British Airways Essay

I re atom going to parties in the new-fashioned 1970s, and, if you wanted to entertain a civilized conversation, you didnt really tell that you worked for British breeze styluss, because it got you talking about hatfuls last turn on subsist, which was usually an unpleasant one. Its staggering how such(prenominal) the distributelines image has changed since and then, and, in comparison, how proud ply are of on the job(p) for BA today. British Airways employee, Spring 1990I recently flew business class on British Airways for the first beat in about 10 historic period. What has happened anyplace that time is amazing. I cant tell you how my memory of British Airways as a family and the experience I had 10 old age past contrasts with today. The improvement in function is truly remarkable. British Airways guest, ignorepurse 1989In June of 1990, British Airways reported its third consecutive class of relieve d hold profits, 345 million before taxes, firmly establ ishing the rejuvenated carrier as one of the cosmeas or so profitable flight paths. The impressive financial results were one peculiarity that BA had convincingly shed its historic bloody awful image. In October of 1989, one respected American publication referred to them as bloody awe near, a description most would not have thought possible aft(prenominal) pre-tax losses totalling more(prenominal)(prenominal) than 240 million in the age 1981 and 1982. Productivity had move up more than 67 percent over the course of the 1980s. Passengers reacted grittyly favorably to the changes. after(prenominal) suffering by means of with(predicate) geezerhood of poor market perceptual experience during the 1970s and before, 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 mercifulkind, selected BA as the winner of its Passenger Service award. In the span o f a decade, British Airways had radically amend its financial strength, confident(p) its work force of the paramount importance of node attend, and dramatically im prove its perception in the market. Culminating in the privatization of 1987, the carrier had undergone fundamental change finished a series of authoritative pass alongs and events. With unprecedented success under its belt, precaution frontd an increasely perplexing problem how to maintain momentum and recapture the focus that would allow them to meet new challenges.Crisis of 1981Record profits must have seemed distant in 1981. On kinfolk 10 of that year, then principal administrator Roy Watts issued a special bulletin to British Airways moduleBritish Airways is facing the worst crisis in its fib . . . unless we count bustling and remedial action we are heading for a loss of at to the lowest degree 100 million in the present financial year. We face the prospect that by next April we shall have piled up l osses of shut up to 250 million in two age. Even as I write to you, our money is draining at the rate of nearly 200 a minute. No business can survive losses on this scale. Unless we take decisive action now, there is a real possibility that British Airways will go out of business for overlook 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 brass had announced its plan to privatize British Airways through a sale of shares to the investing public. Although air duct focussing recognized that the 58,000 ply was to a fault large, they expected increased passenger volumes and improved staff productivity to support them avoid alter and costly employee reductions. While the 1978-79 plan forecasted passenger job growth at 8 to 10 percent, an unexpected recession go forth BA struggling to survive on volumes, which, instead, decreased by more that 4 percent. A diverse a nd aging fleet, increased fuel costs, and the high staffing costs forced the government and BA to disgorge privatization on drive indefinitely. With the airline technically bankrupt, BA management and the government would have to tarry before the public would be ready to embrace 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 stage for the British Airways Board to assume control of two state-run airlines, British europiuman Airways (BEA) and British Overseas Airways Corporation (BOAC), under the name British Airways. In theory, the lineup 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 Frank (later shaper) McFadzean replaced the group division with a structure based on functional divisions to officially integrate the divisions into one airline. Still, a distinct secern 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 infrastructure than it did with profit. As a 20-year veteran and confederation director noted The BEA culture was very much driven by building something that did not exist. They had built that in 15 years, up until 1960. near single-handedly they opened up air transport in Europe after the war. That had been about getting the thing established. The marketplace was taking palm of itself. They wanted to get the network to work, to get stations opened up.BOAC had in any case done its share of pioneering, making history on whitethorn 2, 1952, by sending its first jet airliner on a trip from capital of the United powerdom to Joh annesburg, officially initiating jet passenger service. Such innovation was not without cost, however, and BOAC ground itself mired in financial woes throughout the two decades following the war. As chairman Sir Matthew Slattery explained in 1962 The Corporation has had to pay a heavy toll for pioneering advanced technologies.Success to most involved with BEA and BOAC in the 1950s and mid-sixties had less to do with net income and more to do with flying the British flag. Having inherited numerous war veterans, both airlines had been injected with a military mentality. These observe 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 man resources Nick Georgiades said of the military and civil service history dress those two together and you had an judicature that believed its job was simply to get an aircraft into the air on time and to get it down on time.While governme nt support reinforced the operational culture, a deceiving string of profitable years in the 1970s make it even easier for British Airways to neglect its increasing inefficiencies. Between 1972 and 1980, BA earned a profit before gratify and tax in each year except for one. This was prodigious, not least because as long as the airline was returning profits, it was not aristocratic to persuade the workforce, or the management for that matter, the fundamental changes were vital. Minimizing cost to the state became the normal by which BA measured itself. As one aged manager noted Productivity was not an issue. People were operating effectively, not inescapably efficiently. There were a lot of raft doing different peoples jobs, and there were a lot of people checking on people doing different peoples jobs . . . As a civil service agency, the airline was allowed to become inefficient because the remembering 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 impregnable residual loyalties upon the merger notwithstanding complicated the historical disregard for efficiency by BEA and BOAC. Until Sir Frank McFadzeans shake-up in 1976, British Airways had cut intoed under several 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 jointure of BOAC with the domestic and European divisions of BEA had produced a hybrid racked with management demarcation squabbles. The combative advantages sought through the merger had been hopelessly defeated by the lack of a unifying merged culture. A BA director summed up how distra cting the merger proved There wasnt enough management time devoted to managing the changing environment because it was all focused inwardly on resolving industrial relations problems, on resolving organizational conflicts. How do you consume these very, very different cultures together?Productivity at BA in the 1970s was strikingly bad, especially in contrast to another(prenominal) 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. nonpareil human resources senior manager recalled the awful service during her early 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 vizor of 58,000. The problems became dangerous when Britains worst recession in 50 years minify passenger numbers and raised fuel costs substantially.Lord might Takes the ReinsSir John (later Lord) fagot was appointed chairman in February of 1981, meet a half-year before Roy Wattss unambiguously grim assessment of BAs financial state. King brought to British Airways a roaring history of business ventures and truehearted ties to both the government and business communities. Despite having no formal engineering qualifications, King formed Ferrybridge Industries in 1945, a company which pitch an unexploited niche in the ball-bearing industry. Later renamed the Pollard roll and Roller Bearing Company, Ltd., Kings company was highly successful until he sold it in 1969. In 1970, he joined Babcock supranational 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 include 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 speak of the significance of Kings appointment British Airways needed 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 strike carrier. I would have been comforted by the thought that the worst was place us. There is no certainty that this is so. Upon Wattss announcement in September of 1981, he and King launched their excerpt plan tough, unpalatable and immediate measures to cornerstone the spiraling losses and save the airline from bankruptcy. The radical steps include reducing staff numbers from 52,000 to 43,000, or 20 percent, in comely nine months freezing pay increases for a year and closing 16 routes, eight on-line stations, and two engineering bases. It also dictated lame cargo-only services and selling the fleet, and inflicting massive cuts upon offices, administrative services, and staff clubs.In June of 1982, BA management app stop the Survival plan to accommodate the reduction of another 7,000 staff, which would last bring the total employees down from about 42,000 to nearly 35,000. BA completed 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 150 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 expound by one journalist as imaginative, dynamic, and ex tremely hardworking, euphemistically know on Fleet Street as forceful, and considered by King as simply outstanding. As CFO, Dunlops contribution 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. employ creative financing, Dunlop wrote down 100 million for redundancy costs, 208 million for the value of the fleet (which would ease depreciation in future years), even an spare 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 flat turned his attention to changing the airlines image and further building his turnaround team. On September 13, 1982, King relieved Foote, cone shape & Belding of its 36- year-old advertising 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 disceptation that the BA direction 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 imitate 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 lifted 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 version 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 f inancial evidence 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 marshal Becomes Chief Executive In the midst of the Saatchi & Saatchi launch, King recruited Mr. (later Sir) Colin marshal, 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 deputy 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 guest service, and second, he had worked with a set of customers quite similar to the airline travel segment during his car rental days.Marshall do customer service a personal crusade from the day he entered BA. One executive reported It was really Marshall focusing on zilch else. The one thing that had overriding attention the first three years he was here was customer service, customer service, customer service zero else. That was the only thing he was interested in, and its not an caricature to say that was his exclusive focus. Another senior manager added He has sure as shooting put an enabling culture in place to allow customer service to come out, where, rather 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 became an active role 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. collective Celebrations, 1983-1987 If Marshall was the most important player in emphasizing customer service, then the Putting People First (PPF) computer design was the most important event. BA introduced PPF to the front-line staff in celestial latitude of 1983 and continued it through June of 1984. reign by the Danish firm Time Manager International, each curriculum cycle lasted two days and included 150 participants. The course was so warmly received that the non-front-line employees eventually asked to be included, and a one-day PPF II chopine facilitated the participation of all BA employees through June 1985. Approximately 40,000 BA employees went through the PPF schedules. The political platform urged participants to examine their interactions with other people, including family, friends, and, by association, customers. Its acceptance and impact was extraordinary, imputable primarily to the honesty of its message, the honor of its delivery, and the strong support of management.Employees agreed close unanimously that the programs message was sincere and free from manipulation, due in some measure to the fact that BA separated itself from the programs design. The program emphasized official 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 pleasure 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 recollect people befuddle 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 reverse 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 realized where its booty was buttered. There were a lot of cynics at the time, but for people same(p) myself it was really great to suddenly realize you were working for an airline that had the gritrock to change, and that its probably somewhere where you want to stay.Although occasionally an employee tangle ill-fitting with the rah-rah nature of the program, feeling it perhaps too American, in general, PPF managed t o eliminate cynicism. The excellence in presentation helped signify a sincerity to the message. One senior manager expressed the consistency. There was a match between 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 session with a question and answer session. Colin Marshall himself often attended these closing sessions, answering employee concerns in a manner most felt to be extraordinarily frank. The commitment disp layn by management helped BA avoid the fate suffered by British Rail in its ulterior attempt at a similar program. The British Railway program suffered a limited budget, a lack of commitment by management and interest by staff, and a high degree 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 wha t 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 engage 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 bargain union repre sentatives, were left uninformed of their whereabouts. To their surprise, as the show began an aircraft moved through the fog and laser lights decorating the stage and turned, revealing the new look of the British Airways fleet. A similar 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 bodily image, few on the BA staff could deny in 1985 that his or her working life had turned a new leaf from its frame in 1980.Management attempted to maintain the momentum of its successful programs. pastime 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 Aw ards for Excellence program to encourage employee input. Colin Marshall on a regular basis 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.