not user-friendly to persuade the workforce, or the management for that matter, the fundamental changes were vital. Minimizing cost to the state became the standard by which BA measured itself. As one senior manager noted Productivity was not an issue. People were operating effectively, not necessarily efficiently. There were a lot of citizenry doing other spates transmission lines, and there were a lot of people checking on people doing other peoples jobs . . . As a civil service agency, the airline was allowed to become inefficient because the sentiment in state-run operations was, If youre providing service at no cost to the taxpayer, then youre doing quite well.A lack of economies of scale and strong eternal sleep loyalties upon the amalgamation further complicat ed the historical disregard for efficiency by BEA and BOAC. Until Sir Frank McFadzeans reorganization in 1976, British Airways had labored under some(prenominal) separate organizations (BOAC BEA European, Regional, Scottish, and Channel) so the desired benefits of consolidation had been squandered. Despite operating under the same banner, the organization consisted more or less of separate airlines carrying the associated costs of such a structure.Even after the reorganization, divisional loyalties prevented the carrier from attaining a common focus. The 1974 amalgamation of BOAC with the domestic and European divisions of BEA had produced a hybrid racked with management demarcation squabbles. The competitive advantages sought through the merger had been hopelessly defeated by the lack of a unifying unified culture. A BA director summed up how distracting the merger proved There wasnt teeming management time devoted to managing the changing environment because it was all focuse d inwardly on resolving industrial relations problems, on resolving organizational conflicts. How do you bring these very, very different cultures together?Productivity at BA in the 1970s was strikingly bad, especially in contrast to other leading foreign airlines. BAs productivity for the three years ending March 31, 1974, 1975, and 1976 had never exceeded 59 percent of that of the average of the other eight foreign airline leaders. Service suffered as well. ace human resources senior manager recalled the awful service during her betimes years in passenger services I remember 10 years ago standing at the gate handing out boxes of food to people as they got on the aircraft. Thats how we dealt with service. With increasing competition and rising costs of labor in Britain in the late 1970s, the lack of productivity and poor service was becoming increasingly harmful. By the summer of 1979, the number of employees had climbed to a peak of 58,000. The problems became dangerous when Bri tains worst recession in 50 years trim down passenger numbers and raised fuel costs substantially.Lord poof Takes the ReinsSir John (later Lord) King was appointed chairman in February of 1981, just a half-year before Roy Wattss unambiguously grim assessment of BAs financial state. King brought to British Airways a successful history of business ventures and strong ties to both the government and business communities. Despite having no formal engineering qualifications, King formed Ferrybridge Industries in 1945, a company which comprise an unexploited niche in the ball-bearing industry. Later renamed the Pollard Ball and Roller Bearing Company, Ltd., Kings company was highly successful until he sold it in 1969. In 1970, he joined Babcock International and as chairman led it through a successful restructuring during the 1970s. Kings connections were legendary. Hand-picked by Margaret Thatcher to run BA, Kings close friends included Lord Hanson of Hanson Trust and the Princess of Waless family. He also knew personally Presidents Reagan and Carter. Kings respect and connections proved helpful both in recruiting and in his dealings with the British government.One director spoke of the significance of Kings appointment British Airways look ated a chairman who didnt need a job. We needed someone who could see that the only way to do this sort of thing was radically, and who would be aware enough of how you bring that about.In his first annual report, King predicted hard times for the troubled carrier. I would have been comforted by the thought that the worst was behind us. There is no conclusion that this is so. Upon Wattss announcement in September of 1981, he and King launched their Survival plan tough, unpalatable and immediate measures to stem the spiraling losses and save the airline from bankruptcy. The radical steps included reducing staff numbers from 52,000 to 43,000, or 20 percent, in just nine months freezing pay increases for a year and closing 16 routes, eight on-line stations, and two engineering bases. It also dictated halting cargo-only services and selling the fleet, and inflicting massive cuts upon offices, administrative services, and staff clubs.In June of 1982, BA management appended the Survival plan to accommodate the reduction of another 7,000 staff, which would eventually bring the total employees down from about 42,000 to nearly 35,000. BA fulfill its reductions through voluntary measures, offering such generous severance that they ended up with more volunteers than necessary. In total, the airline dished out some one hundred fifty million in severance pay. Between 1981 and 1983, BA reduced its staff by about a quarter.About the time of the Survival plan revision, King brought in Gordon Dunlop, a Scottish accountant described by one journalist as imaginative, dynamic, and extremely hardworking, euphemistically known on Fleet passage as forceful, and considered by King as simply outstanding. As CFO, Dunlops co ntribution to the recovery years was significant. When the results for the year ending March 31, 1982, were announced in October, he and the board ensured 1982 would be a watershed year in BAs turnaround. Using creative financing, Dunlop wrote down 100 million for verbosity costs, 208 million for the value of the fleet (which would ease depreciation in future years), even an additional 98 million for the 7,000 redundancies which had yet to be effected. For the year, the loss before taxes amounted to 114 million. After taxes and extraordinary items, it totalled a staggering 545 million.Even King might have admitted that the worst was behind them after such a report. The chairman presently turned his attention to changing the airlines image and further building his turnaround team. On September 13, 1982, King relieved Foote, Cone & Belding of its 36-year-old advertisement account with BA, replacing it with Saatchi & Saatchi. One of the biggest account changes in British history, it was Kings way of making a clear statement that the BA teaching had changed. In April of 1983, British Airways launched its Manhattan Landing campaign. King and his staff sent BA management personal invitations to gather employees and tune in to the inaugural six-minute commercial. Overseas, each BA office was sent a copy of the commercial on videocassette, and many held cocktail parties to celebrate the new thrust.Manhattan Landing dramatically portrayed the whole island of Manhattan being elevate from North America and whirled over the Atlantic before awestruck witnesses in the U.K. After the initial airing, a massive campaign was run with a 90-second rendition of the commercial. The ad marked the beginning of a broader campaign, The Worlds Favourite Airline, reflective of BAs status as carrier of the most passengers internationally. With the financial picture finally brightening, BA raised its advertising budget for 1983-84 to 31 million, compared with 19 million the previous year, signalling a clear commitment to changing the corporate image.Colin Marshall Becomes Chief Executive In the midst of the Saatchi & Saatchi launch, King recruited Mr. (later Sir) Colin Marshall, who proved to be perhaps the single most important person in the changes at British Airways. Appointed chief executive in February 1983, Marshall brought to he airline a unique resume. He began his career as a management trainee with Hertz in the United States. After working his way up the Hertz hierarchy in North America, Marshall accepted a job in 1964 to run rival Aviss operations in Europe. By 1976, the British-born businessman had risen to chief executive of Avis. In 1981, he returned to the U.K. as police lieutenant chief and board member of Sears Holdings. Fulfilling one of his ultimate career ambitions, he took over as chief executive of British Airways in early 1983. Although having no direct experience in airline management, Marshall brought with him two tremendous advantages . First, he understood customer service, and second, he had worked with a set of customers quite correspondent to the airline travel segment during his car rental days.Marshall made customer service a personal crusade from the day he entered BA. One executive reported It was really Marshall focusing on nothing else. The one thing that had overriding attention the first three years he was here was customer service, customer service, customer servicenothing else. That was the only thing he was interested in, and its not an exaggeration to say that was his easy lay focus. Another senior manager added He has certainly put an enabling culture in place to allow customer service to come out, where, quite than people waiting to be told what to do to do things better, its an environment where people feel they can actually come out with ideas, that they will be listened to, and feel they are much more a part of the success of the company. Not just a strong verbal communicator, Marshall bec ame an active employment model in the terminals, spending time with staff during morning and evenings. He combined these actions with a number of important events to drive home the customer service message.Corporate Celebrations, 1983-1987 If Marshall was the most important player in emphasizing customer service, then the Putting People First (PPF) program was the most important event. BA introduced PPF to the front-line staff in December of 1983 and continued it through June of 1984. Run by the Danish firm Time Manager International, each program pass lasted two days and included 150 participants. The program was so warmly received that the non-front-line employees eventually asked to be included, and a one-day PPF II program facilitated the participation of all BA employees through June 1985. Approximately 40,000 BA employees went through the PPF programs. The program urged participants to examine their interactions with other people, including family, friends, and, by associati on, customers. Its acceptance and impact was extraordinary, due primarily to the honesty of its message, the honesty of its delivery, and the strong support of management.Employees agreed almost unanimously that the programs message was sincere and free from manipulation, due in some measure to the accompaniment that BA separated itself from the programs design. The program emphasized positive relations with people in general, focusing in large part on non-work-related relationships. Implied in the positive relationship message was an emphasis on customer service, but the program was careful to aim for the benefit of employees as individuals first.Employees expressed their delectation on being treated with respect and relief that change was on the horizon. As one frontline ticket agent veteran said I found it fascinating, very, very enjoyable. I thought it was very good for British Airways. It made people aware. I dont think people give enough thought to peoples reaction to each other. . . . It was hardhitting. It was made something really special. When you were there, you were treated extremely well. You were treated as a VIP, and people really enjoyed that. It was quash roles, really, to the job we do. A senior manager spoke of the confidence it promoted in the changes It was quite a revelation, and I thought it was absolutely wonderful. I couldnt believe BA had finally woken and unclutterd where its bread was buttered. There were a lot of cynics at the time, but for people like myself it was really great to suddenly realize you were working for an airline that had the guts to change, and that its probably somewhere where you want to stay.Although occasionally an employee felt uncomfortable with the rah-rah nature of the program, feeling it perhaps too American, in general, PPF managed to eliminate cynicism. The excellence in presentation helped signify a sincerity to the message. One senior manager expressed the consistency. There was a match betwixt the message and the delivery. You cant get away with saying putting people first is important, if in the process of delivering that message you dont put people first. Employees were sent personal invitations, thousands were flown in from around the world, and a strong effort was made to prepare tasteful meals and treat everyone with respect.Just as important, BA released every employee for the program, and expected everyone to attend. Grade differences became irrelevant during PPF, as managers and staff members were treated equally and interacted freely. Moreover, a senior director came to conclude every single PPF academic session with a question and answer session. Colin Marshall himself frequently attended these closing sessions, answering employee concerns in a manner most felt to be extraordinarily frank. The commitment shown by management helped BA avoid the fate suffered by British Rail in its subsequent attempt at a alike program. The British Railway program suffered a lim ited budget, a lack of commitment by management and interest by staff, and a high arcdegree of cynicism. Reports surfaced that employees felt the program was a public relations exercise for the outside world, rather than a learning experience for staff.About the time PPF concluded, in 1985, BA launched a program for managers only called, appropriately, Managing People First (MPF). A five-day residential program for 25 managers at a time, MPF stressed the importance of, among other topics, trust, leadership, vision, and feedback. On a smaller scale, MPF stirred up issues long neglected at BA. One senior manager of engineering summarized his experience It was almost as if I were touched on the head. . . . I dont think I even considered culture before MPF. Afterwards I began to think about what makes people tick. Why do people do what they do? Why do people come to work? Why do people do things for some people that they wont do for others? Some participants claimed the course led them to put more emphasis on feedback. One reported initiating regular meetings with staff every two weeks, in contrast to before the program when he met with staff members only as problems arose.As Marshall and his team challenged the way people thought at BA, they also encouraged changes in more visible ways. In December 1984, BA unveiled its new fleet livery at Heathrow airport. Preparations for the show were carefully planned and elaborate. The plane was delivered to the hangar-turned-theater under secrecy of night, after which hired audio and video technicians put together a dramatic presentation. On the first night of the show, a darkened coach brought guests from an off-site hotel to an undisclosed part of the city and through a tunnel.The guests, including dignitaries, high-ranking travel executives, and trade conglutination representatives, were left uninformed of their whereabouts. To their surprise, as the show began an aircraft moved through the fog and laser lights decorati ng the stage and turned, revealing the new look of the British Airways fleet. A correspondent presentation continued four times a day for eight weeks for all staff to see. On its heels, in May of 1985, British Airways unveiled its new uniforms, designed by Roland Klein. With new leadership, strong communication from the top, increased acceptance by the public, and a new physical image, few on the BA staff could deny in 1985 that his or her working life had turned a new leaf from its condition in 1980.Management attempted to maintain the momentum of its successful programs. Following PPF and MPF, it put on a fairly successful corporatewide program in 1985 called A Day in the Life and another less significant program in 1987 called To Be the Best. Inevitably, interest diminished and cynicism grew with successive programs. BA also implemented an Awards for Excellence program to encourage employee input. Colin Marshall regularly communicated to staff through video. While the programs enjoyed some success, not many employees felt touched on the head by any successor program to PPF and MPF.