Improving Operations Management at British Airways - Report Example

Running Head: OPERATIONS MANAGEMENT AT BRITISH AIRWAYS Operations Management at British Airways of the of the Table of Contents Abstract 3 Company Profile 3 SWOT Analysis on British Airways 4 Strengths 4 Weaknesses 4 Opportunities 5 Threats 6 Analysis of British Airways, Comparing Marketing, Finance, HRM, Management Structure and Operational policies ………………………………………………………………………………7 Marketing 7 Finance 7 HRM 7 Management Structure 8 Operations 8 Recommendations 9 Conclusion 11 References 12 Abstract British Airways has its own symphony that includes several policies and procedures. Its key role is to provide its services to the international and domestic travelers. The current economic recession has marked an effect on British Airways too. However the airline is very much coping with the current economic and fiscal changes so far, nevertheless British Airways is still in an open competition with several other airlines, this is to assure its realistic, practical and superior efforts to keep its name high amongst other counterparts. Operations Management at British Airways British Airways (BA) contains a formalised composition with a number of predefined policies and measures, and it’s because of its magnitude and the global range of its movement. The objective of this assignment is to analyse the practices and to outline British Airways approach to managing change in its organisation according to the current economic climate all over the world. (Vrana, V, 2006, 510) This issue assumes a particular relevance in an increasingly competitive environment in the service industry. The report is divided in two parts. The first part analyses the strategic approach to the market and the corporate culture of the airline. The second part includes some recommendations to help the current standing of the air line as a result of worldwide economic disaster. Company Profile British Airways plc (BA) is amongst worlds major international airlines, that carries greater number of passengers from one destination to another than its other competitors. British Airways is a scheduled international passenger airline. (Law, Leung and Wong, 2004, 105) The Companys main activity is the operation of international and domestic scheduled traveler airline services. The Company also gives other services to other parties, for example aircraft maintenance. British Airways have a board and a leadership team. Whilst the structure would lend itself to a hierarchical one, British Airways encourage employee participation, suggesting a top down and bottom up approach. (Lewis, 2008, 960) British Airways are set up as a traditional hierarchical structure; however management is moving into collective decision making, involving all employees. (Strategic Direction, 2006, 26) BA operates from many airports, but its main base is at London Heathrow. SWOT Analysis on British Airways Strengths Being the national flag carrier is an inherent advantage that the home market will identify with. This can be exploited to the airlines benefit. British Airways are heavily committed to be at the forefront of technology, offering everything from check-in via mobile Internet to innovative in-flight technology. Business people want superior quality travel and their flatbeds would be considered a competitive advantage on long-haul flights. BA has improved the range of services it can offer customers through its policy of global alliance. (Schmitt, 2005, 310) BA is a founder member of the One World airline alliance. The other founding members were American Airlines, Canadian Airlines, Cathay Pacific and Qantas. The main reason behind such an arrangement was that research had shown customers wanted to buy the full range of international services they required from a single business rather than several different airlines. Such alliances also present opportunities to reduce average costs through economies of scale. Weaknesses British Airways has lost a significant portion of the market to low-cost carriers with the growth of the no-frills, short-haul market. The events of September 11th have significantly affected the market for air travel and forced British Airways to take cost cutting procedures. British Airways have had to dramatically lower the cost of flights because of the aggressive pricing and promotion from the smaller airlines, so that it can maintain its status as a dynamic opponent in the market. British Airways have failed to adapt to change in the external market and competitive environment and control their costs. BA has had to introduce a restructuring programme, which not only cost money, but hundreds of jobs as well. Recession in the region of Far East has also marked effects on the British Airways, rise in prices of petrol, administration taxing, and airports privatising. BA still contains huge number of planes that require insurance, which has increased tenfold due to current scenerio. This has caused a rise in air fares too. (Huang, 2006, 385) Opportunities Open Skies agreement between the United States and the United Kingdom would create an open and competitive environment in one of the worlds largest international aviation market. Globalisation of the airline industry will enable BA to expand their services and profit bases abroad. Airlines are becoming increasingly dependent upon each other and have entered into mutually beneficial alliances and networks in order to compete in a global market and also helping to prevent new players to enter the market on long-haul routes. BA recently moved to service the business/premium service segment whereby service quality and not price is the overriding factor in selecting an airline. Thus, as a result of significantly higher operating costs engendered in traditional airlines and in response to developments in the low cost segment. BA found it necessary to re-think their position in the market. Threats: Deregulation and the single destination provisions that small airlines were set removed, a number of airlines are able to operate and therefore compete on the major international routes that larger airlines had an oligopoly on. The comparatively low level airline companies cause a serious danger to BA since they present considerably cheaper flights. The following development of a low cost no frills market subdivision which evolves major improvements in costs of operating costs has disturbed the equilibrium of traditional economical advantage. BA miscalculated the hazard and was forced into reactive style. The events like September 11th and economic disaster will continue to have an impact on the global airline industry, in terms of passenger traffic, future consumer behaviour, and the financial & economic health of airlines, and thus will have contributed significantly to the further demise of the European airline environment, accelerating and intensifying existing problems in the industry. Analysis of British Airways, Comparing Marketing, Finance, HRM, Management Structure and Operational policies Marketing British Airways is to increase the use of the Internet to 50% within two years. British Airways reduced their marketing costs by 4.5% in the same period. (Holloway, 2006) Summary: The airlines marketing policy is to increase their use of the Internet to reduce costs. Finance British Airways were reporting a pound 115m loss recently. British Airways are now looking to raise pound 900m through property and aircraft disposals. (Huang, 2006, 389) Summary: British Airways are looking to reduce costs, which include capacity reduction and aircraft disposal. HRM British Airways heavily invest in employee development. BA is reducing their workforce by 23%. (Mattila, 2007, 262) Summary: British Airways are cutting their workforce, BA have a paternalistic approach to their workforce. Management Structure: British Airways have a board and a leadership team. Whilst the structure would lend itself to a hierarchical one, British Airways encourage employee participation, suggesting a top down and bottom up approach. (Lang, 2007, 4) Summary: British Airways are set up as a traditional hierarchical structure; however management is moving into collective decision making, involving all employees. Operations British Airways is focusing on profitable markets dependent on business travel. BA is cutting aircraft size, to reduce capacity but maintain frequency. BA is insistent on remaining a full service airline. Summary: British Airways is focusing on the business traveler. Recommendations BAs approach is based on the assumption the management are firmly in control. Of course, the reality in the modern world is that management seeks to manage and control, but often events move ahead, and strategies have to emerge to enable the organisation to manage change. (Law, 2004, 99) For BA it would be necessary to adopt more than one style of strategy. BAs policy to be the undeniable leader in the entire world travel realised that environmental factors throw its strategy off course. (Kim, S, 2003, 26) As it was impossible for them to have foreseen the destructive events of September 11th and increased competition by LCAs, these uncontrollable events had a devastating effect on the airline industry. In order to compete against LCAs (Low-Cost Airlines) BA introduced GO Airline, but this venture lost BA millions as it came too late. The GO Airline failed to compete with the other LCAs and was sold off. That resulted in BA to deal with mainly business flights. Then The British Airways came up with a fresh operation statement i.e. to be the unquestionable leader in the world of travelling. By reconstructing its advertising, marketing, and managerial advancement and significantly making their customer service far better, British Airways changed its status and funds. The most recent direction the airline has acquired will recover employee-management relations and customer service will ultimately set monetary and operational objectives. The airline must focus on getting customers who look for superior services and travelers who are holiday flyers, by giving reduced prices for traveler family units and older flyers (e.g. pensioners). (Maxham, 2001, 11) The company must consider that the old-age citizens hold funds saved up along with their pensions hence it will be beneficial for the company if they propose concessions and special bargains to them. Early signs will be a raise in number of passengers; then the organization will need to carry on promoting and increasing confidence of consumers if they are willing to get travelers both new and old. Another trouble-free means to get more customers is to significantly reduce air fares, so that the flying will get more available to citizens. (Kim, 2003, 25) It was always needed to train the crew with virtual learning tool. Hence just recently airline has announced to provide proper virtual training to its staff members and it will save company’s 20000 pounds in a year. (Thompson, 2009) So every member of staff would not need to see an air craft in reality to get training, rather they will be provided with virtual tools to do so. Moreover, has initiated an email system, that will make all the airline staffs connected to eachother through mobile phones. Innovative plans could be made to help out in reducing costs a bit more. Avoiding long routes, reorganization of the fleet and downsizing of the company could bring huge yearly savings. In order to guarantee British Airway’s endurance in this indecisive period, the company needs to provide very best service with some guidelines to be learnt from the low scale airlines that have been performing quite well in this time of worldwide economic crisis. Conclusion British Airways is the just a single network carrier airline all across Europe facing a tough low fare contest on its small haul domestic and European systems for point-to-point travel. It is consequently several steps ahead of its competitors in dealing with low fare competition. It is restructuring its short haul network, and launching a new pricing strategy and internet booking arrangement, which should allow it to fight more efficiently. The short haul European market share of low fare airlines will grow sturdily in the upcoming years, and airlines like Air France, Lufthansa, SAS and KLM are prone to face increased contest. This may encourage them to reassess their individual small haul operations, as British Airways has done. British Airways is quite managing with the economic and other types of changes so far, though it is still in open contest with a number of airlines, this is to guarantee they will stay practical, reasonable and to the front of the contest from all features of the businesses. 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