Corporate Strategy - British Airways and Alitalia - Assignment Example

Introduction: A tale of two airlines This case study revolves around the turnaround stories of two of Europe's flagship airlines that are nothing short of national emblems; British Airways (BA) and Alitalia of late, have faced stiff competition, from low-cost airlines abroad. Under pressure to rewrite their failing corporate structures, they underwent some painful "surgery" including laying off of excess manpower, to present brave examples of 21st century survival skills. What was it, then What is it, now "Sick" would be a compliment to describe the mess the airlines found themselves in, after tasting globalisation's fury, and the emergence of niche private players in their most profitable routes. While Alitalia, a two-third state-owned enterprise was beset with labour union problems and was almost teetering near bankruptcy with net losses of 519 mn in the close of 2003 (its auditors refusing to certify its results!) (Source:ICFAI), BA was also consistently making loss in the 1980's until an ambitious privatisation programe slowly changed its fortunes by the onset of the Gulf War. BA also suffered extreme negative publicity due to some failed campaigns against competitor Richard Branson's Virgin Atlantic, facing lawsuits worth 3 million (Soure:Wikipedia), not to mention trade union problems, strikes etc. which continue until this day. The scenario is far more encouraging today. British Airways despite some steady hurdles like high oil prices, and a strong pound, have maintained profits since privatisation and quite consistently, since 2002. Its net profit for March 2006 stands at 529 mn (Source:Hemscott). With the relentless pursuit on upgrade of fleet and service management, the loss-making Giant has transformed into a lean, mean machine. As for Alitalia, losses are down at 200 mn in 2006 amid continued shutdown fears. (Airwise) Turnaround roadmap Organisationally, both airlines have changed for the better. While the British Airways is a newly-revived private major, Alitalia also has reduced government stake from two-thirds to about 49% (Airwise). Over 23,000 jobs were slashed in the 1980's during BA's get lean mission (Wikipedia). As for Alitalia, its decision in Sept 2004 to cut down over 5000 jobs brought it to a standstill due to a more hostile labour union, although the management announced March 2006 that its cost-cutting measures were 80% over. Alitalia, in 2001 became member of Europe's conglomerate Sky Team Alliance, as is eventually bracing for a merger with Air France and KLM (wikipedia). BA has reinvented itself around localising itself in the Asian market, by launching in 1995 a subsidiary called British Asia Airways in Taiwan replacing its traditional Union tailfin for a Chinese character emblem. BA also launched a low-cost airline called Go in 1998, and is thus better prepared, organisationally, to lead itself into the future (wikipedia). Most corporate strategies swiftly achieve results after what is known as situation and SWOT analysis, and brainstorming for a solution. BA started conducting "scenario workshops" in Feb 1994 (Moyer, K). The task at hand was to capture current scenario so that future strategy could be planned. Over 40 interviews were conducted with senior managers, and then with academics, engineers and aircraft manufacturers on a host of topics from IT and air transport regulations. All this culminated into developing teams writing the "official future" of the airline. Simultaneously, data on passenger traffic, economic growth and aircraft supply (Moyer, K) were calibrated to evolve a mission statement which would guide the airlines future operations in every manner possible. For BA, the maxim became "Think global, act local" and it has refurbished its image as the "world's favourite airline". Alitalia, when doing a SWOT analysis, came to these core decisions. Its major weaknesses lied in a poor revenue management system (Interview: Lariati), and a badly-managed baggage handling system (wikipedia) which led to many customer-complaints. Added to the negative publicity was the recent hijacking episode involving Alitalia airlines. Its opportunities lied in fostering ties with information giants such as Sabre Technologies, which led to superior revenue and baggage handling systems (Sabre website). Major threat still existed in persistent labour union problems. Once these change management exercises are seriously adopted, it becomes imperative to undergo an image makeover, and enable customer satisfaction to directly translate into profits. Using proper communication channels, the right mix of PR and marketing delivers optimum results targeted at specific groups. British Airways has done a series of innovative exercises to increase its market share. It advertises itself in highly local-specific content at target countries. E.g. in the burgeoning market of India, it has tie-ups with several Indian airlines and has earned a handsome share of the country's air scene. To attract high-profile executive crowd, it was the first passenger airline to implement full-flat beds in business class. To retain this target group, the airline has the worlds largest Frequent Flyers Club for executives. It has collaborations with cross-functional teams such as EuroStar railways for cross-channel transportation. Among its PR initiatives, BA is the premier partner for the 2012 London Olympic Games and a major sponsor of the recently-built London tourist attraction, "London Eye". Among its media initiatives, BA is common to all of James Bonds recent flicks such as Die Another Day. (All data from wikipedia). Its website is a one-stop portal for all information from bookings to gathering reward points. No wonder from a loss-making entity, BA has come a long way in becoming one of the most celebrated airlines in the world. While BA was named the world's 5th best airline in 2006 (source: airline equality), Alitalia was nowhere in the list. As recent as of May 2006, it was forced to cancel 74 and 66 flights worldwide because of union strikes (source:airwise). In Dec 2005, an anti-trust suit was filed against Alitalia for advertising a round ticket for the price of a one-way journey. Many customers feel that Alitalia's attitude towards luggage loss is apathetic. Some customers went on to develop websites like www.alitaliasucks.com to bring further disrepute to the airline. Management is not able to pay heed to such concerns since its grappling its own ghosts of striking unions, and cancellations of flights till this date. In a nutshell, Alitalia must take a leaf out of BA's book if it is to save itself from extinction. This is not to say the airline has a lacklustre PR campaign. In fact, it is among very few airlines to have country-specific websites accessible at one uniform portal. Using latest software such as Sabre as discussed earlier, it tries to be very diligent in conducting bookings at competitive prices. According to Roberto Loriatti, Alitalia is extremely focussed on the highly-competitive low cost, high-margin airlines market. But, all said and done, it is just the beginning for Italy's national airline. References Airline equality (2006) 2006 World Airline Award. Retrieved 17 May 2006 from http://www.airlinequality.com/2005/airline-05-regional.htm#world Airwise (2006) .Airwise news. Retrieved 17 May 2006 from http://news.airwise.com/story/view/1137968187.html Hemscott (2006). BA Profit. Retrieved 17 May 2006 from http://www.hemscott.com/companies/company-summary.docompanyId=1593 ICFAI center (2004). Retrieving Alitalia-a loss making airline Retrieved 17 May 2006 from http://icmr.icfai.org/casestudies/catalogue/Business%20Strategy2/BSTR126.htm Moyer, K. (date unknown). Corporate planning: British Airways (A case study). Retrieved 17 May 2006 from http://www1.ximb.ac.in/users/fac/dpdash/dpdash.nsf/pages/CP_Brit_Airways M-travel (2006). Interview with Roberto Loriarty. Retrieved 17 May 2006 from http://www.m-travel.com/news/2005/11/interview_with__15.html Wikipedia (2006). Alitalia. Retrieved 17 May 2006 from http://en.wikipedia.org/wiki/Alitalia#Lawsuits_and_complaints Wikipedia (2006). British Airways. Retrieved 17 May 2006 from http://en.wikipedia.org/wiki/British_Airways#Financial_performance Read More