Category: British Airways

Abstract

After an extensive study on pertinent issues on British airways, the report brought to book strategic commercial challenges facing the BA Company particularly after profits started plummeting after 11 September attacks. commercial challenges facing the giant BA company include, turbulent global economic times, competition from cheaper Asian airlines, unpredictably rising fuel prices, environmental, mass industrial actions by employees as envisaged in a BBC news report(2010), strategic management plans, and threats from other cheaper alternatives such as railway transport.

It was reportedly determined and recommended that company employees be treated fairly and be included in decision-making according to (Marketing plan strategy and objectives,1997).

Elimination of wastes, was recommended and that management strike a balance between sustainability and environmental issues, improved strategic planning for sustainability, employee productivity, and sustainability and increased performance as coined by (David, 1989). In addition, the report presents a SWOT analysis of the company to help determine the diagnosis for problems plaguing the company especially on employee unrests (Thinking Managers, 2010).

Introduction

Synonymous with air travel, British Airways is a strong international brand that has been in the air travel business since its inception in 1947. The company, a key player in the industry has undergone radical changes, made high profile decisions at managerial levels deemed controversial and at times attracted mass industrial actions by its employees.

In addition, it has had to go through periods of dispute resolution in the industry. The company faces diverse strategic challenges that the report evaluates and provides a diagnostic approach to the challenges, and reports on how decisions made affects the company, employees, the environment, and as a player in the transport industry.

In addition, the report analyses the key strengths, weaknesses, opportunities, and threats for the company and looks at ways to address these issues while maintaining a strong customer base, a large market share, and market lead. It analyses the company’s corporate social responsibilities, and emphasizes on the worth of these issues in relation to the global economic and environmental challenges as determined by (Bazerman and Moore, 2009).

Problem Statement

Commercial challenges facing the British Airway company including turbulent economic times, rising fuel costs, environmental issues, substitutes, and employee strikes calls has caused it to experience reduced customer base, employee dissatisfaction, and plummeting profits.

Evaluation of the Challenges and Practical Solutions

Challenges

The British Airways is a company that has been in business for a long time since its inception in 1947. With innovative business minded executives, the company has undergone changes both at management and employee levels.

The company’s strategic business interests are global. Despite that, it faces a host of internal and external commercial challenges related to its operations, market position, employee retention, fading customer numbers, cheaper Asian competitors, stringent landing rules in other countries, and environmental issues; all these challenges translating to reduced profitability and market share.

Quinn (1980) determined that these challenges call upon management to make radical decisions to steer the giant company to a realize profits, stay in the market and maintain the lead it has enjoyed over the years. According to Gincell (2004), external challenges faced by the company include alternative and cheaper means of transportation, such as the railroad, and road travel, and turbulent economic times.

For the company to remain successful in the market and continue raking in profits, it has to integrate a strategic plan for that purpose (Plan Your Marketing Strategy, 2010). A strategic plan would make the company win in the current economic times. Quinn (1998) asserts that a well-formulated strategy helps a company win against economic challenges such as plummeting profits, a reduced customer base, and unnecessary costs.

A well-formulated strategy entails certain elements that steer a company to win. BA is resource intensive. Quinn (1998) asserted that a good strategy must be extensively formulated and opponents do a lot of strategizing. In addition, if the management of BA formulates strategies relevant and realistic to the global down turn of many economies and reduced household incomes. It would enable the company utilize its resources efficiently without incurring wastes, according to Baker (2008).

Strategies and Policy goals

Quinn(1998) identifies five levels of strategies, including policy goals, which require that a statement of what the management wishes to achieve both in the short term and long term be laid out. In this case, besides profitability, the airliner has to competitively stay in the market despite the turbulent global economic times.

In addition, the company should formulate policies regarding reduced extravagance on the available resources generated from profits, and adds that a link of strategy and performance was vital (Prescott, 1990). BA is a company that has been in business for many years, to determine whether the new strategies formulated can be measured against profitability of previous years and identify whether they have eliminated wastes or not as explained in the Strategic Management of British Airways Company (2008).

Non-executive directors of the company should also contribute constructively challenge the current strategies and constructively contribute to the development of new and well-formulated strategies.

Quinn (1998) concludes that by implementing well-formulated strategies at the five levels in the company, challenges of economic down turn could be combated to allow the airline stay in the market. These levels of strategy include, policy goals, overall goals of the business concern in line with the global economic down turn where each strategy should work towards achieving the laid down objectives, and that the goals of the BA company be well spelt both at management and employee levels.

According to Dibb, Simkin, Pride and Ferrell (2008), goals and objectives of the company should be specific, well formulated, achievable, within a properly laid down period, while keeping the interests of the company at heart according to (Marketing plan strategy and objectives, 1997).

Measurable objectives

In addition, the objectives set should be measurable to eliminate waste and induce profitability at this difficulty economic times. It was also noted that the goals set by the company be measurable and attract all employee participation to elicit quick response from the management down to employee levels, then to the community.

This done, the management should look at those policies that cannot be compromised and those that cannot be compromised. The paper, Marketing plan strategy and objectives (1997) asserts that managers should be keen about when to implement those policies, strategies put in place to test the strategies if they have worked, where they need adjustments as noted by (Prescott,1990).

BA management should decide on the cost of implementing cost-cutting policies and determine to what extent they have to be implemented and the level, to which they have to be implemented. Some policy decisions are place a business at an awkward position, particularly the decision to cut on salaries or lay off employees.

The management, faced with that cost cutting strategy, at times is in a dilemma. The impact of those decisions have implications of poor decisions on the brand name of the company which translates to reduced profitability, a bad image, consequently leading to a reduced market share and profitability which in the end translates to reduced profits. One decision sparks a chain of events in a business organization.

It is vital for management to make long-term projections of their strategies, and integrate logistical support for their implementations. Despite the economic down turn, there is growth potential for the company. This could result from appropriately formulated strategies, use of efficiently skilled work force to implement the company’s strategies.

Strategic planning

According to Edward and Heller (2006), to steer the company and vigorously make it a leader in the market, a strategic plan could enable it develop a large overall ambition for the company. According to Investor relations (2010), Management at the same time should come up with operational plans that answer the question on how the company should win while operating is an economic environment that is pushing profits down, so uncertain, and facing other competitors in the market.

According to the article, Corporate planning case (1996), the report affirms that the company should endeavor to determine how it will be organized resourcefully to stay afloat, how to respond to challenges such as reduced passenger bookings by initiating intensive marketing campaigns to attract more customers, how to face competitors in the business.

SWOT analysis

According to article on Strategic Management (2002), the company should develop and conduct an internal and external analysis of the company. In addition, the Value Based Management (2009) asserts that despite the strengths, weaknesses, opportunities, and threats faced by a company, it should positively and effectively and analyze its internal and external SWOT.

The management of BA should embrace the five stages as asserted by the Value Based Management (2009), including setting long-term performance targets for the company, form the right product matrix, which includes, the suppliers of fuel, and a right marketing mix. By investing on the activities correctly, the company may realize an upper hand against its competitors in the market as is determined in Marketing Plan Now (1997).

It determines that management has to invest in those activities that steer and crest a good reputation for the company. In addition, the company needs outsource other activities that are not core to the business of carrying passengers in the global scenario.

Challenges of employee treat met also play a role in negating on the BA business activities. Management should reduce employee discrimination and grant them equal opportunities. Reducing employee discrimination could reduce largely to which employee find them demoralized, but rather motivate them.

Employees

Despite British airways (BA) being a key player in the air travel industry, it has had to undergo a series of problem that eventually escalated to mass industrial action by its employees. BA has faced internal and external challenges over time.

Some of the problems are self-inflicted while others stem from the environment. One of the self-inflicted problems included the decision to scale down employee salaries. This reduced to low employee morale and attracted mass industrial actions with disastrous consequences. It had adverse effects on customer retention. The company lost many customers who opted for alternative and cheaper means of transportation.

The company is capital intensive. Its operations are expensive in the current economic turbulent times. Fuel for the fleet of its aircrafts comes from an unstable Middle East region. In addition, profit realization depends on the ever-changing prices of fuel in the oil market. In the recent past, fuel prices have soared, causing increased transport costs. This too influenced the number of customers travelling by BA. This could reflect on administrative activities of the company as defined on the article (What is Business Administration, 2008)

Well-implemented practical innovative solutions remain the key to maintaining the position of the Airways Company. Employee satisfaction contributes to a successful business organization. Satisfied employees remain motivated as the worries and anxieties associated with retrenchment, salary reduction, and other forms of lay offs, be they temporary or long term influence employee productivity.

A satisfied and fear free employee may be expected to give the best to the employer by way of productivity and innovation. Dissatisfied employee in business organizations may undermine organizational activities that lead to loss in profitability consequently negating any gains made by the business organization.

Resolutions of worker’s grievances need timely attention. Management may engage employees in speedy grievance resolutions that would curb scenarios like mass industrial action that translates to loss of income in the way of profits. In addition, the brand name of an organization whose employees settle their disputes in the way of mass industrial actions and other forms of boycotts suffers reputation.

BA management has to make deliberate efforts to listen to employee disputes and create excellent channels of communicating their grievances to the management in a timely manner to avoid disputes spiraling out of control (Strategic Management of British Airways Company, 2008).

Alternative Measures

Another challenge facing BA are the alternative low cost airways and the global economic crisis. Profits have ever been plummeting as passengers search for alternative low cost means of travelling. To help address these, the airline could opt for a merger with other air transport companies.

As Sekaran (2004) argues, this universal approach coupled with cost cutting approaches such as using smaller aircrafts on shorter routes could address the threat from substitutes. The report call for a radical shift in its external environment policies could revive its profit margins and make the airline more profitable. Policy formulation could provide a framework on a balanced implementation of its strategies (Policy Formulation & Analysis, 2001).

According to potter’s five forces model, the management has to lay a strategy based on the five forces. These are based on suppliers. For the case of BA, the suppliers are those who sell the company fuel for propelling the jets, suppliers of its fleet of aircrafts, spare parts, and other components essential to efficient operation of the fleet. A good and stable relationship with suppliers could place it at a strategic advantage over fuel prices against competitors.

Long-term contracts for the supply of fuel at stable prices from reliable companies could place it at an upper in profit generation and maximization. The company may form long-term agreement with fuel suppliers at a concessionary rate than the actual market price. In addition, potter asserts that new entrants, buyers in this case who are customers and substitutes, consist of industry competitors determine the extent of rivalry in the industry.

New entrants

One strategy of facing and dealing with new entrants is to provide incentives to customers, use of hard selling concepts, luring customers by offering price discounts at a competitive rate to the new entrants, and establishing long term relationship particularly with those customers who use the airline frequently. Customer needs need to be assessed to tailor make air travel needs, to suit customer needs. Good listening to customers is also another important marketing strategy.

Substitute routes exists such as road and rail transport. These need critical evaluations. The marketing and administrative management need to identify the need that drives customer to use alternatives of rail and road transport as opposed to air travel. According to the findings, the report recommended that the company conduct a SWOT analysis to determine its strengths, weaknesses, opportunities and threats.

According to the report, the key strengths of the company revolved around a strong brand name, strong customer focus, experienced staff, and use of modern technology. In developing a SWOT analysis, the management should first seek to capitalize on the weaknesses of their competitors, eliminate the weaknesses that plague the company, seize the opportunities available for the company to turn it round and generate more profits.

According to the report Management executives, had to ask questions about newcomers, and their potential to cause a stir in the market. New entrants might be more powerful and create greater competition in the market. In addition, research established that the SWOT analysis called upon executives in the company to identify technology related issues of its fleets, and communication technologies that are more efficient and reliable.

Rivals in the market presented another challenge to the company. Further recommendations were that management strategizes on how to be ahead of rivals by diverting from being capital-intensive. Further, the airway’s business plan emphasize more on profitability, quick decision-making, employee retention and inclusion in decision-making, and set both long term and short-term business plans.

On the issue of weaknesses, further recommendations were that the companies focus more its strengths such as a strong brand name, which was synonymous with air travel, and its efficient staff according to the report by the article Marketing (2010).

New Markets

According to QuickMBA (1999) on marketing, various opportunities existed for the company to exploit in addition to new markets. A new market comes with its own challenges. Inclusive are legal requirements and other stringent rules by the host country.

In addition, old competitors in that environment of newfound opportunities, tax requirements, and other hurdles may present a challenge for the airline in exploiting them particularly in the Asian markets asserts Baker (2008). To counter this, it was recommended that the management of BA form business alliances with other smaller companies in the markets to ensure the smooth movement of customers from one destination to the other according to The New York Times Company (2010).

Quinn (1980) says that BA should have a strategic plan to change quickly with the changing environments. Their plans emphasized on operational management. It however was recommended that the company establish plans of action flexible to the rapidly changing customer and the environment and embrace business process reengineering concepts (Value Based Management, 2009).

Conclusion

in view of the above discussion, BA is facing a host of challenges that include the current global economic down turn that has impacted on its profits, new competitors from the Asian markets who offer cheaper alternatives, rising fuel prices, environmental issues, substitutes, and employee strikes. To counter threats, the report recommends that the company formulate a strategic plan to counter all those threats by conducting a SWOT analysis, identifying its strengths, weaknesses, opportunities, and threats.

It further recommends that the company emphasize on its key strengths to defeat threats and carry out other cost cutting measures to allow it face the challenges profitably according to the British airways annual report2008/2009, in addition to factoring environmental factors (Environmental Factors Affecting British Airways Essays and Term Papers, 2010).

The figure is a scenario of a workshop of a process strategic planning

Taken from: corporate planning case British Airways.

References

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Introduction

British Airways (BA) is the leading airline in the United Kingdom (UK). The company’s main operational hubs are Heathrow and Gatwick airports (Heathrow Airport Limited 2019; London Air Travel 2018). Its fleet size is comprised of about 270 aircraft, while its flying routes span across 170 destinations (Routes Online 2019; Jarvis 2017).

BA’s strategic direction is based on a three-pronged strategy, which focuses on expanding its airline fleet, transforming customer experiences and growing its global route network (British Airways PLC 2016; (Burke & Noumair 2015). In line with this strategy, The company’s competitive advantage is linked to four key performance indicators (KPIs): financial performance, customer service, operations and colleagues (British Airways PLC 2019). Its dominance on the transatlantic route and its Heathrow operational base is also key competitive advantages (Burke & Noumair 2015).

According to figure 1 below, BA’s financial performance within the last eight years has marginally improved from £ 8,537 million to £13,020 million (Statista 2019).

Although the company’s financial performance has steadied throughout the decade, its customer service record has declined. YGR (2018) and Efthymiou et al. (2019) support this view by noting that the public perceptions of the airline’s brand value and quality have decreased by 11.5 and 13.4 points, respectively. In this report, different strategic management tools, such as SWOT analysis, will be relied on to analyse BA’s performance, and they are useful to individuals who would want to invest in the company. An analysis of the company’s key differentiating factors is highlighted below.

Differentiation

In an industry crowded with many competitors, airlines are struggling to differentiate their services and create dominant alliances to stay ahead of their rivals (Sharma & Singh 2017). The concept of market differentiation stems from the need for businesses to provide unique products to selected markets (Airline Trends 2015). Different strategic analysis tools are used to assess a firm’s differentiation strategy. One of them is the Ansoff matrix, and it is used to review BA’s strategy in table 1 below.

Table 1. Ansoff matrix

Although the above Ansoff matrix shows different aspects of BA’s strategic focus, the focus of this review will only be on the airline’s market development strategy.

Market Development

According to the Ansoff matrix described above, BA’s market development strategy has mainly been characterised by customer segmentation (according to classes), the introduction of loyalty programs, diversification, new customer segments and new routes (One World 2019). Customer classification according to income brackets has dominated the airline’s overall marketing development plan because its other strategies are premised on segmentation. For example, the company’s loyalty programs are based on this strategy (One World 2019).

BA’s marketing development plan has been pushed on two fronts: passenger and cargo (Statista 2018). In line with this business model, BA has established a wide transportation network that spans more than 170 destinations spread across 70 countries (Routes Online 2019). This market network is vast, and few airlines can match it. BA has also purchased several aircraft from Airbus, which are equipped with advanced technology for passenger comfort and efficiency (British Airways PLC 2019). It also has a few Boeing planes, which support the current fleet (British Airways PLC 2019).

Broadly, BA had had moderate success in its market development strategy because of its keen focus on customer satisfaction. For example, the multinational analyses customer satisfaction levels to make sure its loyal clients do not have waning interests. Notably, the average age of most BA customers is 48 years, and they frequently fly with the airline (British Airways Media 2017). To achieve high levels of customer satisfaction, the airline has leveraged its technology-based resources (Liu 2018). For example, the use of the internet to make bookings, cancel flights and receive feedback has helped the company to maintain a good reputation with its customers (Liu 2018). This development is highlighted in the SWOT analysis highlighted in Appendix 1.

The use of technology to improve BA’s overall strategic performance highlights the high level of organisation of the firm’s value chain system, which considers technology as a valuable part of its service delivery framework. The airline’s value chain system is highlighted in Appendix 2. Indeed, according to the value chain analysis, BA regards technology as the third tenet of its value chain model. The others are infrastructure, human resource, technology development and procurement.

Appendix 1 also suggests that BA is undertaking more market development progress under the IAG, which is its parent company. The airline has secured the services of other players in the industry who are also helping it to achieve its market development goals under the IAG banner. For example, BA City flyer is a subsidiary of the company, which mostly offers exclusive flights within Europe (British Airways PLC 2017). The subsidiary operates from the London airport and serves several destinations on the continent. Such entities have helped to bolster BA’s market development strategy, while its shareholdings in other market subsidiaries have assisted in improving its diversification strategy.

As part of the VRIN findings highlighted in assignment 1, BA’s market development strategy has also been complemented by the development of unique and non-imitable competencies, which have supported its overall corporate plan. For example, the acquisition of landing slots across its transatlantic routes has bolstered its route network. Evidence of this advantage is provided in Appendix 1, which shows that the acquisition of landing slots is a resource advantage for the airline and has significantly contributed to the development of its competitive advantage.

BA’s strong brand image is also another non-imitable competency that the organisation enjoys and that complements its market development strategy. Indeed, the airline is one of the UK’s oldest state-owned enterprises and has dominated Britain’s airline industry for decades (Branding Forum 2019). Therefore, many people are aware of its existence, and some of them regard it as a national flag bearer (Branding Forum 2019). This strong brand image has given BA a “head start” over its rivals because it embodies the national aspirations of the British people. In this regard, it remains one of its most coveted symbols of market dominance not only in the UK but also in Europe. Nonetheless, it is important to note that the challenges facing BA in its market development strategy are political and economic in nature (Ethicist 2015; Byford & Wong 2016). For example, the rise in fuel costs has significantly affected the company’s operating margins because fuel is a significant cost component for the business. The uncertainty surrounding “Brexit” is also another impediment to the actualisation of the airline’s market development strategy. However, these challenges have not detracted the organisation from remaining competitive.

Strategy Analysis

According to the SWOT analysis of BA highlighted in Appendix 1, BA’s main strengths are resource advantages, equipment advantages, heightened competencies (in terms of technology use), a strong brand image, support from the IAG parent company and the airline’s alliance. The SWOT analysis also showed that available opportunities include market expansion in the global market and technology development. The current strategies adopted by BA align with the above-mentioned strengths and opportunities because most of the pivot on the need to leverage current competencies to exploit existing market opportunities. For example, according to the company’s 2018 financial report, BA was seeking to leverage its Heathrow operations to expand its global fleet of Airbuses and exploit emerging opportunities of travel in new routes (International Airlines Group 2019). This strategy aligns with one of the opportunities mentioned in the SWOT analysis – global market expansion.

The development of new runways at Heathrow will increase BA’s capacity to schedule more flights because the airport’s expansion will increase air traffic from 480,000 to 740,000 (International Airlines Group 2019). However, BA recognises that this opportunity can only be beneficial to the company if the current operating costs are maintained or reduced (International Airlines Group 2019). This strategy also aligns with the resource capability strength mentioned in the SWOT analysis because Heathrow is an inimitable resource that BA enjoys. Therefore, the airline seeks to leverage such strengths to improve its market position.

Feasibility

The company’s market expansion strategy is set to expand the company’s presence in developing and local markets. This strategy has been coined by the company’s parent company (IAG) through a new program called “Level” (IAG 2016). One of the main goals of this program is to develop new routes linking some of Europe’s major cities to destinations in America (IAG 2016). These routes have been identified because of the increase in human traffic between the two regions. Some of the routes are also expected to exploit seasonal demands, such as the summer route to Los Angeles, which is currently under development (International Airlines Group 2019).

Acceptability of Strategy

Some of BA’s route expansion plans have already been successfully implemented before schedule (International Airlines Group 2019). For example, the route expansion to Barcelona was undertaken before schedule, and the market has responded positively (International Airlines Group 2019). Current plans involve expanding the airline’s routes to Paris and Vienna (International Airlines Group 2019).

Achievement of Market Penetration

BA has achieved significant market penetration through the implementation of strategies aimed at improving its brand portfolio. The progress has happened by strengthening its leadership position. For example, there has been a 10% growth of the airline’s market penetration in the North Atlantic routes (International Airlines Group 2019). This development has been achieved through the introduction of new routes between Dublin, Philadelphia, Seattle, Barcelona and Boston. Other new routes that have contributed to the company’s growth in market penetration include Madrid to San Francisco and Heathrow to Nashville (International Airlines Group 2019).

These examples show that BA is still focusing on expanding its transatlantic networks, and it has achieved significant success so far. It is also important to note that away from the transatlantic routes, the company has also reported increased market penetration levels in selected South American markets. For example, it has achieved a 7% growth in Latin American routes (International Airlines Group 2019). Its operational capacity in Europe has also followed the same pattern because the airline has realised a 15% growth in its operating capacity, especially at Gatwick airport (International Airlines Group 2019). The growth is attributed to newly acquired slots in the airport. There has also been a return to profitability in selected European countries such as Italy, France and Spain.

Possible Areas of Strategy Improvement

As explained in this document, BA’s opportunities have been focused on the development of new routes and expansion in the global market. Based on the pieces of evidence provided above, the airline is partly implementing this strategy because it is still focused on cementing its market dominance across the transatlantic route (majorly between European and American cities). More progress could be achieved if the airline focuses its expansion strategy on developing new routes in emerging countries. Particularly, the airline should consider expanding its route network to BRICS (Brazil, Russia, India, China and South Africa) countries. Although the airline has a presence in these countries, its performance is still dismal compared to its well-established markets.

Appendix

Appendix 1: SWOT Analysis

Appendix 2: British Airway’s Value Chain

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Introduction

British Airways is an international airline that has been in operation for more than one hundred years. The airline brings people with diverse cultures together by connecting them to different destinations on the international front. The headquarters of British Airways are in Harmondsworth, United Kingdom. The Chief Executive Officer of the airline is Sean Doyle, who started his tenure on 12^th October 2020 until now. The airline was founded in 1974 and is the official carrier of the UK’s flag. British Airways is the largest airline in the UK considering fleet capacity and the second largest in the country, after easyJet considering passenger volume. Since its establishment in 1974, the state owned the airline until 1987, when it was privatized.

The principal subsidiary airlines of British Airways are BA CityFlyer and OpenSkies. In 2003, British Airways halted its Concorde Operations due to substantial financial losses incurred by the airline. In 2007, the United States Department of Justice charged the airline a fine of three hundred US dollars for price-fixing (Tan, 2019). In 2011, British Airways amalgamated with Iberia (a Spanish airline) and formed the International Airline Group (a holding company). British Airways is a founder member of the Oneworld airline alliance. Other constituent organs of the association are American Airlines, Canadian Airlines, Qantas, and Cathay Pacific.

Fleet Analysis

British Airways comprises a vast and diverse fleet served by jet-engine-powered passenger aircraft (airliners). The airline prides itself on possessing more than two hundred and fifty aircraft in its service. CityFlyer (the regional auxiliary airline of British Airways) has twenty-four active airliners. Data obtained from ch-aviation.com indicates that two-hundred and fifty-three aircraft are in active operation in the mainline fleet of British Airways. One-hundred and forty-two aircraft of the total number of aircraft constitutes a narrowbody fleet, including Airbus jets only (Tan, 2019). The most miniature aircraft in the narrowbody fleet category is the Airbus A319, and there are about twenty of them, operating short-haul flights of thirty minutes. The Airbus A320 contributes to most aircraft in the narrowbody fleet category and the entire British Airways fleet.

There are sixty-seven A320s in the British Airways fleet, with forty-nine of them in active operation, while eighteen of them are in maintenance or storage. Another narrowbody aircraft is the A320neo, which contributes to seventeen aircraft in the fleet; BA has made another order of five A320s. The BA narrowbody fleet comprises the A321 aircraft, with all the eighteen listed currently listed as inactive (Li & Cui, 2018). The A321s are some of British Airways’ oldest aircraft; on average, they are sixteen years and three months old. The much younger A321neo contributes to ten of BA’s fleet, and all of them are in active operation: the airliner has an order for two more A321neo.

The British Airways fleet constitutes widebody Boeing aircraft, the dominant force in the twin-aisle airliners. The BA fleet has a majority of Boeing 777 in the Boeing family. Boeing 777s popular in the BA fleet include forty-three 777-200ERs and sixteen 777-300ERs. The UK flag carrier has ordered eighteen aircraft of the next-generation Boeing 777-9 (Stone, 2018). The airliner prides itself in flying all three classes of Boeing 787, commonly known as the Dreamliner. The Boeing 787 variants operated by British Airways include twelve 787-8s, eighteen 787-9s, and two 787-10s. According to data obtained from ch-aviation.com, all three variants are in active operation (Stone, 2018). Furthermore, the airliner has ordered ten aircraft for the stretched Boeing 787-10.

British Airways operates fewer widebodies in its fleet; narrowbodies are the most dominant. However, Airbus-widebodies are crucial in the fleet of the airline. The BA widebody fleet comprises eight Airbus A350-1000s, all in active operation (Stone, 2018). In May 2021, the Airbus A350-1000 was endorsed as a possible bellwether for British Airways. The airline has ordered 10 A350-1000 aircraft, likely to join the fleet in the following years. Additionally, the airline prides itself on the possession and operation of the double-decker Airbus A380, which is commonly known as the superjumbo. The airline’s widebody fleet constitutes twelve A380s, but only five are in active operation.

Issues Associated with Feet Composition

The fleet composition can be defined as the resemblance and contrast in each aircraft’s mechanical and functioning features in a specific fleet. Fleet composition constitutes several factors, such as minimum cockpit crew and equipment required for aircraft servicing. Two main structural components of an aircraft (engine and fuselage) are used in fleet composition assessment (Li & Cui, 2018). With that in mind, British airlines comprise widebody aircraft and narrowbody aircraft in their fleet. Therefore, it implies that BA’s fleet’s technical and operational characteristics are different. The narrowbody fleet’s cabin crew and cockpit crew differ from the widebody fleet in terms of number and expertise.

Additionally, the fleet comprises two types of aircraft, Airbus and Boeing, which have different families. Therefore, it means that the maintenance and servicing of individual aircraft are unique and different from other aircraft (Li & Cui, 2018). BA, the aircraft operator must obtain specific maintenance manuals from the aircraft manufacturer for its varied aircraft types. Additionally, the fuselage and engines used by each aircraft are unique from others; this implies that if the BA maintenance crew uses a manual that is not specified for a particular aircraft, problems are likely to arise during flight. In addition, the tools and equipment needed for servicing and maintenance of aircraft components vary from one aircraft family to another. Therefore the operator must obtain tools and equipment for each aircraft within the fleet according to the manufacturer’s specifications.

Critical Analysis of the Route Structure

Since the coronavirus pandemic, British Airways has reviewed most of its route structure, especially flights to destinations considered highly risky, but operations to such destinations are slowly resuming. British Airways uses robust route structures to serve passengers traveling to and from various destinations. The route structures include point-to-point and hub and spoke networks. Point-to-point course framework refers to a network where all the travelers embark and deplane at a specific terminal (Stone, 2018). A hub and spoke route framework is a structure where all travelers, excluding those whose terminal is the hub, relocate to another aircraft at the hub and embark on their specific destination.

The British Airways hubs are Heathrow Airport, London City Airport, and Gatwick Airport. In 2021, Heathrow Airport had 86% of all British Airways flights. It was followed by London City, which operated 10% of BA’s flights, and Gatwick Airport operated 2% of the total BA flights (Stone, 2018). Notably, Heathrow Airport has risen to dominate other British Airways’ hubs by 19% versus its points in 2019 (Stone, 2018). Nevertheless, Gatwick fell by 10% of its effectiveness in 2019. In April 2020, British Airways halted short-haul flights from Gatwick Airport.

Focusing on London as of 8^th November 2021, the airline had two hundred and nineteen destinations from the city, acting as a hub for various spokes. One-hundred and seventy-two destinations were from Heathrow, while twenty-nine were from London City, and eighteen were from Gatwick. There were fifteen top routes from measurements done by the number of flights made via each course in the same year (Efthymiou et al., 2018). Fourteen out of the top fifteen routes originated from Heathrow to Edinburgh, Glasgow, Aberdeen, Manchester, JFK, Nice, Belfast City, Athens, Geneva, Jersey, Barcelona, Amsterdam, Larnaca, Dublin, and from London City to Edinburgh (Efthymiou et al., 2018). As of April 2022, British Airways serves thirteen domestic destinations and two-hundred and two international destinations in seventy-nine countries worldwide.

Cost Control Analysis

Cost control can be defined as a mechanism applied by finance experts in analyzing the overall expenses of an enterprise to reduce project costs and maximize profits. Cost control is vital for any business’s success because it helps maintain a budget for all projects to maximize profitability. British Airways has applied various cost control methods to optimize its profitability (Douglas, 2019). The cost control methods include fuel hedging, minimizing compensation costs, and managing the cost of operational changes.

Fuel hedging is a strategy utilized by companies to minimize or eliminate their exposure so potentially rising fuel costs. Fuel hedging is a robust cost control method that BA uses to cushion the airline against abrupt changes in fuel costs. Notably, fuel expenses amount to a more significant percentage of the expenses incurred by any airline. Fuel hedging works through purchasing fuel futures contracts, swap agreements, call options and implementation of a collar hedge (Liu, 2018). A futures contract refers to a standardized official agreement between two parties to purchase or sell a commodity (Li & Cui, 2018). The delivery and payment will happen at an agreed date in the future. A future contract ensures an obligation for the provider to sell the fuel at a specified price and the buyer to purchase the fuel at an agreed price. Essentially, if fuel prices skyrocket in the future, the airline will be protected against the rise since it will buy the fuel at a price agreed upon in the contract.

In addition, minimizing compensation costs and setting up a robust mechanism is another cost control method utilized by British Airways. Compensation costs are incurred by an airline due to flight irregularities, including flight cancellations and flight delays. Notably, flight irregularities destroy the airline’s reputation due to the negative reviews by passengers (Chang et al., 2019). Therefore, the airline needs to formulate strict rules for the proper compensation for affected passengers. Control of compensation could help the airline reduce errors during settlement that may increase the cost.

British Airways is likely to incur the cost of operations changes, which are inevitable since the airline is trying to recover from the losses incurred during the coronavirus pandemic. Costs are likely to be incurred due to changes in the equipment used, the type of aircraft operated, and crew (Douglas, 2019). Developing a robust model to calculate the cost of such changes effectively manages expenses while maximizing profitability.

The Profitability of British Airways

Profitability is a standard used to ascertain the degree of a business’s profits relative to the enterprise’s capacity. Profitability can be considered a measure of efficiency and essentially a determinant for the success or failure of a business. A business enterprise that gains profits is not necessarily a profitable business; the potentiality of an enterprise determines profitability to generate a return on costs or investment according to its assets in contrast to a substitute investment. With that in mind, it is possible to analyze the profitability of British Airways.

The profitability of British Airways varies from year to year. The airline’s profitability between 1999 and 2005 was measured in terms of return on net operating assets (RNOA). The RNOA dropped from 5.67 % in 1999 to 2.09 % in 2000 (Tan, 2019). The RNOA skyrocketed to 6.00 % in 2001 but plummeted to an astonishing 0.94% in 2002 (Tan, 2019). In the following years, the RNOA increased consecutively from 2.79% in 2003 to 4.01% in 2004 and 5.85% in 2005 (Tan, 2019). The airline’s profit margin increased after 2002, meaning betterment of the business’s capability to maintain sales as operating profits. The profitability recorded by the airline from 2002 to 2005 indicates efforts of cost control and subsequent efficiency in operations. In that period, BA managed to maximize profitability while reducing its fleet.

In 2007, the airline’s balance sheet indicated total assets that were only 88% of its net value in 2003; this showed a total loss of 1.5 billion British Pounds. BA’s aircraft were disinvested by 1.7 billion British Pounds, with land and buildings reduced by three hundred million British Pounds (Tan, 2019). The airline indicated a drop of 2.8 billion British Pounds in the hire and leasing position. A profitability analysis between 2008 and 2009 suggested that the airline’s profitability was lower than the previous years.

The UK flag carrier recorded a steady increase in profitability from 2011 to 2019. In 2021, the profitability was greatly affected when the airline reported a record net loss of 8.5 billion US Dollars; this was due to the coronavirus pandemic, which led to the halting of operations (Hamawandy et al., 2021). In 2020, the revenue earned by the airline from passengers dropped from 27.2 billion USD to 6.7 billion USD. The ban on flights in 2020 affected the operations and, subsequently, the profitability of British Airways (Hamawandy et al., 2021). In 2021, the UK flag carrier reported only 3.7 billion British pounds in revenue (Hamawandy et al., 2021). In February 2022, the airline, through its CEO Sean Doyle, expressed optimism about a return to profitability. Sean Doyle indicated that the UK was moving from being one of the countries with stringent travel restrictions to being one of the most open nations, and they were prepared to exploit the opportunity to ensure a return to profitability.

BA’s Policies and Practices to Counter Cyber-Threats

A cyber security threat can be defined as any potential malicious attempt or attack to illegally obtain or access data, and digital assets, or destroy digital information. Cyber security threats can emanate from different groups of unscrupulous people, including criminal enterprises, corporate spies, hostile nation-states, lone hackers, hacktivists, and disgruntled workers. Recently, many cyber-attacks directed at high-profile organizations have led to the exposure of sensitive data (Škiljić, 2020). In the aviation industry, cyberattacks could lead to aircraft hijacking and potentially lead to the loss of lives and property. It is, therefore, paramount for airlines to take measures that prevent cyber-attacks. Here are some of the policies and practices applied by British Airways to counter cyber threats:

Following a cyber security attack on British Airways in 2018, Britain’s Department for Transport formulated the Aviation Cyber Security Strategy to guide airlines in protecting their data. BA has implemented these guidelines in its operations to protect data for its passengers. The airline has worked towards developing a comprehensive understanding of the cyber vulnerabilities across aviation to help them form a robust system for the protection of their computer systems and data (Škiljić, 2020). It is clear that for cyber risk to actualize, there must be a vulnerability to exploit and the existence of an immediate threat. BA has put effort into understanding the vulnerabilities in their systems by identifying the critical nature of their systems and platforms and the subsequent impact of a probable loss in their integrity and confidentiality.

British Airways has identified and maintained all of its critical digital operational technology and information technology systems, technologies, and platforms throughout the airline and its entire supply chain. The UK flag carrier has practiced a clear understanding of why such digital assets are supercritical to the airline’s operations and where there might be potential vulnerabilities. Additionally, the airline has continually managed cyber risks within its systems (Klenka, 2021). The UK’s technological advancement has continuously changed the operations within the aviation sector. British Airways has implemented a cyber security management regime to help manage cyber risks. The system constitutes continuous identification and assessment of cyber threats, mitigation of vulnerabilities, efficient governance structures, and risk ownership.

The airline has ensured that cyber risks are effectively managed throughout the lifespan of all of its new and advancing technologies, systems, and platforms. In terms of policies, BA is working in partnership with the Civil Aviation Authority to help in the development of a robust, effective, and equitable cyber regulatory framework (Klenka, 2021). The framework aims to enhance the flexible and dynamic risk moderation adopted by the airline to ensure it manages probable cyber risks continuously.

Recommendations and Conclusion

British Airways should develop a robust mechanism for reporting, managing cyber-attack incidents, and sharing information. It is not a question of if but when cyber-attacks are likely to compromise operations in the aviation industry. Therefore, it is prudent for British Airways to sufficiently prepare itself for such occurrences by ensuring clear lines of reporting the cyber-attack. BA should develop and implement robust response plans for cyber-attacks and procedures to enable the airline to identify, manage, beat and recover from a cyber-attack.

The UK flag carrier should ensure adequate allocation of resources to train its cyber security personnel to equip them with skills to prevent and manage cyber-attacks. The airline should develop clearly defined career development paths and further development opportunities for its cyber security experts. Such measures will ensure the growth in the number of efficiently qualified and experienced cybersecurity professionals. It will ensure advancement in the capability of the existing cyber security personnel.

In conclusion, British Airways was one of the most successful airlines before the coronavirus pandemic halted its operations and adversely affected its profitability. BA’s fleet is composed of both narrowbody and widebody aircraft. Airbus aircraft are dominant in BA’s short-haul flights. The airline’s route structure constitutes both point-to-point and hub and spoke networks. Though most of BA’s routes were halted during the coronavirus pandemic, the airline is slowly returning to normal operations in almost all of its routes. The UK flag carrier uses multiple cost control methods, including fuel hedging and mitigation of compensation costs. The airline’s profitability has varied from year to year, with 2021 being the worst year for the airline due to the significant losses incurred. The airline has put up measures to manage cyber-attacks and improve its profitability.

References

Chang, V., Ji, Z., & Arami, M. (2019, May). Privacy and ethical issues of big data in the airline industry. In 4th International Conference on Complexity, Future Information Systems and Risk (pp. 139-148). SciTePress.

Douglas, I. (2019). Do the Gulf airlines distort the level playing field? Journal of Air Transport Management, 74, 72-79.

Efthymiou, M., Njoya, E. T., Lo, P. L., Papatheodorou, A., & Randall, D. (2018). The impact of delays on customers’ satisfaction: An empirical analysis of the British Airways on-time performance at Heathrow Airport.Journal of Aerospace Technology and Management, 11. Web.

Hamawandy, N. M., Ali, R., Bewani, H. A. W. A., bdulmajeed Jamil, D., Rahman, S. K., & Othman, B. J. (2021). The financial Impacts of (COVID-19) on financial reporting quality Airlines Companies: British Airlines. Journal of Contemporary Issues in Business and Government Vol, 27(2). Web.

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Liu, H. (2018). A Strategic Analysis of Chinese Airline Industry under Online Environment: In the Case of China Southern Airlines. Scientific Research Publishing, Inc. USA.

Škiljić, A. (2020). Cyber security and remote working: Croatia’s (non-) response to increased cyber threats.International Cyber Security Law Review, 1(1), 51-61. Web.

Stone, E. K. (2018). A comparison of Mode‐S Enhanced Surveillance observations with other in situ aircraft observations. Quarterly Journal of the Royal Meteorological Society, 144(712), 695-700.

Tan, L. (2019). Corporate metrics methodology application for the market risk quantification in British Airways company. Web.

Overview

Throughout its operations, British Airways (BA) has greatly benefited from its effective operations management. This has resulted in the introduction of policies and strategies that have enhanced the business operations of the firm in a bid of striving to achieve client satisfaction and realizing operational goals and objectives (Smith 2012).

As such, BA has created a strong brand name within the aviation industry based on the number of its international flights, its fleet size, as well as the quality of service it offers to its clients. This paper will thus critically analyse operations management at BA.

To achieve its goals, the paper will focus on BA’s concept of operations, its component parts of various operations and how they interlink with each other, the relationship that exists between the company’s operations and its strategic goals and objectives, distribution channels, factors that impact on operations, the relationship between operational objectives and strategic objectives and the role played by the stakeholders in operations.

The Concept of Operations and Component Parts of Operations

As a renowned entity, BA is currently involved in a number of operations to meet the needs of its clients. These operations can be categorised into dependability, speed, quality, and costs (Cummings 2007). It is evident that these operations are entirely service based in nature.

The operations management team at BA has come up with a number of processes and strategies that aim at enhancing its overall dependability in the short run and in the long run. This team is mainly involved in management, design, and improving the various operational systems and processes within the entity (Taylor 1997).

To further enhance their efficiency, the operations management team has adopted and implemented the use of information technology (IT) as a means of increasing the overall dependability of the firm. As such, all operational parts of the entity are interlinked via IT networks.

Through this approach, the firm believes that the overall efficiency of its operations has improved hence giving it an edge over its rivals not only in Europe but worldwide.

In the airline industry, speed is a factor of essence. With the help of its competent designers who form part of the operations team, BA has introduced integrated circuits as a means of enhancing the speeds of its flights (Gubbins 2003).

This move has played a significant role in enhancing the overall efficiency of the firm’s operations, hence increasing its overall success in the airline industry.

Consequently, BA has introduced the ‘Know-Me’ program, a computerised system that enables BA staff as well as its cabin crew to find the photographs of passengers on board a specific flight (Parker 2012).

This strategy has proven to be an effective technological advancement, especially on high ranking passengers such chief executive officers who strive to meet tight schedules and hence saving them a lot of time in the process of booking flights and quick arrival to their destinations.

To develop a strong brand loyalty, BA has dedicated a number of operations that aim at enhancing the overall quality of that the firm offers.

One of the means through which BA has strived to improve and maintain the high quality services that it has been offering over the years is by maintaining a highly qualified and skilled personnel (Parker 2012).

BA has put in place various training programs that aim at enhancing the skills and expertise of its staff as a means of meeting the contemporary needs of its clientele.

BA has implemented programs such as the IT graduate apprentice program, a course that aims at imparting technical IT knowledge and skills to new as well as existing employees within the entity. There is also the ‘New Skills Strategy’ program that aims at enhancing the personal development of BA employees.

Thus, the technical and business knowledge and skills that employees develop as a result of these programs greatly enhance the overall quality of service that they deliver to BA clients hence leading to the realization of the firm’s operational goals and objectives.

Through its operations management team, BA has come up with concepts that aim at reducing the overall costs of operations within the firm.

In recent times, BA has been facing cost uncertainties that arise from the fluctuating oil prices, reduced prices from rival firms, economic uncertainties as a result of the recent global recession, as well as volatile exchange rates in the international market (Parker 2012).

In response, BA has incorporated the use of optimized fuel systems that ensure fuel is used by aircraft in an effective and efficient manner. Consequently, the firm has automated some of its cabin crew services in a bid of reducing its workforce.

According to Smith (2012), the automation of cabin crew services has enabled BA to reduce approximately 1700 employees.

Operations and Strategic Objectives and their Relationship

As asserted by Pinder (2012), an organization has to achieve its objectives to ensure that its strategy has succeeded. This fact clearly defines the relationship that exists between operations and strategic objectives. As asserted earlier, the operations of BA aim at improving its dependability, speed, quality, and costs.

All these operations are related and interlinked to the strategic objectives of the entity that are summarised in the table below (Pinder 2012).

One of the most critical strategic objectives of BA is to meet the needs of its target market while at the same time ensuring that it gets maximum profits in the process. Secondly, BA also strives to ensure that it is considered the airline of choice by its premium clients.

The firm also wants to deliver differentiated service to all its clients, enhance its presence in key cities around the world and to sustain and build a strong brand name as the leading airline in London.

It is thus evident that these objectives will only be realised in an event where BA’s operations are highly dependable, conducted effectively and efficiently, delivered in high quality and achieved through cost effective approaches and mechanisms.

Information Management

Information flow is critical in any organization. It is due to this fact that BA has integrated an effective and efficient management information system through its e-database whose main role is to control information as well as material flow within the entity (Plenert 2002).

At the same time, this system also ties together the various operating units within the organization. Additionally, this system also ties together the respective systems that sustain the entire e-database network (Plenert 2002).

Additionally, BA has a multifunctional system whose main role is to regulate processes such as design, research, and engineering processes that are critical in the development, production and improvement of products and services within the entity.

Distribution Channels

To effectively reach out to its clientele, BA has come up with two effective distribution channels. There is the direct distribution channel where clients book flights directly from BA reservation system (Smith 2012). The advantages of this approach is that the firm has direct control over the entire reservation program.

Moreover, this approach greatly reduces its distribution costs. There is the third party distribution channel where the company uses third party institutions such as travel agencies.

Despite the fact that this approach increases the overall distribution costs of the firm, it also maximizes BA reach to customers all around the world hence increasing its overall sales.

Factors that Impact on Operations

There are internal and external factors that have a huge impact on the operational outcomes of a given entity. According to the Porter 5 forces analysis, rivalry, threats of substitutes, threats of new entrants, buyer power, and supplier power are the key external factors that can affect the operations of a given entity (Pucik 2007).

In the course of its operations, BA has been experiencing competition from rival firms such as Easyjet and Virgin Airlines (Pucik 2007). Essentially, rivalry tends to reduce the overall profits that a specific entity can earn within the industry it operates in.

As such, BA has strived to achieve a competitive advantage over its rival firms through service differentiation and its pricing mechanism and as such, the firm has been forced to modify its operations to realize these goals.

Consequently, operations at BA have been greatly affected by threats of substitutes. Individuals can choose alternative forms of transportation using either rail, road, or water to arrive at their destination.

Through its operations, BA has strived to encourage its clients to use air transport and specifically to fly with them and not any other airline. At the same time, the firm has been facing constant threats from new entrants.

However, given the fact that the cost of entering into the airline industry is high and already BA has developed a strong brand name as the leading airline in London, this factor has not greatly affected the operations of the firm. BA also faces threats from its suppliers.

According to Cummings (2007), the main suppliers of BA are its airplane manufactures (Boeing and Airbus) and given the fact that the firm has long term contracts with them, it is not easy to switch from one supplier to another. As such, BA faces minimal threats from its suppliers.

Finally, buyer power has a great impact on the operations at BA. The main aim of BA is to meet the needs of its clients. This includes individual fliers and travel agencies (Smith 2012).

Since the cost of switching from one airline to the other is low, BA has been forced to come up with effective strategies through its operations not only to maintain its clientele but also to attract new ones. All these operational adjustments have been made to meet the needs of its customers, hence developing a strong brand loyalty.

Impact of Stakeholders

Stakeholders also play a significant role in the process of operations management at BA. Most importantly, stakeholders are highly involved in the process of decision making. At BA, the views of stakeholders are important, especially during the implementation of new processes and the analysis of existing ones.

As such, the stakeholders’ opinion on these processes is influential as it determines the realisation of the set operational as well as strategic goals and objectives (Quelch 2005).

Moreover, there are those stakeholders that are involved in the direct management of BA’s processes. This includes but not limited to the staff of the company. It is their role to ensure that the set operational and strategic goals and realised within the set timelines.

References

Cummings, N 2007, Transforming logistics support for fast jets, The Stationery Office, London.

Gubbins, E 2003, Managing transport operations, Kogan Page, London.

Parker, D 2012, Service operations management: The total experience, Edward Elgar Publishing, Cheltenham.

Pinder, C 2012, Making organizations humane and productive. Wiley, New York.

Plenert, G 2002, International operations management, Copenhagen Business School Press, Copenhagen.

Pucik, V 2007, ‘Human resources in the future: An obstacle or a champion of Globalization?’ Human Resource Management, vol. 36 no. 1, pp. 163-167

Quelch, J 2005, Cases in product management, Irwin, Chicago.

Smith, K 2012, ‘The British Airways Employee Assistance Program: A community response to a companys’ problems’, Occupational Medicine (Oxford, England), vol. 42, no. 1, pp. 15-22

Taylor, D 1997, Global cases in logistics and supply chain management, Thomson, London.

Introduction

Strategic analysis is one of the fundamental management elements and it involves evaluating an organisation’s business environment in order to be effective in formulating business goals. Conversely, strategic planning is long-term oriented and it focuses on the entire organisation.

Strategic planning involves setting long-term organisational goals and formulating plans that aid in attaining pre-determined ends. Besides, strategic planning enhances optimal resource allocation, thus increasing the likelihood of realising organisational goals and a high competitive edge.

Grunig and Kuhn (2011, p. 8) argue that the ‘process concentrates on determining the future success potentials’.

Organisations base their long-term planning process on the hypothesis that the prevailing environment will persist for a prolonged period. However, Marvell (2009) is of the view that achieving strategic goals is a demanding task due to the turbulent business environment in which firms operate.

Thus, organisational managers must evaluate the emerging issues progressively and adjust their operational strategies accordingly.

British Airways has attained market position by operating as a full service global airline. The airline has established a broad global route network. These aspects have provided the firm with optimal market leadership in the UK. Furthermore, its extensive network has provided a global market presence.

The airline intends to achieve long-term sustainable competitive advantage. However, this goal will depend on the effectiveness in aligning the firm’s operations with the changing business environment such as fluctuating oil prices (Ringbeck, Gautam & Pietsch 2009).

Purpose

This paper involves a critical strategic analysis of the British Airways. The analysis considers a number of elements, which include a resource audit, value systems, product/service portfolio, and the potential future strategic growth.

Resource audit

Effective resource management is essential in organisations’ pursuit for competitive advantage. Resources include an organisation’s competencies and assets. Assets include the diverse resource endowments such as equipments, plants, brand equity, and location that an organisation has developed or accumulated over time.

Conversely, competence includes the abilities, skills, and knowledge within an organisation that enable the firm to transform inputs into outputs directly or indirectly (Sahaf 2008). One of the strategic management aspects that organisational leaders should consider entails adopting a resource-based view [RBV].

The approach accentuates that firms can derive competitive advantage from optimal utilisation of the internal capabilities and resources. However, an organisation’s ability to develop and sustain the competitive advantage from its assets depends on the superiority of its resources and capabilities (Stonehouse & Houston 2003).

British Airways has adopted the RBV in its operation, as evidenced by the resources that the firm has developed individually and through partnership.

British Airways has nurtured diverse business resources, which include technological capabilities, physical resources, financial resources, organisational systems, human resources, and intangible resources.

Technological capabilities

British Airways is committed to meeting and exceeding the customers’ experience. The firm considers technological capability as one of the fundamental operational aspects in attaining total flight reliability.

British Airways undertakes careful planning and resources, which is made possible by the firm’s investment in tooling and training (British Airways 2015b). By developing adequate engineering capabilities, the firm undertakes the right diagnostic and testing on the aircrafts, hence sustaining the condition of its modern commercial aircrafts.

The firm’s technological capability is also enhanced by its extensive aircraft maintenance facility located in the UK. Moreover, a team of over 2,000 skilled engineers undertakes aircraft maintenance. The team undertakes different maintenance activities such as structural repairs and other major aircraft maintenance.

Due to its technological capabilities, British Airways has entrenched its commitment to customer safety, which is a vital element in strengthening customer trust (Bartsch 2012).

In addition to the above aspects, the company collaborates with Original Equipment Manufacturers [OEMs] such as Boeing in its aircraft maintenance process. The partnership enables the airline to undertake effective aircraft maintenance by implementing emerging technologies.

In 2015, British Airways acquired the right to utilise Boeing’s Electronic Logbook [ELB] and Boeing Airplane Health Management software, which enables the organisation to diagnose technical problems electronically in its aircrafts.

Through the partnership, British Airways has remarkably improved its ability to undertake aircraft maintenance. Moreover, the firm is in a position to share expertise and knowledge on aircraft maintenance with Boeing (Payler 2015).

Physical resources

The intensity of competition in the global airline industry has grown considerably due to different factors such as increasing demand for air travel and reforms within the industry such as liberalisation of the airspace (Flouris & Oswald 2006).

Surviving in such an environment is quite challenging and it requires the industry players to develop a high level of operational efficiency. In a bid to achieve this goal, British Airways has integrated a number of physical resources. First, the firm owns and operates the largest hi-tech fleets.

The fleet is comprised of different types of aircrafts such as Airbuses, Boeings, and Embraer. The airline has a fleet of over 2,000 aircrafts (British Airways 2015a).

The airline has also integrated effective ground handing technologies, which enable the firm to handle the customers’ luggage effectively and efficiently. Every week, the airline handles over 250,000 bags, which is made possible by different equipments and facilities (British Airways 2015a).

Due to its effective ground handling services, British Airline sustains operational efficiency at Heathrow Airport, which ranks amongst the busiest airports in the world. This aspect has contributed to the company’s high competitive advantage.

Human resources

British Airways has integrated employee training as one of its strategic management elements. Training is performed on different aspects such as aircraft training, which is undertaken using state-of-the-art facilities (Katie 2010).

The airline has integrated a program referred to as ‘airmanship’, which focuses on training employees on how to handle customers and luggage by focusing on safety.

This move has enabled the company to develop an effective working culture. Moreover, the company’s physical resources have led to the development of a high level of trust among different customers such as individual and business customers.

Financial resources

British Airways has developed adequate financial strength, as evidenced by its attractive profit margins. It is projected that the firm’s profitability will reach £1.3 billion in 2015 (Whiterow 2013).

The company profitability is expected to arise from the establishment of new routes, hence serving a large number of customers. Due to its financial strength, British Airways sustains its competitiveness by acquiring new technologies and new aircrafts.

Value systems

British Airways is focused on achieving and sustaining an optimal market position. In a bid to achieve this goal, the airline has invested in a number of activities that culminate in value addition to its products and services. The firm’s value adding activities do not focus on the internal operations exclusively.

On the contrary, the firm management team appreciates that its ability to develop a value system that culminates in the desired level of synergy depends on the extent to which effective linkages are established between the internal and external activities.

Evans, Stonehouse, and Campbell (2012) affirm that value addition can be achieved by changing the customers’ perception regarding the products and services offered. Consequently, the firm influences the consumers’ decisions to consume its air travel services.

The company’s commitment in delivering value to its target customers is illustrated by the value chain analysis below.

Primary activities

Inbound logistics

The Heathrow International Airport serves as British Airway’s hub. Moreover, according to British Airways (2015a par. 6), ‘the airline has also established operations at other airports such as London Gatwick and London City airports’.

At Heathrow Airport, British Airways operates in three main terminal, viz. Terminal 1, Terminal 3, and Terminal 5. The airports have considerably improved the airline’s seamless operations.

Operations

Ensuring seamless operations is a critical element in sustaining competitive advantage in the airline industry. British Airways has taken into consideration a number of elements, which include check-in, service desk, effective baggage and handling, bounding and lounge services, and airport pushback.

The check-in, bounding and lounge services, baggage, and handling operations ensure that customers are served efficiently and cargo is handled effectively. Conversely, effective airport pushback using tractors ensures that passengers board the aircraft easily at the established terminals (British Airways 2015c).

Outbound logistics

The company intends to achieve and sustain adequate competitiveness in the global airline industry. Consequently, the firm focuses on offering diverse air transport services such as passengers and cargo services.

The firm has established the British Airways World Cargo hence ranking the firm amongst the leading cargo airline companies. The airline offers courier services in over 200 destinations located in over 80 countries (British Airways 2015a).

By establishing the British Airways World Cargo, the firm has improved its efficiency in offering customers different cargo services around the world.

Marketing and sales

It is imperative for firms’ managers to develop adequate brand loyalty in order to enhance the development of repeat purchase behaviour amongst customers.

British Airways has developed adequate level of brand awareness, which has been enhanced by the adoption of different techniques such as offering customers loyalty programs, effective pricing, and market communication through different mediums such as point of sale materials and online marketing.

The firm undertakes online marketing through different platforms such as social media networks. Moreover, the firm has integrated public relations, as evidenced by the participation in different charitable activities and sponsoring different cultural and sporting events.

These marketing approaches have influenced the customers’ perception positively regarding the services offered by the firm.

Service

The company has integrated a number of after-sale services such as customer service, which is available for 24 hours per day. Efficient customer service delivery have also been promoted by the integration of online support portals that customers can use in seeking clarification and raising complaints regarding the firm’s services.

Other services offered include catering and hospitality services and lounges. These aspects have contributed to development of a high level of customers’ satisfaction.

Support activities

British Airways has considered a number of support activities that aim at enhancing the effectiveness of its primary activities. Some of the support activities that the firm has taken into consideration are evaluated herein.

Human resource management

Developing a strong human capital base is a vital element in establishing a strong competitive edge (Hill & Jones 2010). British Airways recognises human capital as one of the critical organisational asset. Thus, the firm has integrated efficient human resource management practices.

Some of the HRM aspects that the firm has considered entail employee reward and training. The firm’s reward system is comprised of monetary and non-monetary rewards. Conversely, the training programs enhance the employees’ knowledge, skills, and expertise, hence their ability to execute their roles and responsibilities optimally.

By adopting these approaches, the firm has improved the employees’ level of job satisfaction significantly due to fair and equitable remuneration and the career progression opportunity.

The ultimate effect is a high rate of employee retention, which further fosters the firm’s ability to achieve and sustaining its long-term competitiveness (Riege 2005).

Firm infrastructure

British Airways has designed its operations into a number of functional departments, which include marketing, finance, legal, quality, and public relations. The respective departments have the discretion in making decisions associated with their operations.

However, it is essential for the departmental heads to ensure that the decisions made contribute to the attainment of the overall organisational goal. Furthermore, the functional departments must operate synergistically, for example by sharing information in order to enhance the entity’s operational effectiveness.

Technological development

The company invests in continuous research and development in order to promote its market dominance. However, the firm’s research and development initiatives are undertaken collaboratively between British Airways and Original Equipment Manufacturers [OEMs] such as Boeing.

Furthermore, the airline collaborates with ICT companies in implementing digital technologies such as in-flight entertainment systems coupled with computerised reservations system.

Additionally, the airline has integrated a flight scheduling system. These aspects have enhanced the firm’s innovativeness, hence its capacity to undertake new product development.

Product and service portfolio [BCG Matrix]

British Airways intends to attract a substantial number of customers by offering attractive products and services. Currently, the airline offers two main products, which include cabin and cargo services.

The British Airways World Cargo has improved the airline’s capacity to offer cargo services to diverse customer groups such as the corporate and individual customers. The firm ensures a high level of professionalism in handling cargo.

Moreover, handling of cargo services is promoted by the integration of advanced automated freight handling technology. Thus, the airline handles million tonnes of freight. Furthermore, the firm has designed its flight schedule effectively, hence improving its reliability to customers.

With regard to cabin services, British Airways has designed its cabin services into different classes in an effort to meet the travel needs of the different customer groups. The main classes include the short haul, mid-haul, and long haul.

The short-haul unit is further divided into economy and business class while the long haul unit is comprised of the first class, club world, world traveller, and world traveller plus. The respective business units are instrumental to the firm’s performance.

However, their contribution varies and likelihood of adding to the firm’s long-term growth differs as illustrated by the BCG matrix below.

Figure 1: [BCG Matrix]

The cabin services can be categorised as source of income due to their ability to generate sufficient cash flow to the firm. Through the cabin service, British Airways serves a large number of customers. However, the potential for growth is relatively low due to the intense competition within the industry (Uddin & Akhter 2011).

Moreover, the entry of low-cost airlines companies has increased the intensity of competition. Conversely, the cargo services can be considered within the ‘star’ category due to high market growth potential.

Currently, growth in international trade between the UK and other countries has increased demand for cargo services. By developing efficient cargo services, British Airways will be in a position to enhance its attractiveness in the global airline industry.

Potential future strategic growth

Demand for air travel has increased considerably over the past decades. This trend has been spurred by the recognition of air travel as one of the most efficient method of transportation (IATA 2014). This aspect presents a notable opportunity for airlines to enhance their profitability.

However, the airlines’ efficiency in tapping the market opportunity will depend on the adopted strategies. British Airways can stimulate its growth by adopting a number of strategic growth options.

1. Strategic alliance – Despite the fact that the firm is a member of OneWorld, which is one of the leading global alliances, the firm can enhance its competitive edge in the global airline industry by collaborating with other well-established airline companies. However, the alliance should not only be limited to airline companies, but also OEMs. This approach will enable the firm to develop sufficient competitiveness by developing its tacit and explicit knowledge. Furthermore, the airline will benefit from code sharing (Das & Teng 2002). Subsequently, the firm will attain a high operational efficiency. However, the firm should conduct a comprehensive strategic fit analysis before forming the alliances in order to determine the likelihood of attaining a high competitive edge by collaborating with the identified airline companies (Kale & Singh 2009).
2. Market expansion– Another strategic option that the firm should consider in its pursuit for market growth entails market growth. The firm should enter the emerging economies such as the BRIC, which are considered as some of the most attractive markets due to their high rate of economic growth and volume of trade (Holloway 2003). These countries are increasingly liberalising the industry through the open-sky policy, which presents an opportunity for the firm to establish its market operations successfully (Petrick-Felber 2014).

Conclusion

The above analysis shows that British Airways has invested in effective strategic management practices. First, the firm has focused on developing its internal strength by exploiting different organisational resources such as human capital, physical, financial, and technological resources.

The firm has integrated both internal and external stakeholders in operations, which has led to the development of an effective value system. In addition to the above aspects, British Airways has diversified its product offering, hence maximising its cash flow. Moreover, the firm meets the diverse customer needs.

Recommendations

In a bid to improve and sustain sufficient competitiveness, it is essential for British Airways to take into consideration the following elements.

1. The airline should focus on improving the customers’ perception regarding its products, services, and operation by investing in comprehensive value addition processes. In a bid to achieve this goal, the airline should develop sufficient market knowledge by investing in market research in order to understand the market trends.
2. The company should invest in technological development by implementing emerging airline innovations. Some of the issues that it should focus on in its technological development relate to implementing fuel-efficient innovations and in-flight systems.
3. The firm should invest in extensive continuous employee training on different operational aspects, customer safety, and security. These aspects will aid in strengthening the company’s brand.

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