HOW CAN EFFICIENT TRANSFORMATION IMPACT AN ORGANISATION? BRITISH AIRWAYS STORY

Today, the aviation giant British Airways is a part of the Oneworld alliance. Its fleet includes more than 280 airliners and flies to 75 countries worldwide, transporting 123,000 passengers daily.

The company proudly positions itself on the market as a leader in innovation, emphasising that it made the first scheduled commercial flight in the history of aviation. In addition, British Airways was the first to launch commercial flights on supersonic aircraft, and today is one of the first to launch a fully automated boarding system on domestic flights.

But one of the significant symbols of the United Kingdom experienced several challenges throughout its history.

The British Airways case reveals how organisational changes can transform even big corporations. Of course, the wrong decision can lead to catastrophic failures, but an adequate approach can turn even a desperate situation into a success. 

The Company To Be Avoided

The International Airlines Passengers Association in 1980 proclaimed British Airways as an air company to be avoided by passengers. The organisation’s business model was disturbing and problematic. 

The existing conditions catalysed staff discontent. A lot of customers were dissatisfied with the services available. The main factors of clients` unhappiness were:

• old fleet
• uncomfortable journeys
• company`s record for unpunctuality of its flights
• BA`s productivity was considerably below that of its main overseas competitors.

To put it shortly, the corporation’s operation processes, customer services, and employee relations were dysfunctional.

In 1981 Sir John King, later Lord King was appointed as Chairman of British Airways by Prime Minister Margaret Thatcher. He was assigned to deal with the misfortunate situation and prepare the airline for privatisation. He was later credited with turning a loss-making giant into one of the most profitable airlines, turning the company into the “World's Favorite Airline” when many major airlines were in crisis.

His first move was to implement aggressive “American-style” marketing and management philosophies. A team of experts was brought in to change the company's image and brand. In addition, the airline's fleet and route network were reorganised. Implementing the program “Putting People First” was another crucial aspect that empowered employees to interact positively and support customers.

BA`s stakeholders identified various steps and measures to transform the company. The first step of the plan was to reduce the number of workers.

A British Airways official representative stated to Business Week magazine that they had too many staff, but because of the unions, the company couldn't get rid of them. As a result, BA was forced to remain gigantic to dispose of the excess labour.

However, King managed to reduce the workforce from 60,000 to 38,000 in three years without a strike because he took various measures to boost staff morale and optimise business processes. 

The offer of generous severance pay for people leaving the company led to record losses of 545 million pounds sterling that were covered at taxpayers' expense.  

BA was privatised in February 1987. The company’s privatisation helped to move the airline from a loss-making entity to a profitable enterprise.

In the 1990s, British Airways became the most profitable airline in the world; its slogan became “The World's Favourite Airline”.

Dirty Tricks

Shortly after BA`s privatisation, Richard Branson's company (Virgin Atlantic Airways) began to compete with them on the most profitable routes. When Virgin Atlantic brought home hostages (British citizens) from Iraq in 1991, they received a public outcry and were awarded landing slots at London Heathrow Airport. After this story, King told BA`s CEO Colin Marshall and Director of Public Relations David Burnside that “something should be done with Branson”. 

This command began a famous “dirty tricks” campaign. Several examples of these “tricks”:

• Approaching VA`s passengers and getting them to switch to BA.
• Attempts to hack the VA`s computers when flights departed the gates. Once BA had the passenger information, they called passengers to persuade them to switch their flight to BA with upgrades.
• Calling up Virgin`s passengers pretending to be from VA, lying that their Virgin flight was cancelled and suggesting to fly BA instead.

This campaign ended with Branson suing King and British Airways for defamation in 1992. King countersued Branson, claiming his accusations were baseless, and the trial dragged on until 1993. 

Finally, British Airways realised that the case was not going in their favour and offered 500,000 pounds in concessions to Branson and 110,000 pounds to his airline. In the future, British Airways had to pay up to 3,000,000 pounds in taxes and fees. 

Branson divided the compensation among his employees and called it the “BA Bonus”.

Wrong Experiments

In 1996, BA got a new executive director, Bob Ayling, and a difficult period began for the airline. The competition arose, and high oil prices and the growth of the pound sterling led to a drop in profits. The company`s attempt to cut down the costs restructureв the pay scales and the allowances for the cabin crew. This action led to the employees` strike in 1997. The progress of the conflict between management and trade unions costed the company hundreds of millions of pounds. 

Another big problem for BA was the alliance with American Airlines. This union did not go well due to regulatory difficulties and was followed by huge losses.

In 1997 Bob Ayling replaced the traditional flag of Great Britain on the tails of aircraft with national motifs. This action aimed to change the company`s image as a strictly national carrier of Great Britain in the direction of a more cosmopolitan image. But this step was unsuccessful. Ayling had to stop this process, announcing that the fleet would have two types of paint: half - with the flag of Great Britain and the other half — with national motifs. 

In 1999 British Airways reported a 50% drop in profits. It appeared to be the worst result since privatisation. In March 2000, Bob Ayling was removed from his position. After 2 months, Rod Eddington replaced him in the post. Eddington began to pursue a policy of job cuts. These measures reached their peak in 2001 after the infamous September 11 terrorist attacks.

On September 8, 2004, British Airways announced the sale of its 18.5% stake in Qantas airlines while maintaining a partnership in operational activities (including revenue sharing), including the so-called Kangaroo flights. Thus, the company earned 425 million pounds, which was directed to reducing the company's debts.

Saved By The Pilot

In September 2005, former Aer Lingus CEO Willie Walsh was assigned to take over from Rod Eddington to save the company. Walsh began his career with Aer Lingus on an A320 as a co-pilot. After becoming CEO of Aer Lingus and later of British Airways and International Airlines Group, he continued to fly and obtained flight licences for other aircraft types.

Walsh announced a significant management change for British Airways that was expected to save 300 million pounds in 2008, the opening of Terminal 5 at Heathrow and the sale of BE Connect to Flybe. British Airways retained a 15% stake in Flybe upon completion of the transaction.

Walsh managed a series of acquisitions and mergers, eventually leading the International Airlines Group, with hubs in London, Dublin, Rome, Barcelona and Madrid. The group included:

• British Airways
• Iberia
• Iberia Express
• Vueling
• Aer Lingus
• Level

By entering IAG into a close alliance with American Airlines, Willie Walsh acquired IAG hubs in Miami, New York, Chicago, Dallas, St. Louis and Los Angeles, essentially becoming the owner of the Atlantic Ocean and the airspace above it.

In 2010, during the eruption of the Icelandic volcano Eyjafjallajökull, Willy himself piloted the B747 and flew around the volcano, proving the safety of flights and interrupting the blockade of transatlantic traffic.

In 2006, the airline won an honorary Skytrax award. Other awards were also gained through the last 10 years, but now BA is facing certain difficulties again. So let`s watch together how the great company is going to deal with them.

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