Operations Management at British Airways - Research Paper Example

Operations management at British Airways Executive summary The airline segment has alwaysremained a profitable sector in the U.K. Due to high costs of operations, most airlines companies around the world are required to strategically operate by devising economical plans of operations. In the light of such aspects, the current report has been developed which analyses the operational strategies existing at British Airways. The airlines sector has always remained highly competitive. Moreover with the emergence of new airlines alliances and low cost strategies, the operations of premium airlines are often effected. The current paper seeks to identify the manner in which British Airways operates and how they meet the market needs so as to remain profitable and also as one of the most preferred airlines of the U.K. The paper also throws light upon some of the operational issues existing in the firm and develops some recommendations in mitigating the same. Table of Contents 1. Introduction 4 2. Methodology 4 2.1 Research objective 4 2.2 Research philosophy 5 2.3 Research method 5 2.4 Interview methodology 5 3. Data analysis and findings 6 3.1 Strategic analysis 6 3.1.1 Service offerings 6 3.1.2 Customers and market analysis 9 3.1.3 Order winner and order qualifiers 11 3.2 Operational analysis 13 3.2.1 Breaking down the operational process 13 3.2.2 Delivery system 15 3.2.3 Marketing strategies 16 4. Issues and Recommendations 18 5. Conclusion 19 Reference list 21 Appendix 22 Questions for interview survey 22 1. Introduction The airlines sector is considered to be one of the most profitable industries across many developed nations. The industry contributes approximately £49.6 billion towards the GDP of the U.K. British airways (BA), established by the government of the U.K are one the largest airlines service of the nation on the basis of fleet size and international flights. Based on passenger numbers, BA is the second largest company after Easy jet (Waller, 2003). The company was established by way of merging four airlines firms, namely, British European Airways, British Overseas Airways Corporation, Northeast Airlines and Cambrian Airways. BA had also merged with Iberian airlines to form the IAG (International Airline Group), the third largest airline group in terms of revenue. BA is essentially a Boeing customer. The company serves over 160 destinations worldwide (Clark, Johnston and Shulver, 2000). The vision of the company has remained to be the world’s most preferred airlines. In order to achieve such a vision the company relies upon rendering excellent services to passengers. Until the year 2013, the company has carried over 39.9 million passengers. It accounts for a profit of about £281 million in the year 2013. The average number of employees on the basis of company records is approximately 38,592. The current paper focuses upon the strategic operations of the company. Emphasis is given to the manner in which the firm supports the market through its services. The report also focuses upon identifying some of the issues existing within the organization and how the company tries to mitigate the same through its operations. To understand the functions of the company, the report includes detailed description of the operating and delivery systems. The data for the current paper in respect of understanding the company functions is collected through primary source which includes an interview survey with the company’s managers, employees and their customers (British Airways, 2014). 2. Methodology 2.1 Research objective The research focuses upon obtaining information regarding the operations of British Airways so as to understand some of the issues existing in the organization. The study also incorporates understanding the manner in which the company serves consumers so that the desired objectives can be met. In order to fulfil such research objectives, efforts have been taken towards procuring correct, reliable and valid data. The researcher aims to develop adequate understanding regarding the operations and the manner in which firm’s functions to fulfil the needs of consumers. 2.2 Research philosophy The current research is largely based upon the interpretivism philosophy. The philosophy is based upon the idea that a research work usually depends upon the understanding of the researcher. The philosophy states that a similar theory can be understood differently by various individuals based upon the nature of the researcher and the factors under which the research work is carried out. The interpretive philosophy does not require following any fixed structure. The philosophy allows the researcher to structure the work as per his understanding and objectives of the work (Kothari, 2004). Since the current research is based upon acquiring knowledge in respect of the operations of British Airways, the interpretivism philosophy is seen to be suitable. 2.3 Research method The current study is based upon the case study method of analysis. The case study method focuses upon a particular organization or a given situation. All data and information in the research are acquired based upon the organization or the situation under scrutiny (Kothari, 2004). The case study method may include either statistical or theoretical data, on the basis of the set research objectives. In the current study, data has been collected in respect of the operations of British Airways and the manner in which the company meets the needs of the passengers. Data regarding the operations of the company has been collected from various publications such as books and journals. These are essentially secondary sources. The main source of information for the current study was collected through interviews. The data gained through the interview survey is analyzed theoretically and is supported by facts gathered from secondary sources such as books, journals and website publications. Some empirical evidences through secondary data have also been collected and analyzed in the current paper. The secondary source of information facilitates validating the points and gain more supporting evidences for the information procured through primary survey (Kothari, 2004). 2.4 Interview methodology In the current study data in respect of the operational systems in BA has been collected through the interview technique. Through the interviews conducted with the managers, employees and customers, necessary information has been collected. By the interview survey, the researcher can gain practical and first hand feedbacks regarding the manner in which operational activities for meeting market needs are carried out by the organization. The interview method is considered to be suitable for developing an in depth knowledge regarding the subject matter of study. In the current research a semi-structured interview method is followed. In a semi structured process the interviewee frames few of the questions in advance while other questions are framed by him during the interview process based on the responses received from the interviewee. This is a more open, adaptable and informal technique. The interview method is a more personalized survey technique than the questionnaire method. The researcher in the current study has directly approached the respondents for conducting the interview. Although the interview technique is highly useful for gaining adequate data, the system is time consuming and cost intensive that leads to the overall level of the firm (Kothari, 2004). 3. Data analysis and findings The population for the interview survey includes 5 managers, 11 employees and 14 passengers of British Airways were interviewed in the current survey for acquiring information regarding the manner in which British Airways operates and to understand some of the potential issues existing in the organization. The operations of the firm are widely categorized in two sections. The first section deals with the strategic policies of the company in respect of its operations. The second section incorporates analyzing the main systems and operations of the company. Questions were formulated and put across to the respondents so that adequate information can be procured for fulfilling the main research objectives. The responses were supported by adequate number of evidences obtained from secondary sources. 3.1 Strategic analysis 3.1.1 Service offerings What are the services offered by British Airways? Broadly the main services offered by BA are passenger and cargo transportation. In cargo transportation, both passenger and commercial cargo are transported across the destinations where the flight operates. Information in respect of the services offered was acquired from the managers of BA. The following figure describes the different services offered by British Airways (Moyer, 1996). Figure 1: Service offerings of British Airways What are focus point of the services offered? The managers and employees of BA responded to the above question by stating that the primary goal of the company is to provide best in class services. The company aspires to become one of the most comfortable, enjoyable and timely flight service providers. In order to fulfil such objectives the company recruits the most efficient on flight and ground crew members. Every care is taken so that passengers do not face any trouble during their journey (Waller, 2003). 3.1.2 Customers and market analysis Who are the target customers and what market does the company serve? The target customers of BA can be broadly categorized in two sectors namely business travellers and leisure travellers. Business passengers can again be classified into frequent travellers and less frequent travellers. The superior quality services offered by BA have enabled it to become the first choice for many frequent business travellers. It has also been successful at attracting individuals who go on holiday trips frequently. Of the passengers interviewed, majority stated that they prefer BA as compared to other airlines due to the high quality services and superior brand name (Neely, 2002). Who are the competitors of BA? In terms of the services offered, the direct competitors of British Airways are Virgin Airlines. As per the interview survey conducted, managers and employees of BA had stated that in the recent times it was seen that Virgin Airlines had taken drastic measures for attracting passengers which included providing cheaper tickets and various seasonal offers. Virgin Airlines can be considered to be a direct competition in terms of premium airlines brands. However, the cheap and affordable airlines are also a huge completion for BA. This cheap airlines segment includes Easy Jet and Flybe predominantly. Easy Jet, Flybe and British Airways together serve the maximum number of passengers in the U.K, in the domestic market. Virgin Atlantic in the recent times failed to provide quality services which had declined its competitiveness in the market (Slack, Chambers and Johnston, 2010). Figure 2: The U.K airlines sector rankings in terms of load factor and passengers (Source: Airline Network News and Analysis, 2014) 3.1.3 Order winner and order qualifiers What makes BA an important player in the airlines industry? Over the years, BA has remained successful at developing a strong brand name for itself and the U.K airlines industry as a whole. The airline contributes adequately towards the overall revenues earned by the airlines industry. Apart from revenues, BA also plays an important role in terms of areas served and passengers carried. The strategic policies of the company are seen to enhance the company’s competitive position in the market. One of the strongest competitive advantages enjoyed by BA is its widespread market area and strong market presence. The company serves the maximum number of destinations across the world, as compared to other U.K airlines, making it one of the most widespread airlines networks of the nation. The airline also enables its passengers with technology support in few of its fleet carriers, so that they can stay connected with friends, family and their work while travelling Based on the interview survey carried out, maximum respondents had opined that the quality of services were the prime selling point for the company which makes it an important player in the industry. The quality of the food and beverages served on flight is also comparatively better than most of the competitors of BA (Tushman, Reilly and Charles III, 1996). What the basic qualifying factors for BA services? The order qualifying factors of BA are its safe, high quality and timely services. Managers, employees and the customers interviewed had stated that for any airlines the primary success factors are timely services, safe flight arrangements, good in flight ambience and the quality of food. Proper luggage handling was also mentioned as an important criterion by few of the respondents of the interview survey (Johnston and Clark, 2005). British Airways ensures that all such factors are adequately accomplished by the company. Managers and employees had additionally stated that apart from efficient services, it is also essential that the company maintains a decent level of internal financial stability and controls its costs of operations adequately. British Airways is also preferred for commercial transportation of cargo, due to its timely services and safe cargo handling processes. In the recent times it has also taken efforts towards improving the luggage handling systems. The company is also seen to invest adequately towards innovation related activities for devising ways in which the costs of operations can be minimized and be made more aligned with the changing needs of passengers (Insinga and Werle, 2000). 3.2 Operational analysis 3.2.1 Breaking down the operational process What is the broad breakdown of the operational process at British Airways? The operational processes of the company includes a supply chain network consisting of 50 suppliers who provide over 900 products to the company in respect of food, beverages and other items which are used on board. The company has developed 90 partnerships globally to support its logistics network and participates in innovative projects for improving the overall service framework of the company. The following framework describes the BA’s system of operations. Figure 3: Process breakdown of British Airways The above framework in respect of the operational flow at BA has been constructed on the basis of the feedback obtained from employees and managers of the interview survey. The system begins with proper software updates in respect of ticket booking, reservation seat allocation and information exchange between passenger and the company. These operations fall under the category of IT maintenance and communications. It also includes systematic allocation of work to employees and workers falling under the category of ground and in flight staff. The next level of operations is in respect of maintenance of aircrafts. These include routine and pre flight checks. Reports relating to such checking are updated in the company’s ERP (enterprise resource system) as well. Such routine checks help avoiding any type of damages and also facilitates providing prior information in respect of when aircrafts parts are required to be replaced. This level of operations also includes fuel refilling and handling of luggage and cargo. Luggage and cargo handling includes the transportation and storage from pick up points at the airport till they are collected at the delivery point. The third level of operation is the actual delivery of services to passengers which begins once thy board the plane, till the time they board off. The services include providing in flight assistance, food, beverages and other necessities (Johnston and Clark, 2005). 3.2.2 Delivery system How would you describe British Airway’s service delivery system and its efficiency? Majority respondents who participated in the interview survey stated that the service delivery system of BA is highly efficient. The delivery system of the services of the company begins from the time when the passengers board flight. Adequate importance is given by the firm to ensure that services are delivered as per the expectations of the passengers. The delivery system also includes handling of luggage and commercial cargo. The company establishes a well synchronized flow chain which allows the transportation of luggage between airports in a timely fashion. Security is a prime aspect in the manner in which services are delivered by BA. Ground staffs carefully check the cargo and passenger luggage to prevent accidents. The checks are also required to be done efficiently to prevent accidents. The rising number of terrorist attacks has also made airport authorities and airlines service providers remain conscious regarding the manner in which the services are delivered. Strict rules have therefore been established in respect of passenger and luggage checking. This is also a reason behind why passengers are required to go through a number of procedures before they actually board the flight. In order for the company to successfully deliver timely services, it becomes essential to provide timely training. Changes in technology and management of services particularly necessitate providing of training to both ground staff and the flight crew (Jennings, 2002). 3.2.3 Marketing strategies What are the marketing strategies of British Airways? As per the interview survey carried out, customer needs, pricing policies and promotional tactics are the main marketing strategies of the company. Customer needs- BA adequately understands that customers buy ticket considering their budget. As a result the brand provides consumers with numerous ticket options as per the budgetary needs of customers and their preferences in respect of the way in which they prefer to travel. Pricing strategies- The Company establishes a pricing system which is suitable in terms of earning positive returns on investments. Through pricing strategies the firm tries to improve their market share as well. In case of business class and elite seats, the company follows the premium pricing strategies. For the economic class, the company is seen to follow medium and penetrative pricing strategies. A low price strategy facilitates the airlines to compete with other airlines in an effective manner. Many airlines had to restructure their pricing policies due to the increased popularity of the low cost airlines segment (Lysons and Farrington, 2005). Promotional tactics- The Company offers more than the basic flight services. This includes providing car rental services, hotel facilities and shopping facilities. Providing such services essentially falls under the category of sales promotion. The advertising division of the company manages promotion over 30 tools which range from television, press, radio, posters and the social media. Additionally promotional tactics also include direct marketing tactics such as online memberships and message alerts (Radnor and Barnes, 2007). How does BA place its services? Placing activities means the distribution and movement of activities from the manufacturer to the consumers. BA’s supply chain is well integrated including a number of retailers and suppliers. In the recent times, the company has reduced their dependency on retailers for direct promotion of activities and relies upon their direct sales activities. This has however increased their investments in infrastructure. The company mainly follows the just in time inventory system where orders are placed only as per the requirement, keeping in mind the lead time requirements. The operations of the company are structured suitably to meet the needs of the consumers and delivery of timely services (Jiang, 2007). Are the operations of the company well designed to meet the needs of the market? The interview survey reveals that majority respondents agree that BA has well integrated operations systems which successfully meet the needs of the market. BA designs its operations in a manner such that the gap between customer expectations and delivery of services are low. Managers are of the opinion that it is essential to establish frequent communication with consumers for enhancing sales. Moreover, with the growth of the commercial and corporate sector, rapid movement of resources is essential (Radnor and Barnes, 2007). BA serves the development of industries with the timely and fast transportation of men and materials. It has therefore remained as an integral part of the logistics chain of many international organizations. Additionally, it is also seen that air travel has nowadays become more commonly and frequently opted for. This is due to enhanced lifestyle and the need of saving time in travelling. The entire operational system is designed in a manner such that they add value to the company. The company is seen to frequently update their operations from the technology point of view for remaining competitive in the airlines industry. BA also seeks new and innovative ways for meeting consumer needs and for increasing safety during flights (Radnor and Barnes, 2007). 4. Issues and Recommendations The most common consumer complaint in respect of BA services is the mismanagement of luggage and cargo. Passengers are often seen to complaint that their luggage gets misplaced quite often and even after they are traced, much time is taken up by the airlines to deliver it to the passengers. Another common problem faced by passengers is the cancelation of connecting flights. Passengers complain that the employees of BA working at the customer service department often could not provide them with the right connecting flight causing them much delay. Managers claim that during off season, their flights do not meet the minimum reservations required, so as to cover the costs of operations. As a result some flights end up becoming cancelled. In order to prevent such cancellations, BA should come up with launching different offers and freebie services in order to attract travellers. Passengers also have commented that the BA in flight services is not up to the mark in the economy class, as per the costs charged by them. As a result people flying in the economy class are often seen to avoid premium airlines and opt for low cost airlines (Huy and Mintzberg, 2003). In order to improve the passenger baggage related services, the company should adopt automated bulk coding and identification system. Complete efforts must be taken in order to reduce the luggage misplacements and loss. In general, as compared with other airlines of UK, the luggage handling services of BA are highly efficient. Also in the recent times the company has implemented new systems which reduce the time required for running passenger and luggage checks. Attention should also be given to the manner in which the flight attendants treat passengers and the manner in which their grievances are removed. Hospitality is also an essential part of the airlines sector. Every employee of the airlines, including both ground and in flight staff must remain hospitable with passengers. 5. Conclusion British Airways is seen to formulate effective operational strategies to meet the market needs and run successfully. The existence of high financial stability within the organization is indicative of the fact that the company is able to generate sufficient sales. Moreover BA is also seen to expand continuously in terms of its number of aircrafts. Through mergers and alliances, company has been able to tide over the financial crisis of the recent times with much ease. The company has also been successful at minimizing costs of operations through optimal use of resources. The carefully set strategies of BA are directed towards making it live up to the brands tag line “world’s most responsible airline”. In the airlines sector, logistic management is crucial as a number of firms from other sectors, depend upon the fast and timely movement of material provided by different airlines. Hence establishing proper relations with large commercial institutions and supporting their logistics chain has remained important for British Airlines. In order to enhance its operational efficiency, the company stresses on developing strategies which are competitive and helps to reduce costs of operations significantly. This facilitates it to charge low fares from passengers and thereby attracting much customers from the low cost airlines sector. This is one reason why BA has been able to become one of the popular choices for budget conscious travellers even though it does not fall in the category of low cost airlines. Reference list Airline Network News and Analysis, 2014. Virgin Atlantic’s Little Red service still struggling to fill more than half of its seats as UK domestic market stops shrinking. [Online] Available at: [Accessed 26 December 2014]. British Airways, 2014. Home. [Online] Available at: [Accessed 26 December 2014]. Clark, G., Johnston, R. and Shulver, M., 2000. Exploiting the service concept for service design and development. New Service Design, Sage, 1(1), pp. 71-91. Huy, Q. N. and Mintzberg, H., 2003. The rhythm of change. MIT Sloan Management Review, 44(4), pp. 79-84. Insinga, R. C. and Werle, M. J., 2000. Linking outsourcing to business strategy. The Academy of Management Executive, 14(4), pp. 58-70. Jennings, D., 2002. Strategic sourcing: benefits, problems and a contextual model. Management decision, 40(1), pp. 26-34. Jiang, H., 2007. Competitive devise for low-cost airlines. Asia Pacific Management Conference, 13(1), pp. 431-436. Johnston, R. and Clark, G., 2005. Service operations management: improving service delivery. New Jersey: Pearson Education. Kothari, C. R., 2004. Research methodology: methods and techniques. New Delhi: New Age International. Lysons, K. and Farrington, B., 2005. Purchasing and supply chain management. New Jersey: Pearson Education. Moyer, K., 1996. Scenario planning at British Airways—a case study. Long Range Planning, 29(2), pp. 172-181. Neely, A. D., 2002. Business performance measurement: theory and practice. Cambridge: Cambridge University Press. Radnor, Z. J. and Barnes, D., 2007. Historical analysis of performance measurement and management in operations management. International Journal of Productivity and Performance Management, 56(5/6), pp. 384-396. Slack, N., Chambers, S. and Johnston, R., 2010. Operations management. New Jersey: Pearson Education. Tushman, M. L., Reilly, O. and Charles III, A., 1996. Organizations: Managing Evolutionary. California management review, 38(1), p. 4. Waller, D. L., 2003. Operations management: a supply chain approach. Connecticut: Cengage Learning EMEA. Appendix Questions for interview survey 1) What are the services offered by British Airways? 2) What are focus point of the services offered? Options respondents Best in class services 26 Profit making 4 Total 30 3) Who are the target customers and what market does the company serve? 4) Who are the competitors of BA? 5) What makes BA an important player in the airlines industry? Option Respondents High revenue 4 Market presence 7 Brand image 8 Quality of services 11 Total 30 6) What the basic qualifying factors for BA services? options Respondents Safety and ambience 15 Customer satisfaction 5 Luggage handling 7 Cost of services 3 Earning profits 0 Total 30 7) What is the broad breakdown of the operational process at British Airways? 8) How would you describe British Airway’s service delivery system and its efficiency? options Respondents Highly efficient 23 Moderately efficient 7 Lacks efficiency 0 Total 30 9) What are the marketing strategies of British Airways? Options Respondents Pricing policies 10 Customer needs 11 Promotional tactics 9 Total 30 10) How does BA place its services? 11) Are the operations of the company well designed to meet the needs of the market? Options Respondents Strongly agree 24 Agree 6 Disagree 0 Strongly disagree 0 Total 30 Read More