British Airways

OnLine Case 11.1 British Airways
This case tracks a number of strategic changes at BA as the airline has attempted to remain profitable in a competitive industry affected by a turbulent environment. BA has competed internationally, Europe-wide and on domestic routes. Internationally it has had to deal with the growth of Virgin Atlantic as well as flag carriers from around the globe; within Europe the low frills airlines such as Ryanair and EasyJet have become very powerful. The nature of competition is not the same. At the same time – and this is documented in a separate case – BA brought difficulties on itself with the troubled opening of Heathrow’s new Terminal 5, when flights were cancelled and bags lost. It has long been reported that BA wanted to become a truly global airline, but this has yet to happen. The background John King (later Lord King) was recruited from outside the industry to become Chairman of the then nationalized British Airways (BA) in 1981. Supported by Chief Executive, Sir Colin Marshall, he turned the ailing company around and, in 1987, BA was successfully privatized. By the early 1990s, BA was ranked seventh in the world in terms of revenue, but fifth in terms of passenger miles flown (behind the four leading American carriers with their huge domestic networks). Only Swire Pacific (of Hong Kong) and Singapore Airlines were more profitable. In fact, many of the world’s largest airlines were being run at a loss, many of them subsidized by their governments. By 2000, Lord King had retired. He had been succeeded by Marshall, who had in turn been replaced by Robert Ayling. Growth and prosperity had fluctuated in the intervening years. BA had been affected by the expansion of Virgin Atlantic and had ‘lost the war of words’ between these two rivals, fuelled originally by the tension in the relationship between Branson and King. Capacity globally had expanded to exceed demand, but airlines were still being propped up – as a result prices had...