British Airways Strategies

Introduction

British Airways is an international and UK’s largest airline that currently operates to over 300 destinations in different countries across the world at different schedules. The formation of the British Airways originated from the March 1974 dissolution of two constituents of the British Airways Group (British Overseas Airways Corporation (BOAC) and British European Airways Corporation (BEA)). Although the market has not been without competition since the emergence of Virgin Atlantic in 1984, British Airline has continued to operate and expand through acquisitions and collaborations. An example of an acquisition is the 1988 acquire of British Caledonian. The company is now a privatized entity (British Airways, 2008).

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The company operates airline passenger and cargo services, and their recently posted report on the year 2007/2008 indicates that they carried more than 300 million passengers and 805, 000 tones of cargo during this period. The company, which has a principal place of business as Heathrow has also entered into agreement with other corporations, codeshare and franchise partnership deals. The company’s operations play an important part in providing leisure, business travels, employment and business opportunities to people around the globe. The company had 245 aircrafts at the end of March last year according to their recent report, an improvement from 242 about a year earlier. The following are the categories of their aircrafts; Boeing: 747s, 777s, 767s, 757s, 737s, and Airbus: A 320s, A321s, A319s, and Avro RJ100s (British Airways, 2008).

During the financial year 2007/2008, the company achieved an operating profit of 875 million euros and increased pre-tax profit by 272 million euros compared to the previous financial year. Achieving this financial strength enabled the company’s ability to deal with the difficult climate as a result of the risen fuel prices and economic slowdown. The revenue during the same year rose by 3.1% to 8,753 amid the impacts of the movement of exchange rates. However, although the passenger revenue went up, the seat factor decreased to 75.6 % (by 0.5 points)-an indicator that reveals how full flights are. The company realized decreased (by 0.7%) expenditure on operations, and costs and employee costs also decreased. The posted working capital (3,148 million pounds) was lesser than that posted as at March 31, 2007 (3,431 million pounds). The company also encountered more financial risks; liquidity, credit and market risks (British Airways, 2008).

Business organization

Fleet planning, network planning, marketing, distribution, sales, pricing, and revenue management rests in the hands of the commercial team. The company ensures that a variety of products and a price mix are offered in all the countries to serve a range of customers. This is the work of the revenue management which is the duty of the commercial team. Revenue management also seeks to monitor and control the sale of seats so that the company can improve in profitability (British Airways, 2008).

The designing, development and delivery of the British Airways products and services rests in the hands of marketing and distribution teams which is also charged with the mandate to strategize the booking and distribution channels. The group also handles and manages the internet portal ba.com and the company’s relationship with other channels of distribution around the world.

The need for new fleet, fleet management and planning of fleet is managed by the company’s fleet planning. The work to plan the networks and scheduling is carried by the Network planning which also has a duty to manage the company’s slot portfolio across the network. The performance, routing, and briefing materials for all the company’s departures (400 of them) are done by the team of Flight planning specialists.

The company also has a team of in-house Engineering function charged with the duty of managing and maintaining the aircrafts. The company has two maintenance locations at Heathrow where the technical and support staff are located, and also at Gatwick as a smaller support base. The heavy overhaul facilities are located at different places, for example Scotland for Boeing 737 and Cardiff for 747. Where the company requires more competitive or more quality maintenance, it outsources the services (British Airways, 2008).

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The company has about 2900 pilots based at Heathrow and about 350 at Gatwick. Pilot recruitment, support and training rests in the hands of the flight operations team which is also charged with the responsibility of fleet operations’ safety. The company has established a Flight Training plan where the duties to manage recurrent and conversion training rests in the hands of a team of fleet-specific training managers. The training kit consists of “14 full-flights and four fixed-base stimulators” (British Airways, 2008). The company sells simulator facilities to other airlines and the corporate firms and provides for all of its training requirements. The company has further established a closer relationship between its engineering staff and technical staff and the manufacturers of aircraft to come up with and maintain craft operation standards and policies (British Airways, 2008).

Account management teams placed in various countries around the world help the company to maintain the relationship with major customer groups through sales.

Travel agents, the internet, contactBA call centers and other global distribution systems are utilized by the company to ensure that customers acquire product and other information such as schedules and fare (British Airways, 2008).

The operations planning team where the BA World Cargo is incorporated, is charged with the following responsibilities;

  • Scheduling operations, coordinating the maintenance and flight schedules for fleets, controlling and rescheduling the schedules, crew, resources and aircraft for example as a result of disruptions from weather.
  • Planning and controlling worldwide operations, taking care of time observance, and baggage performance.
  • Planning ground resources and the resources for cabin crew and the flight.

As part of strategy to upgrade the customer experience, the company established a Customer Services directorate in 2007. The facility enabled the company’s staff that would be involved in the customer journey and other contact operations come together. The company also helps the children who are traveling alone, customers who are physically challenged, manages check-ins and boarding through a passenger services’ team. In order to ensure that the services provided by the company’s third-party agents at network airports is the same level as aforementioned, an airport solutions team with a worldwide coverage has been established. Other extended duties for the customer staff in the period 2007/2008 includes improving contact centers to be able to afford more online check-in and offering training for new systems and processes in the Terminal 5 (British Airways, 2008).

The company distributes its information through Information Technology systems like the Employee Self Service which can be useful to the employees wanting to know how to do their duties, the ba.com for customers wishing to save time spent and the inconveniences at airport during bookings and the encounter with the travel agents among other benefits, online check-in systems and global distribution systems. These have helped the company to increase the capacity of volumes of passengers it can serve at ago; reduced time wastage and inconveniences involved with physical encounters between the travelers and travel agents, and reduced the cost of operations through reduced links of travel agents. Information Technology has also helped the company to manage the environment. This includes the reduction of green gas emissions from power usage through saving of power when using notebook laptops by the Company (70% more on power efficiency), powering off of the personal computers overnight, and the following of the principles established by the Waste-Electrical & Electronic Equipment (WEEE) (British Airways, 2008).

The market and products

The company operates airline services in and out of the United Kingdom. The company flies to Africa (e.g. Cape Town, Lusaka, Nairobi and Tripoli), UK & Ireland (e.g. Newcastle, Manchester, Jersey and Aberdeen), Europe (e.g. Paris, Frankfurt, Amsterdam, Barcelona, and Turin), American region (New York-JFK and Newark, Washington, Bermuda, and Chicago), Middle East and South Asia (e.g. Delhi, Doha, Kuwait, Mumbai and Tel Aviv), and Asia/Pacific (e.g. Sydney, Beijing, Hong Kong and Tokyo). The company sources its materials and equipment from companies like Airbus (for the supply of the Airbus planes) and the Boeing who are the suppliers of its Boeing equipment. The company in the last financial year established some or completed other sourcing projects with its suppliers (2008). The company also has established preferred suppliers who it operates business with (British Airways, 2008).

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In addition to improving the company facilities to save waiting time, lessen the number of queues and offer range of catering option to customers through the Terminal 5 facility, the company has established a range of products and services in order to meet diversified market needs. Last year, the company established the Kids Council group and attained advice from young travelers in this group. In an effort to make sure that they better their services to the customers, the company carries out a customer-focused research every year and involve over 600, 000 customers. The companies Boeing 747 airplanes now contains the new Club World which was redesigned cabin to facilitate wider seats, offer privacy and comfort, allow sleeping behind a touch button screen and passengers can choose between cold or hot food options. The company’s planes afford entertainment for passengers in their Boeing 747s and 767s with movie options, choice and control as per the customer choice.

The company has already an internet booking facility through the ba.com where a quarter of the bookings are made. The people intending to fly can access information on the price even before they fly, while those at flight can share information. The company has in place projects certified by the UN to achieve emission reduction for example using the internet booking facility reduces the carbon emissions because it avoids use of papers.

Strategy

One of the avenues companies can exploit is having a strong relationship with its suppliers. This is because the relationship for example, can lead to establishment of ethical codes of conduct or agreements in favor of the company buying that will enable it meet the customers’ demands more satisfactorily. The company plans to have a new supply contract in 2010 under a reviewed in-flight catering needs, and this will offer more opportunity for the suppliers to exploit. The launch of British Airways’ OpenSkies subsidiary in mainland Europe would also result in more opportunity to relate to the suppliers in the industries concerned. The company also seeks to continue surveying suppliers to determine their social corporate responsibility and strengthen its supplies decision by using self-certification data. A company also may seek to strengthen the relationship with its suppliers by ensuring payments are made in time. The company also carried out on-time payments to 88% of payments to suppliers as per end of March last year in the UK market. The company set a worldwide on-time payment target of 90% last year. The company uses the provisions in the Companies Act 1985 on the number of days’ purchasers in creditors and the British Industry code of practice on supplier payment (CBI) (British Airways, 2008).

The company has established the effective channels of communications which can help it advance its business and other agendas. During the year 2007/2008 the company realized that face-to-face engagement as a means of communication was the most effective strategy, followed by Information Technology which was identified as second in enabling change across business. The company has invested in the Information Technology through the use of internet booking and the Terminal 5 facilities. The company also employs a simplified and automated corporate processes channel through the use of Employee Self Service (British Airways, 2008).

The company has an online booking facility as discussed earlier which allows customers to purchase their ticket even while at home. The company also has an online check-in system that is continuously being improved. This system boosts operations through advanced flight planning since the customers can select the number of checked bags they will take to the airports. It also allows diversity since customers can use it on other carriers for connecting codeshare journeys. The booking facility is however an option which means customers can book through traditional method through the travel agent. The strategy of booking via the internet may be effective because it avails other advantages to customers who are willing to make other bookings for services like hotels and holiday offers to the places they are traveling to. In addition, because usage of such a facility can save on time, it is present a potential growth level in future. Most of the Executive Club redemptions are made online and a calculator can now help customers to determine the places they can spend their mileage for (British Airways, 2008).

The position of the employees to helping a company offer better service and achieve goals cannot be underestimated. The company can wish to source from the employees by viewing them as important resources and exploiting their potentials. The vision style of the British Airways company was updated and modernized last year to focusing on the feedback from the employees to help the company offer best services.

Improving performance and expansion by a company can be achieved through various strategies. One such strategy is to acquire other firms; another is to establish agreements and mergers. Performance may be improved through these strategies if the other organizations are better in the target areas of focus. Another strategy is the establishment of more locations such as airports and operational routes. The British Airways company in her business plans wished as per last year to improve performance on operations and customer experience at Heathrow base through the improvement of the Terminal 5 facility. The company, using the BP10 facility which made them focus on punctuality and baggage performance wished also to further the benefits to offering “brilliance” in key areas like ba.com, Terminal 5, schedule from London, and customer service. According to their published report, the company recognizes the need to achieve a competitive cost base as a way to achieving investment and growth plans. In addition, the company aimed at reducing deficits, solving the pension problems and controlling costs through the BP10. The company had plans subject to the resolving of the pension conflict, acquire competition for longhaul aircraft this year (2009) to reach certain growth level, and replace its fleet with a further acquire beginning 2011. the company during the last year’s financial year considered the priorities and themes of the then BP10 to establish a three-year business plan named as BP11 which would go up to 2010/11 financial year (British Airways, 2008).

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The company established an operational cooperation that is also strategic and tactical, with Qantas through the Joint Services Agreement (JSA). In 2005, the agreement was given a further go ahead by the Australian Competition and Consumer Commission to an addition of five years and hence will proceed to 2010. The two benefit from one another through coordinated sales and marketing activities across the globe, both contribute to the venture via sharing the costs and revenues on the JSA routes, and the British Airways can thus serve the market covered within the agreement (between Southern Asia/Australia and UK/Continental Europe). The result has been the provision of improved customer service, departure times and flights for the customers. The company codeshare with American Airlines where the latter places its codes to over 80 British Airways routes and British Airways places their codes on over 120 of their routes. The company also entered into an agreement to cooperate with Iberia on the Heathrow-Madrid and Heathrow-Barcelona routes through the Joint Business Agreement (JBA). The company also has shareholding in Iberia of about 13.15% according to their 2007/2008 annual reports and accounts (British Airways, 2008). This relationship according to the report has helped the company improve schedules and customer’s value for money.

The company is also a member of the oneworld alliance together with Royal Jordanian, Qantas, Iberia, Japan Airlines and American Airlines, among other members. Other relationships include codeshare with Finnair, Japan Airlines, Malev, LAN and Cathy Pacific all of which are members of the oneworld group and others like bmi outside the oneworld group. The company also partners with franchisees companies and through them the passengers are connected to their mainline services. The company also may reap benefits with this relationship with companies like Comair in South Africa and Sun Air in Scandinavia through providing payable services to them and a fee that they pay to British Airways also (British Airways, 2008).

Promotions, offers and opportunities

Promotions are a key strategy that any company can use to ensure that it attracts more customers and compete effectively. A company would take advantage of the available opportunities like new policies or lifts on previous bans that favor certain conditions in order to launch competitive promotions and offers. The company moved to act in accordance with the lifting of the hand baggage restrictions by the UK Department for Transport. Last year, the company reintroduced the allowance on hand baggage where passengers traveling from, through and to UK would receive allowance of two pieces of hand baggage allowance. Passengers using the First and Club World were also offered with a special treatment to carry three bags and a choice listed shopping equipment which is not charged, in addition to the normal baggage allowance. Companies also can use promotions and offers for products and services to beat their competitors by offering new exemplary services and products through innovative means. The company through the introduction of the offer for carrying one sporting equipment as afore-described may therefore attract more customers since reportedly no other airlines has such an offer.

One of the strategies to ensure that the business enjoys customers through continued purchases is establishing customer loyalty. Programs that can have the customer stick to the company can emphasize on increasing customer loyalty through reward culture and building trust through offering better and improved services. Another invention by the British Airways that has attracted more customers, namely the LIFT loyalty and reward BA World Cargo programme was launched in 2007.

The company also continues to participate in activities that boost corporate responsibility which has been established as a new priority by the company’s business BP11plan. This includes achieving increased lower carbon emissions, waste reduction and recycling, investing in community relations program and achieving reduced noise and air pollution. Examples of programs that improve community relations are the East London community work, young athletes’ bursary scheme and their partnership with the London 2012 Olympic and Paralympics Games.

Strength

The company which focuses to operate her spend through preferred suppliers, operates with 2, 050 suppliers (97% of the total) who were awarded formal preferred supplier status in 2007. One of the key strengths of businesses is for the operators to identify the areas of risk and to subsequently move to mitigate these risks. Identification of these risks would enable the organization continue with its operations even if the risks occur, if they are unavoidable or for example for other organizations, or that these risks would have to be minimal if not eliminated. Risks in businesses may be hard to analyze because for large corporations they may be many, or that many issues or factors would come into play for a convincing analysis to be carried out. The company identified according to their report 25 suppliers who in case they failed to operate or their businesses were seriously affected, they would also affect the operation of the airline.

The company carries out a risk analysis across these suppliers and taking into consideration five dimensions. The update for the risk analysis is done on a monthly basis and mitigating actions taken when any supplier is deemed to be at risk. In order to further manage risks, the company uses monthly Dun & Bradstreet company reports in order to routinely monitor the financial health of some major suppliers. The company therefore is able to get an early warning on increment of risks. In case there is a failure from the major suppliers, the company uses Business Continuity Plans to cover up the shortage. In addition to ensuring demonstrating that these plans are tested regularly, contingency plans are put in place to deal with interruptions. These plans include securing alternative suppliers, use of the company’s own resources and scaling down the required service.

Change in the consumer behavior in wanting the more elegant and technologically oriented products and services is a potential field that the company can exploit through the use of its Information Technology development strategy. For example, consumer behavior in demand for more holidays, short breaks and self created trips and holidays has reportedly increased according to the British Airways report (2008). Strongest growth according to this report was shown with the usage of internet for online bookings. The company can expand to cover new market by use of their already developed resources meant to help passengers have their time through check-ins and lounges services among others. In addition, with rise in the number of those seeking for information online about holiday increasing to 78% according to the Holiday Online Planning (2007), the shopping patterns become sophisticated with usage of web 2.0 and social software, and more demanding, the company should expand the range of offer to cover wider range of consumers. Consumers have also been indicated to exhibit multi-channel behavior towards consumption of the travel options to internet which include usage of phones, emails, and high street, and the company need invest in the diverse options (Dijk, Minocha, & Laing, 2006). The customer behavior is influenced by a range of factors including ease-of-use and usability in the system serving the customer (Nah, & Davies, 2002), enjoyment brought by online purchases (Saeed, Hwang, & Yi, 2003), and obstacles brought by the system and the customer choice discussed in Dijk, Minocha, & Laing, (2006). The company would continue to invest in harnessing the advantages that would come with increased entry into educational institutions in the international countries following the application of aggressive strategies to attract more students in Australian and British institutions of learning for example (British Airways, 2008). According to the prediction of the eMarketer online sales including unmanaged business travels with airline included would increase to about $ 126.9 million by this year (2009). The company can use the condition in the established US market to increase customer online service.

Challenges

Competition is one of the continuing challenges that the company continues to face in the indirect flights, charter services, and similar routes and from other modes of transport. The establishment of a Single Market in air transport in 1992 made the market more open in Europe for more competition in the air industry (Han Tourism Congress, 2007). Competition influences the company’s pricing decisions where they have to, in order to cope well. The company also experiences competition from international players through the UK government’s policy of liberalizing the market. In addition, the company in its report has criticized the state aid as distorting competition and its incompatibility with the regulations and policies designed to open up markets. Competition in the airline market has been presented by the establishment of cheaper travel arrangements like Ryanair which caused other companies to introduce cheaper channels also, a strategy called spin-off (Han Tourism Congress, 2007). British Midland established its bmibaby as reaction to this strategy.

There are challenges that the airline must consider dealing with so that its business will continue to flourish and compete more efficiently in the UK and international market. One of these challenges is making sure that the security requirements established by the UK Secretary of State for Transport are met. These requirements even have been indicated to exceed those established by the ICAO as international standards and European Union. In addition, various foreign countries will require that certain security measures be implemented and this may pose a challenge to the airline company. For example, passenger disclosure which still continues as a requirement in the European Union may be required in other parts where it was not required as a method to deal with terrorism. The company would thus be required to employ more or similar techniques to minimize customer inconveniences as in EU. The issues of security become more complex because of the fact that they may change overtime and adoption of changes may present an additional costs or further adjustments. The company has a security department that can identify the threats for the businesses and direct the implementation of appropriate measures. Security issues cuts across physical borders. The company also must ensure security is maintained in its network ba.com to effectively avoid any chances of customer violation through data breaches or related challenges which also have been reported with big corporations like Heartlands Payment Systems.

While environmental concern continues to be in focus, more international and local regulations may be formed and this would require the company to respond appropriately. Such regulations may present potential costs to the company as measures of compliance are implemented.

With increase in fuel prices occurring at the rate it has been occurring in the recent past, the company also faces a challenge of minimizing such costs or implementing measures to counteract the cost in order to cut the cost expenditure on fuel or keep it as low as possible. According to the company’s information, the fuel price has shot up three times in five years and their fuel bill went to an excess 2 billion pounds for the first time. The company report projected that it would present a third of its total costs. Another challenge that the company would face is the deterioration of the world economy indicated in the recent pasts whose effects may affect negatively customer expenditure forcing people to cut on leisure and other unnecessary expenditures like holiday and travels.

References and bibliography

British Airways. 2007 Annual Report and Accounts. CTD. Web.

Datta Debarshi Subham Chakravarty. European Airline Industry-Strategies for the New Millennium. Web.

Dijk Geke, Minocha Shailey, & Laing Angus. Multi-channel consumer behavior: Online and Offline travel preparations. (2006). Montreal, Canada. Web.

Forsythe, S.M. and B. Shi, Consumer patronage and risk perceptions in Internet shopping. Journal of Business Research. 2003. 56(11): p. 867-875

Han Tourism Congress. Trends in the Airline Industry. (2007). Web.

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Silvia Patricia. The Interne, Threat or Tool for Travel Agencies? Web.

Saeed, K.A., Y. Hwang, and M.Y. Yi, Toward an Integrative Framework for Online Consumer Behavior Research: A Meta-Analysis Approach. Journal of End User Computing, 2003. 15(4): p. 1-26

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