QUESTION
CHANGE MANAGEMENT-BRITISH AIRWAYS AND MORE
SOLUTION
INTRODUCTION
BRIEF HISTORY ABOUT BRITISH AIRWAYS
Based on the size of fleet, international flights and destinations, British Airways is the largest airline in the United Kingdom. It is the second largest in terms of the number of passengers carried. It is based in Waterside and its main hub is at the London Heathrow Airport. The British Airways Board was set up in the year 1971, to operate two nationalized airline companies- BOAC and BEA, along with two smaller airlines Cambrian Airways and Northeast Airlines. These four airline companies merged on 31st March, 1974 to conglomerate into British Airways. It spent almost 13 years as a government company and was privatized in February 1987. there was expansion of the company when it acquired British Caledonian in 1987 and Dan-Air in 1992.
AN OVERVIEW OF THE MARKET
The economic meltdown coupled with fuel price hike has seen the upsurge of consolidation in the airline industry. Many of the airline companies have either experienced bankruptcy or have been acquired by others. Overall, the global aviation market has been weak.
There was collapse of companies like SkyEurope, Flyglobespan in 2009. Also, JAL of Asia field for protection against bankruptcy. Many mergers have taken place as well, such as Northwest and Delta in the US.
STIFF COMPETITION
The aviation industry is marked by stiff competition.
On shorthaul routes, BA faces tough competition both on ground and in the air. Due to the infrastructure improvements, train operators in UK are grabbing a much larger share of the travel market. There has been significant reduction in train travel time in areas such as the West Coast mainline. Despite of the snow in January, Eurostar continued to expand and its passenger number rose by 1.2 percent in 2009 and the demand for flights from London to Paris and Brussels fell by 3 and 14 percent respectively.
In the longhaul market, BA has been significantly affected by deregulation. In summer 2008, the first phase of the EU-US Open Skies agreement took place and it changed the market environment on transatlantic routes.
SOME INTERNAL CHALLENGES FACED BY BRITISH AIRWAYS
• Striving to raise finances at the time of continuing debt crisis.
• Strive to reduce drastically the historic cost base.
• bring about a change in the current working practices.
• take radical measures to tackle the pensions deficit successfully.
PROBLEMS FACED
One of the major problems faced by British Airways is the sharp fall in the frequency of traveling by first class and business class passengers. In order to cut down costs in an economy crippled by recession, businessmen have cut down their non-essential traveling.
Also, there has been a sharp increase in fuel price. This has subsequently led to higher ticket prices. As a result, British Airways has faced tough competition from low cost airline that offer cheap discounted rates to passengers. This has caused BA’s passenger count to plummet astonishingly.
There has been a significant degradation in the quality of service offered by British Airways. The company’s reputation has been recently disfigured due to its lack of punctuality. As a result it has also been slapped with a series of fines in conjunction with the new British laws and regulations concerning the aviation industry.
There has been a recent series of clashes between the airlines’ authority and the staff members (Telegraph, 2010). This is because BA has suffered such huge revenue falls that it is unable to pay even salaries to its staff. The main reason behind this is the Euro zone crisis. As common people are severely affected by the crisis and are facing liquidity crunch, they are severely cutting back on luxury expenses. British Airways has always been known for the premium quality service it offered. Naturally, the high quality of service brought along with it higher ticket prices. Eventually, people started preferring cheaper airlines which were more affordable. This turned out to be dismal for the airlines as its major source of income was from the first class and premium travelers. The situations worsened for the airlines as the internal management system disrupted. Not only did it have unhappy customers, but unhappy personnel as well. There were several strikes and efforts for negotiation. Infact, the staff was even asked to offer free service in the month of July, 2012, as a part of a “battle for survival” as put forth by the management.
THE ECONOMIC CRISIS AND ITS IMPACT ON BA
The magnitude of destruction of the recent global financial crisis is comparable to that of the great depression of the 1930s. The breakdown of big financial institutions, collapse of stock markets worldwide, bank bailouts were some of the numbing consequences of the crisis. Many major businesses were forcibly shut down. Unemployment, foreclosures and reduction in public wealth was rampant. The focal point of the triggered collapse is considered to be the bursting of the housing bubble of The United States of America.
Needless to say, the British Airways was severely affected by the crisis as well. The economic conditions existing in the years 2009-2010 has been the most severe experienced by the airlines. This has led to a series of permanent structural changes in the company. Consequently, the changes have drastically reduces the short term revenues and have changed the dynamics of aviation industry on the whole.
Here are some of the statistics from the Annual Report of British Airways (2010) which prove the pathetic state of the company.
- Group Revenue for 2009/10 was £7,994 million, compared with £8,992 million in the previous year.
- Group loss before tax for 2009/10 was £531 million, compared with a loss before tax of £401 million in the previous year.
- Group operating loss for 2009/10 was £231 million, compared with a loss of £220 million in the previous year.
- Group loss per share for 2009/10 was 38.5 pence, compared with loss per share of 32.6 pence in the previous year.
- Network-wide Ready to Go performance of 59 per cent, compared with 53 per cent in the previous year.
REASONS AND NEEDS FOR CHANGE
Thus, the reasons and the needs for change can be summarized as below:
- The economic crisis, beginning from the subprime crisis to the Eurozone crisis.
- Changes in market conditions- increased competition from low cost airlines.
- Management problems- the revolt by the working staff.
- New mergers.
SUCCESFUL MERGER WITH IBERIA
The merger between British Airways and the Spanish airlines Iberia was successfully carried out on the 24th of January, 2011 with the shares being listed in the International Airlines Group (IAG) . As a result, this became the third largest airline in Europe. It also became the sixth largest in the world. The largest being Delta Air Lines, Lufthansa, United Continental, Air France-KLM and AMR.
Despite the fuel price hike, International Airlines Group experienced a boost in its profits, which mainly stemmed from an increase in demand in the transatlantic routes. The company saw a rise in profits from 84 million euros to 503 million euros as compared to the previous year when it was formed (Bloomberg, 2012). Passenger revenues increased by 11% from previous year.
REASONS FOR SUCCESS OF MERGER WITH IBERIA
One of the main reasons for the success of the merger with Iberia and the drastic increase in profits was the extension of the service network of the airlines and improved customer service (British Airways).
SIMPLIFIED BOOKING PROCEDURES
- Booking was allowed from either airlines’ websites or call centers.
- An increase in the choices of itinerary and destinations world wide.
- A combination of British Airways and Iberia flights were allowed which would allow the consumer to avail special offer prices.
- Aligned baggage allowances were offered to make it simpler to transfer between flights.
- Passengers traveling in First or Business Class could take advantage of priority security and boarding at some airports.
- Special customer service benefits were offered- as help would be available from either airlines. If a connection is missed due to a delay a seat on the other airline would be offered regardless of the booking.
- An expanded worldwide network was on the offer across Europe, North America, the Far East and Australia, Africa and South America.
- In order to give the passengers ultimate luxury, airport lounges in excess of 120 were available worldwide.
JOURNEY BENEFITS
MORE DESTINATONS
DEDICATED LOUNGES
FREQUENT FLYER PROGRAMMES
Passengers would be rewarded with frequent flying benefits with either of the airlines.
ANALOGY WITH LEWIN’S MODEL;STRATEGIES AND BUSINESS MODEL
LEWIN’S MODEL
One of the common rebuttals to the phrase “nothing is constant” is “change is constant”. Change is inevitable in every business organization, be it old or new, small or big (Mrashak, 2005). In order to stay abreast with the changing environment-economic, social, political and cultural, every organization constantly tries to adopt change. There might be several types of changes- structural, organizational, changes in planning, formulation, execution, objectives, services, expenses, etc. Infact, the more flexible the organization, the better it can adapt to change.
It is imperative that change management is properly understood and implemented by the people involved in the business. Its success is largely a function of the nature of business, the type of change and the people.
After having a brief overview of the situation of British airways, we can draw an analogy from Kurt Lewin’s model of the 1940s. This model can help to suggest a framework that could be followed by the airline company. Although, there are several other models that could fit well too, this model allows a better understanding due to its simple and generic nature.
The model is based on the unfreeze- change- refreeze structure. This can be exemplified as follows- if we have a block of ice which we want to shape into a conical structure, we first have to unfreeze the ice, change its shape and refreeze it.
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UNFREEZE
What the model thus suggests is that change must be looked upon as a systematic process. It must be divided into stages. In the early stage it is important to identify the particular change along with the cause of it. This is a lesson which British Airlines must learn for. Due to the economic crisis, it went for severe losses and instead of a systematic change, it adopted severe cut down measures. This led to chaos and turmoil in the organization which was uncalled for. BA had decided to cut down staffing levels on long haul flights and had also cut down perks of the staff. This had caused several walkouts and had cost the airways around 150 million pounds. It was the unfreeze stage which BA failed to carry out. The motivation stage had not been generated within the organization. What BA must have done was prepare the staff for the change and “unfreeze” first.
The organization must be made fully aware of the current situation and clearly explained why the existing system cannot be continued. This can be done by presenting before them facts and figures such as the falling sales, revenues and profits. BA had become one the most troubled airlines with lack of punctuality and good quality services.
The organization must be able to understand their role in the whole functioning of the business. The core must then be targeted and the attitude and value system must be challenged. Just as the foundation of a building must be rock solid in order to support the entire structure, so must be the foundations of the business.
It is this stage of change that is the most difficult. BA failed in this step itself when it began downsizing prematurely. Employees were caught unexpected and they had not absorbed the change. It came to them as very sudden which led them to revolt. What was required was that they were to be given some time to re examine things and under the situation from their perspective. This would kindle a motivation within them and it would make them more participative with the change rather than rebellious.
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CHANGE
After the unfreeze stage comes the change stage. Once the organization has absorbed the need for change and is prepared the change must be executed. New methods of doing things must be adopted. Their beliefs and attitude are now redirected towards the new direction.
Although, it might take a long time for the change to take place. It would take time for people to accept the required change and start acting positively for the change. Apart from downsizing, BA must have brought about a series of positive changes. It had faced a lot of competition from low cost airlines. BA must have compromised a little on the luxuries offered and brought the prices down. It must have focused more on retaining customers which would help it in the long run as well. This would maintain the brand loyalty as well.
Another reason for the strife by the staff was that they did not see any benefits at all. They should have been apprised with the long term gains that they would get. It is quite obvious that most would put personal benefits before the company’s. hence, the might be reluctant to adopt the change. It was BA’s fault that they thought that the personnel would act for the best interests of the company.
Hence, in a nutshell, we can say that the two most important factors to facilitate change are time and communication. Effective communication with sufficient time could come together to bring about successful change.
REFREEZE
The final stage is the refreeze stage. Once, the change has been brought about, it is time for consolidation. Characteristics of this stage are consistent job profiles, unchanging organization, set goals and objectives. The organization must feel secure at this stage and must utilize the change in everyday activities. A sense of familiarity must have seeped in regarding the changes. This should help in boosting employees’ confidence, comfort and performance level.
It is very important that the refreezing is carried out effectively. Else, employees might feel trapped in a conundrum regarding their actions. Their course of activities and objectives must become crystal clear to them. Also, it is only when stability has been achieved again that the organization can think of initiating the next change. Change must not be done only for the sake of it. The employees must fully absorb the new conditions and be gradually motivated for the next ones.
The success of a change must be celebrated so that the employees’ morale is boosted and they look forward to the next change.
BUSINESS PLANNING
A certain manner in which the company can plan their business activities is discussed below.
EMPLOYEES
The driving force behind any organization is its employees. Hence, British Airways must strive in order to gain the confidence of its employees. It has to restore any types of dissatisfaction or insecurity among them. Voluntary support and dedicated service from the staff is imperative. They can help in improving customer service. There must be targeted investments in order to recruit the best personnel and manage talent in the best possible way. Performance related pays and bonuses must me introduced. BA has always carried a customer-centric picture which must be carried forward by cultured leaders. Integrity, devotion, commitment must be enhanced amongst the staff as they are the backbone of the company.
FOCUS ON CUSTOMER EXPERIENCE AND SATISFACTION
In the end it all boils down to pleasing the customers. The best possible service must be provided to them. There are several to dos in this area. Regular training sessions must be conducted so that the call centre and information staff are well up to date with all latest developments. The ticket booking system must be simplified as much as possible. Special care must be taken regarding cordial behavior and prompt response by the cabin crew. A simple feedback system could be inculcated to keep a check on this. In flight entertainment must be taken good care of. The variety of entertainment offered must be constantly updated and latest technology be adopted. Investments are to made in this direction.
PARTNERSHIPS
Alliance with other airlines could greatly help by increasing the network base and offering wider choice to the consumers. We have analyzed how the partnership with Iberia reaped great benefits. Similar mergers and acquisitions could be carried out to constantly expand business.
GLOBAL APPEAL
Maintaining a global appeal to customers that would attract them to choose British Airways.
PREMIUM SERVICE
The premium service offered by the airlines would be continued. The quality of services should not be tampered with and customers would realize value for money.
AVIATION SERVICES
Developing new services and aircrafts that would complement transportation of goods and travelers alike.
SAFETY AND PUNCTUALITY
It is of utmost importance that special attention is paid to the punctuality of flight timings and that all safety norms are strictly adhered to. There must be constant checks of emergency in flight equipment. The cabin crew must be specially trained for emergency situations.
STAKEHOLDER ANALYSIS
Stakeholder management and analysis is very crucial for the success of any business organization. The right people must be engaged in the right work. Any action undertaken has an impact on a large number of people. This has repercussions on the success of the project. Support from these people is necessary for success. Stakeholder analysis is concerned with winning over key people and build their support system (Fletcher, et. al, 2003).
The first step in this analysis is identifying the people who will be most affected and who are most powerful and influential. There must be effective communication with them in the form of meetings, etc. the stakeholders must be prioritized properly and then efforts must be put in accordingly to keep them informed and satisfied.
CONCLUSION
We have first looked at a brief history of British Airways. Then we recognized the market conditions, the causes for change, some successful changes, existing strategies and proposed business modeling. Here, we have analyzed a specific case but it can very well be generalized to understand business modeling and management of change. The reasons for the success of certain organizations is there ability to strategically plan their businesses and carry out the required change effectively. The business models such as that of Lewin’s could be adopted by any organization and is not specific to any. The basic objective of all these models is the same- successful business management.
WORK CITATIONS
Bloomberg(2012), Retrieved August 8, 2012, from
British Airways, Retrieved August 8, 2012, from
British Airways (2010), Retrieved August 8, 2012, from,
http://mu.hu/download/alapismeretek/BA_AR_2010.pdf
Fletcher, A., et al. (2003). “Mapping stakeholder perceptions for a third sector organization.” in: Journal of Intellectual Capital
Marshak, R.J. (2005). Contemporary challenges to the philosophy and practice of organizational development. In David L. Bradford and W. Warner Burke (Eds.) Reinventing organizational development: New approaches to change in organizations. San Francisco, CA: Pfeiffer.
Telegraph (2010), Retrieved August 8, 2012, from,
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