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Operations
Management British Airways
The paper discusses the Management at British Airways. Various Management tools
such as SWOT, PESTLE and Porter’s 5 Forces Theory have been evaluated regarding
the airline. The paper also looks at the business resources at British Airways, and
evaluates its physical resources as well as provides a suitable conclusion as well as
recommendations.
[Year
]
Deepak
Hewlett-Packard
[Pick the date]
CONTENTS
1. Introduction: .......................................................................................................................................................................... 2
2. Business Resources at Brit ish Airways: ........................................................................................................................... 3
2.1 Introduction: ................................................................................................................................................................... 3
2.2 Technology: .................................................................................................................................................................... 4
2.3 Financial: ......................................................................................................................................................................... 5
2.4 Conclusions: ................................................................................................................................................................... 6
3. SWOT Analysis on Brit ish Airways:................................................................................................................................ 6
3.1 SW OT ANalysis Theory: ............................................................................................................................................. 6
3.2 St rengths:......................................................................................................................................................................... 7
3.3 Weaknesses:.................................................................................................................................................................... 7
3.4 Opportunities: ................................................................................................................................................................. 8
3.5 Threats: ............................................................................................................................................................................ 8
4. External Analysis of Brit ish Airways: .............................................................................................................................. 8
4.1 PESTLE Analysis: ......................................................................................................................................................... 9
4.2 Porter’s 5 Forces Analysis: ........................................................................................................................................ 11
5. Evaluation OF HOW a British Airways policies and procedures contribute to effective and efficient
management of physical resources: ..................................................................................................................................... 13
6. Conclusions: ........................................................................................................................................................................ 14
7. Recommendations:............................................................................................................................................................ 15
References:............................................................................................................................................................................... 17
1. INTRODUCTION:
The organization chosen for the purpose of this paper is British Airways. In the last ten years,
British Airways has come back to profitability after being privatized, and has been more
customer friendly than in the past. This transformation of the airline bears witness to the
strong resolve of the new management that operates in an industry that has seen several major
airlines like Virgin Atlantic go into losses. The airline industry is volatile to say the least.
However, British Airways which lost approximately 10 billion GBP during the last
recessionary cycle which was brought about with the Gulf War, has quickly returned to be a
profitable airline. The latest financial statements of the firm show pre tax profits of 452
million GBP with total sales of approximately 7 billion GBP. (Moyer, 1996). British
Airways is the world’s largest ‘international passenger carrier’ (Moyer, 1996: 172) catering
to approximately 36 million people worldwide in 82 countries and flying yo 194 destinations
globally. (Moyer, 1996).
2. B USINESS RESOURCES AT B RITISH AIRWAYS:
2.1 INTRODUCTION:
The business resources of a company are in three forms basically: Tangible resources,
intangible resources and human resources. Tangible resources are generally cash reserves,
and physical assets. In the case of British Airways, it would be its fleet of aircrafts and
hangars at various airports around the world, and other administrative equipments such as
computers and other portable devices. Intangible resources comprise of the technology
employed by the firm, its brand value to customers and the general working culture at the
workplace. British Airways commands a huge brand equity, being the world’s largest
international passenger carrier. British Airways has 6 Boeing 777-300, 12 on order Airbus
380-800, 57 Boeing 747-400, 47 Boeing 777-200, 8 on order Boeing 787-8, 21 Boeing 767-
300, 3 Boeing 757-200, 11 Airbus 321-200, 41 Airbus 320-200, 19 Boeing 737-400, 7
Embraer 190, 33 Airbus 319-100, 2 Airbus 318-100 as well as 6 Embraer 170 as part of its
commanding fleet (including subsidiaries, but excluding franchisees). (British Airways, n.d)
In addition to these airlines, British Airways is only one of two airlines that has the
Supersonic Concorde as part of its fleet (although it is not operational at present) “British
Airways Concorde made just under 50,000 flights and flew more than 2.5m passengers
supersonically. With a takeoff speed of 220 knots (250mph) and a cruising speed of 1350mph
– more than twice the speed of sound - a typical London to New York crossing would take a
little less than three and a half hours as opposed to about eight hours for a subsonic flight. In
November 1986 a British Airways Concorde flew around the world, covering 28,238 miles in
29 hours, 59 minutes.” (British Airways, n.d).
2.2 TECHNOLOGY:
The technology at British Airways is always developing, both in terms of aviation technology
and the usage of technology for customer services in-flight. Recently, the airlines tested their
“happiness blanket” (British Airways, n.d)1which is a blanket a flyer can use to cover
themselves for sleeping, responds to brainwaves of the flyer and changes colours accordingly.
This will help the cabin crew keep track of the customers needs, and provide them relevant
services as and when required by them. For example, depending on a certain colour of the
blanket, the cabin crew will know that the customer is sleeping and hence will not want any
refreshments or entertainment. (British Airways, n.d)2 At the same time, a different colour
may suggest that the flyer is about to get up and the cabin crew can prepare food or
entertainment for the client. In February 2014, British Airways employed the market leader in
‘open source solutions’ Red Hat to cater to the “company’s growth and additional business
requirements for its production environment – and, in particular, to support the production
environment for its external website, BA.com – British Airways needed to expand its IT
infrastructure. As consumers have shifted their airline ticket buying patterns, British Airways
supports on average in excess of 450,000 visitors to BA.com per day.” (Raleigh, 2014) This
support from Red Hat has enabled British Airways to expand its ecommerce website and
1 Available at http://www.britishairways.com/en-
gb/bamediacentre/newsarticles?articleID=20140702132928#.U7pglLFmh3U
2 lbd
cater to a larger number of customers, in an advancing technological world, where passengers
require multiple services to be available to them with the push of a button. These online
services include buying and cancellation of tickets, web check-in facilities as well as pre
booking of foods and drinks in flight. (Raleigh, 2014)
2.3 FINANCIAL:
British Airways has considerable financial resources at its disposal. It is currently in the
phase of investing over 5 billion GBP over the next 5 years in new aircrafts, better
technologies, smarter in flight cabins and comfortable lounges (at airports for esteemed
customers) to make the journey of its passengers comfortable both in flight and during the
waiting period. (British Airways Plc, 2012) British Airways is also entering into a strategic
alliance with Japan airlines (JAL) where the airlines have agreed to share revenues on long
flights between Europe and Japan, and also provide reciprocal mileage points to its frequent
fliers irrespective of the flyer using British Airways or Japan Airlines. (British Airways Plc,
2012) In 2012, the airline had net income of 10,827 million GBP, (British Airways Plc, 2012)
an increase of over 8% since the previous year. (British Airways Plc, 2012) Although, its
operational profits decreased by 47.1% at 274 million GBP, (British Airways Plc, 2012) it
was still profitable compared to some other global airlines that reported losses for the same
period. (British Airways Plc, 2012)
British Airways believes that its most important resource and point of advantage vis a vis its
competitors are its people. (British Airways Plc, 2012) Continuous engagement and peer
discussions are a common thing at the airline, which makes it an extremely fun place to work
at. In fact, “In 2012 the employee opinion survey, "Speak Up", was simplified in response to
feedback from colleagues, featuring fewer, more relevant, questions. The improved survey,
conducted by independent research organisation ORC International, provided a confidential
means for every colleague to voice their views on what they feel about working at BA. The
2012 survey achieved the highest ever response rate. Management was pleased with the high
scores for colleague engagement and pride in the airline, and is committed to taking action as
a result of the detailed feedback.” (British Airways Plc, 2012)
2.4 CONCLUSIONS:
In short, British Airways is the premier airlines in the world today, it has remained profitable
despite other airlines in the industry suffering losses or winding up completely by utilizing
the vast resources available to it and by quickly adapting its strategies to focus on the client in
a customer service industry. It has continued to invest heavily in technology and make it a
part of its working culture. By putting focus on its employees and encouraging them, it has
ensured that its employees contribute to the overall success of the organization and build on
the brand of British Airways.
3. SWOT ANALYSIS ON B RITISH AIRWAYS:
3.1 SWOT ANALYSIS THEORY:
SWOT is an acronym for Strength, Weakness, Opportunities and Threat (Renault, 2014). It is
primarily used to examine what the strengths and weaknesses are of an organization, and
what opportunities and threats it can face in the future. In order to successfully capitalize on
the Opportunities, the organization must utilize its strengths and in order to combat future
threats, it must repair or remove its weaknesses.
3.2 STRENGTHS:
Excellent Brand Image: In 2014, British Airways was on top of the list, when it came to
Super brands. (Winch, 2014)It was ranked ahead of Rolex as well as BBC in the UK. (Winch,
2014)
Big and Stable: As mentioned earlier, British Airways operates a massive fleet of aircrafts.
Moreover, it is often referred to as a “flying bank” due its immense stability in the
organization and core values. (Ross, 1998, p. 123)
Entire LHR Terminal 5 solely for its use: The incredibly swanky and technologically advance
new Terminal at Heathrow Airport has been dedicated to the sole operations of British
Airways, (BBC, 2008) which makes it a huge advantage for the British Carrier.
3.3 WEAKNESSES:
Lack of Reliability: In 2010, BBC reported that one in every four people lost their luggage
while travelling on British Airways. (BBC (a), 2010). Moreover, it is constantly faced with
labor issues, (BBC (a), 2010)with its cabin crew as well as ground staff having a history of
going on extended strikes for poor or lack of pay.
Lack of Innovation: Once heralded as the envy of all other airlines, the Concorde, has been
placed in the hangar, and is non-operational for some time now. Moreover, British Airways
lack of innovation, and refusal to cut costs at Concorde has made it lose its competitive
advantage in today’s environment, where economy and cheap tickets rule the market.
(Europa, 2012)
Poor Employee Management: Persistent strikes are not the only employee related issues at
the airline. On the administration side, there were issues with arrogant behavior, lack of
concern, poor correspondence, and a refusal to listen to staff and specialized specialists. Staff
was inadequately prepared, confidence was low, and goodwill had since a long time ago
dissipated. (Corkindale, 2008)
3.4 OPPORTUNITIES:
Entry into Emerging Markets: With the developed markets reaching saturation point, British
Airways is looking to target the developing markets, particularly in the South East Asia
region. It has tied up with the Spanish Airline Iberia as well the Portuguese Airline TAP.
(Thomas, 2012)
3.5 THREATS:
Open Skies Agreement: The British Airways United Airlines collaboration fell apart due to
unresolved issues in the “Open Skies Agreement.” (Godsmark, 1996) With both the US and
Great Britain at loggerheads over the issue, the open skies agreement further threatens to
cause damage to British Airways.
4. EXTERNAL ANALYSIS OF B RITISH AIRWAYS:
4.1 PESTLE ANALYSIS:
PESTLE Analysis is an acronym given to “Political, Economical, Social, Technological,
Legal & Environmental” analysis. Similar and (or) related acronyms are PESTEL Analysis
and sometimes just PEST analysis. (CIPD, 2014)It is an extremely useful tool to determine
the environmental influences in order to make strategic management decision. For example,
USA and Cuba are in the middle of a trade embargo. Planning a trade with Cuba without this
knowledge would be disastrous as it is prohibited and will not be allowed, thus wasting
considerable company resources.
Political: Air travel and security are almost synonymous these days, and have seen increment
in wellbeing and hostile to terrorism activities as a consequence of the September 11 air
seizing in the United States and the London bombings of July 2005. Separated from that,
substantial regulations on air transport calendar and a limit on planned traveler flights above
United Kingdom area have likewise influenced operations for most aerial shuttles working
inside the European mainland. Consistence to new regulations is a vital choice if British
Airways obliged steady and beneficial operations. In the meantime, efforts to establish safety
are additionally an imperative measure as shopper trust in a carrier is beginning to weigh on
the capacity of airlines to actually guarantee safe venture's without monstrosity episodes, for
example, hijacks and bombings.
Economic: The worldwide monetary emergency of 2008 has had an overwhelming bearing
on the United Kingdom-based organizations and the planned carrier business has
additionally been influenced. From 2008 onwards, world development had been anticipated
for only 2 percent yearly. In the meantime the debilitating pound against the Euro likewise
gravely influences British Airways which happens to be UK based. Oil costs have declined
by near to half subsequent to its tops amid the year 2007. As the United Kingdom was the
first worldwide superpower to be hit with the emergency alongside the United States,
customer spending has additionally seen its most keen decrease in 13 years. This pattern has
not changed much for as far back as 5 years. Expense cutting measures by both people and
organizations has seen a gigantic downgrade in the quantity of travelers in the course of the
last 5 year period.
Social: The United Kingdom has a maturing populace which is unfortunate. In the meantime,
the worldwide monetary emergency has likewise prompt basic levels of unemployment that
has never been seen in the United Kingdom for quite a long time. With the more established
era steadily extending, British Airways can take encouraging points in the way that the more
seasoned era contain generally resigned people who are additionally ready to make travel
arrangements and long relaxes in the meantime, with unemployment being at a high, dealing
and cost correlations crosswise over rivalries are certain to increment.
Technological: A late review uncovered that 34% of online buyers are anticipating utilizing
cost correlation locales more with Interned savvies seeing an increment since the late 2009.
In the meantime, internet booking administrations and check-ins are getting to be among the
business principles where most contenders are utilizing it. It is no more an oddity gloated by
British Airways alone. English Airways will most likely keep up innovative mindfulness
while likewise staying away from the propensity for getting to be exclusively dependent on
engineering based shopper advertising and overlooking different markets. English Airways
ought not overlook that the more established era still have an extensive rate of people who
perform ticket obtaining and check-in system the exemplary logged off way.
Environmental: New ecological arrangements, for example, commotion contamination
controls and vitality utilization controls have been mooted following the later phases of 2009
and 2010. Heathrow airplane terminal which is the world's busiest airplane terminal and
British Airways "home turf" is getting progressively congested with approbations to get more
land for development methodology not giving any positive suggestions. More up to date
enactments and ecological issues concerning area obtaining will just build operational
expenses. Customers today are likewise progressively naturally cognizant and scan for
indications of moral natural approaches when picking administrations and items. Natural
agreeableness is among the greatest promoting patterns of the 2010 decade
Legal: Legitimate issues have emerged as value settling among similarly invested rivals in
the trust of countering the assortment in customer inclination regarding evaluating. In the
meantime, legitimate wrangles because of lodge team strikes that has happened long ago
additionally render a precarious lawful stage for British Airways. The Open skies
understanding in 2009 was seen as an open door for British Airways and rivalries to
uninhibitedly transport flying machines between the United States and Europe. English
Airways merger with American Airlines experienced a considerable measure of lawful
processes that are both unreasonable and unnecessary preoccupation from the primary
business.
4.2 PORTER’S 5 FORCES ANALYSIS:
Porter’s theory of competitive analysis depends on five forces that generally affect any
business organization. (CGMA, 2011) These are: 1. Threat of New Entrants 2. Bargaining
power of suppliers 3. Bargaining Power of Buyers 4. Competitive Rivalry within the industry
and 5. Threat of Substitutes (CGMA, 2011)the analysis of Porter’s five forces reveals how
competitive a certain industry is or how attractive it is to new players (CGMA, 2011). It may
be used for firms already in industry to evaluate their own strengths and weaknesses or by
firms trying to enter a new market. (CGMA, 2011)
1. Bargaining Power of Customers: The Bargaining power of customers is Moderate. Clients
are profoundly value touchy; consequently client needs incredible administration on moderate
rate. So low centralization of purchasers to suppliers implies they have small bartering force.
Purchaser force is solid particularly in the ease market, as there is little separation between
business offers. Internet use has offered attention to client to discover better arrangement on
the web.
2. Bargaining Power of Suppliers: The bargaining power of suppliers is high. Airline
suppliers have a high dealing force. Distinguishment of the optional guidelines made by
IATA which incorporates the time of utilization of an area opening and re-timings of existing
spaces for particular reasons which are given need over totally new space requests. BA
confined by sole supplier fuel suppliers (Air BP is the sole supplier of fuel at the airplane
terminals) BA representatives use aggregate haggling through exchange unions so as to build
their bartering force.
3. Threat of New Entrants: The threat of New Entrants is low, because it depends on:
Expected countering: Price and promoting obstructions
Product Differentiation.
Normality strategy or enactment
Economies of scale
High Capital necessities of expense passage
aggressive environment
Accessibility of supply and circulation channels
4. Competitive Rivalry of Firms: The level of rivalry among the firms is high. A developed
industry with almost no development; organizations can just become by taking clients far
from contenders. BA works both short pull and whole deal flight. There is little separation in
term of cost of item and administrations they offer to client in whole deal flight. BA unions
and organization together has solid effect on virgin and different contenders. Along these
lines they expands client fascination in new market and which additionally builds piece of the
overall industry. In January 21, 2011 Spain's Iberia air transport merger with British aviation
routes.
5. Threat of Substitutes: The threat of Substitutes is Low. The danger of substitutes alludes to
the capacity of purchasers to change to an option sort of item, subsequently choices to air
travel. While it is reasonable to recommend that there is no genuine option to whole deal air
go regarding time and expense, the plan B for short-pull ends of the line do exist, and differ
from mentor to auto to rail. Short pull flights: the quick prepare Long pull flights: no
outstanding substitutes.
5. EVALUATION OF HOW A B RITISH AIRWAYS POLICIES AND
PROCEDURES CONTRIBUTE TO EFFECTIVE AND EFFICIENT
MANAGEMENT OF PHYSICAL RESOURCES:
British Airways has outlined five strategic goals for its success, they are:
Be the airline of choice for long haul premium customers (BA, 2010: 29)
Deliver an outstanding service for customers at every touch point (BA, 2010: 29)
Grow our presence in key global cities (BA, 2010: 29)
Build on our leading position in London (BA, 2010: 29)
Meet our customers’ needs and improve margins through new revenue streams (BA,
2010: 29)
British Airways has identified long haul premium customers as their main target to sustain
their profits. (BA, 2010)They will identify the requirements of these customers and provide
what they need in order to retain current customers and add new ones in the course of the
years. (BA, 2010) They plan to train their staff (the ones who have a face to face interaction
with the clients) to ensure that they deliver an outstanding service to the clients at every point
of their interaction. (BA, 2010) This will ensure higher revenues for the airline. (BA,
2010)They aim to expand their presence in big cities around the world, while concentrating
on their base hub in London. (BA, 2010)The main source of revenues for the airline is ticket
sales; however they shall endeavour to build on other services provided to the client and build
revenue on that through their strong brand image, while retaining a concentration on their
ticketing sales. (BA, 2010)
The airline will utilize its sources to the fullest extent and concentrate on these strategies and
build on them continuously. British Airways has planned its fleets and travel routes for years
in advance. (British Airways, n.d) However, it does account for changing economic
conditions, and changes in customer preferences and tries to plan for the same. (British
Airways, n.d) This is a testament to the vast resources the airline has at its disposal that it can
be flexible and proactive in today’s changing business environment and hence adapt to the
demands of the passengers in a quick and efficient manner.
6. CONCLUSIONS:
British Airways has privatized in 1987 and after that it was more gainful. In 2008 British
Airways has made benefit of £813 million pound however it has extraordinary deficiency
2009 and 2010. Because of credit crunch and now subsidence, economy is fabricating
gradually so British Airways is moving towards enormous natural change towards their
polices and methodology to bring about a noticeable improvement UK air transport. English
aviation routes have part of organizations and cooperation and in January 2011 British
Airways combined with Spanish Iberia carrier and made worldwide solidified Airline
Consortium S.A.
7. RECOMMENDATIONS:
In a review of British Airways operations by Astute Solutions’ ePowerCenterTM, they found
that “The existing processes were complicated and lengthy, Multiple customer databases
were being created across the airline, It was not possible to report on companywide service
failures. They recommended that, “create a single, global customer service platform
connecting all customer relations sites and 350+ service representatives, Improve the speed
and lower the cost of service recovery, by increasing operational performance and
productivity, Provide timely and relevant feedback to the company, and become aware of
service problems immediately, Increase operational performance and productivity, Improve
passenger compensation procedures across its 145 airport locations.”
British Airways already deploys a huge fleet of aircraft and is in the middle of adding some
more. It has recently ordered 12 Airbus 380-800, the world’s largest commercial airliner to
add to its already commanding fleet. (British Airways, n.d) However, its concords are not
operational at the moment and have been declared retired by the airline. Concorde was retired
after the Air France mishap in 2000. (Westcott, 2013) (Air France is the only other airline
apart from British Airways to have the Concorde in its fleet). Ben Lord from the SCG
believes that retiring the Concorde was very political. He said an additional 20 to 30 million
GBP invested in the Concorde could see it soaring in the skies again. (Westcott, 2013)
However British Airways remains reluctant to make this investment. It might be a good idea
to get the Concorde back into operation as it has a certain niche value to it. Hundreds of
people gather to catch a glimpse of the Concorde every time it can be spotted. The Concorde
requires only a small portion of financial investment that British Airways commands.
Returning the Concorde into operations can see the airline increase its revenues and please
the frenzy that is still associated with the Concorde, even after a decade of its retirement.
Perhaps it is time the Concorde came back into operation.
The objective of British Airways is to present better-quality administration to its clients,
stakeholders and representatives alike. The workforce of British Airways is a critical positive
gimmick that strives to offer most extreme progressed and satisfying administration to its
shopper. Their statement of purpose likewise retells their mean to accomplish the status of the
best carrier generally. To be fruitful, the organization of British Airways needs to show duty
to their business and have faith in it more than any other person. A crucial aspect of British
Airways in directing a flourishing business is to relate every single allotment of their business
reason to all the stakeholders.
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