Ba Research Report

Only available on StudyMode
  • Download(s) : 169
  • Published : May 13, 2013
Open Document
Text Preview
A research report with a word limit of 1,500 on British Airway’s (BA) change program that resulted in long-running industrial disputes between its management and crew members in 2009-2011. The contextual information about the BA’s introduction of strategic changes – why BA produced this change, explain market (rising fuel costs etc.) British Airways is the UK’s largest airline. Since becoming privatized in 1987, BA has continued to grow despite increased competition (Connell & Williamson, 2011). The UK’s economic climate had a large influence to why the British Airways’ industrial occurred. In 2011, UK inflation was 4% on the previous year, compared to an average pay rise of 2.3% for the same period. This means that the cost of living was increasing at a much more rapid rate than people’s income. As a result, workers like BA’s cabin crew put pressure on employers to raise pay. Additionally, lower disposable income means fewer than usual are withdrawing money for one-off purchases such as foreign holidays - “A lot of people are not touching their savings because they do not know what is round the corner” (Giles, Groom & Bounds, 2011). Therefore demand for international flights is lower. Fuel accounts for 25% of British Airway’s total costs, therefore any fluctuations in the price of natural resources will have a huge impact on this industry. In 2011, after oil prices surged to $110 a barrel, BA informed passengers that they face rising fares (Groom, 2011). IAG’s (BA’s parent company) fuel costs were predicted to rise by €1.2bn to €5.1bn (£4.36bn) in 2011 (Groom, 2011). However increasing fares would have reduce the airline’s competitiveness. Alternatively the company could remain profitable by reducing wage costs instead of passing the increases onto the customer. The airline industry has also been affected by social trends. Insurance costs have risen because of fear of terrorism and tighter security checks at airports (Barrows & Neely, 2011). Technological advances have reduced demand for business flights, with companies using alternative communication systems such as teleconferencing in order to cut costs (Shaw, 2011). As a result of these macroeconomic factors, BA felt that they needed to adopt an internal cost-cutting strategy to remain profitable. The dispute developed into a row over travel concessions removed from Unite members who went on strike, as well as suspensions and dismissals (Groom, 2011). The current environment of high unemployment increased BA’s bargaining power as an employer (Conrady & Buck, 2012, 11). The union was powerless to stop the original cause of the dispute as BA removed at least one crew member from most long-haul flights, saving £63m a year (Groom, 2011). It has also hired 700 new crew members in its so called “mixed fleet” on certain routes, earning £17,000 a year on average compared with £29,000 for existing Heathrow cabin crew (Groom, 2011). This programme should yield £160m annual savings within a decade. According to Deutsche Bank, following the cuts, BA has the lowest employee costs of the major European network airlines at 22.9 per cent of sales in 2010 compared with 26.8 per cent in 2006 (Groom, 2011). Evaluation on the nature of such changes – was it gradual, radical, top management, grass roots up scale, depth time scale. Apply the kaleidoscope model. On October 6, 2009 the airline announced plans to cut 1,700 cabin crew jobs and freeze pay. Union officials accused the company of ''holding a gun'' to the heads of staff and warned that they were prepared to fight the proposals. It wasn’t until May 1, 2011 that the dispute was on the verge of being resolved following a breakthrough in crucial talks aimed at ending the long-running row (Telegraph, 2011, May 12). The dispute lasted more than 18 months and led to 22 days of strikes costing BA £150m. Therefore this proved to be a costly process, and had it been resolved sooner, BA would have saved a lot of money and...
tracking img