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British Airways should focus on their quality standards
Executive Summary :
British Airways is a market leader in the United Kingdom air line operations. In the last decade due to immense increase in competition there has been erosion in their market share.
This report analyses the past and current environment of British Airways. Through this evaluation I have recommended that British Airways should focus on their quality standards existing in the industry which adds on to the competitive advantage of the organisation.
The people –led processes strategy was derived from a number of sources outlining BA’s decline in customer satisfaction and employee satisfaction. The improved quality technological advancement coincides with the renewal of BA’s aircraft fleet leading to overall customer and employee satisfaction.
The objectives and structure of the report has sections which will enable an operational direction in terms of quality to be recommended to British Airways.
British Airways is United Kingdom’s leading airline and the largest international scheduled airline. It is also engaged in the operation of international and domestic carriage of freight and mail, and ancillary services (Datamonitor 2008). BA flies to more than 300 destinations worldwide with its codeshare and franchise partners. It has carried 32 million passengers in 2009/10, earning £ 8 billion in revenue, down 11% compared to previous year (Annual report British Airways 2009/10).
Since privatisation in 1987, BA has continued to grow as a competitor in the market. BA has been labelled the world’s first airline to take part in the scheme to reduce green house gas emissions (2002) and allow its passengers to print online boarding passes (2004) (British Airways 2008).
Despite the economic downturn, BA’S future looks promising. According to BA’s 2008 annual report it aims to be the “world’s most responsible airline", great importance lies in developing principles and careful operational and strategic direction to allow the achievement of the goal.
2. Competitive priorities of British Airways:
Differentiated Customer Experience:
BA aims on offering a unique customer experience. BA conducts market research every month with its customers to know them better and the people they have recommended BA to, it reaches around 57,000 people in one month through this program. Its current strategy is to upgrade customer experience through the introduction of text and mobile services for business class customer. It conducts programs like “CUSTOMER FIRST".
BA has focussed on organic growth. It has formed alliances and partnerships to attain a competitive advantage over its competitors.BA has recently formed a joint alliance with American Airlines and Iberia to co-operate on transatlantic flights giving it an advantage of connecting the major financial hubs New York and London.
Corporate Social Responsibility:
BA since the past has been a pioneer in the airline industry for adopting the fundamental. It has introduced programs like One Destination .It has had achievements like being the first to identify its forest footprint. It has invested in research projects like Solena to develop sustainable alternative aviation fuels in order to reduce the carbon footprint.
In the past and current strategies BA aims on practicing Total Quality Management. Being a part of the premium airlines BA invests in their staff, fleet and other facilities in order to provide the best customer service.
3. INTERNAL ANALYSIS OF BA’S OPERATIONS:
3.1 VALUE CHAIN ANALYSIS:
British Airways have tried to develop efficient operational system through forward and backward mitigation. In order to reach maximum levels in the value systems to the suppliers and channel value chains BA tends on controlling many of its component supplies in-house and through BA Holidays plc.
Fig.1 – PORTER’S VALUE CHAIN (Adapted from Johnson et al.2008.p110)
The value chain in the Fig.1highlights how the primary and support activities add value to British Airways.
There are little inefficiency that reduces the amount to the organization as illustrated in Fig. 2 and Fig 3.
FIG.2: SUPPORT ACTIVITIES VALUE LOSS:
FIG.3: PRIMARY ACTIVITIES VALUE LOSS:
3.2 RESOURCE BASED VIEW:
According to operation management a organisations unique capabilities contribute to its competitive advantage and better-quality performance. The below shows the resource based view of BA’s resources and competencies:
Fleet of 245 aircrafts flying to more than 550 destinations (British Airways, 2010).
Offering distinct services like British Holidays and the London Eye Company.
International Customer Database.
Pursuing the ONE WORLD program through its partnerships and alliances.
Flight Stimulators and Cabin Safety Training, Training of ground school, service training on the terminal 5(British Airways 2010).
Economies of Scale from ongoing suppliers.
The competency to fly and manage the safety of passengers on various routes (Davies 2000).
Monopoly over Terminal 5 of Heathrow Airport (BBC 2008).
Being recognised as one of the premium and reputable brand around the globe due to the long standing existence in the Airline industry.
Being recognised by City and Guilds as the first UK based airline as a training centre, qualifying all cabin crew with NVQ Level 2(British Airways 2008).
One of the subsidiary “Open Skies", never has more than 64 passengers per flight and with one attendant per twelve passengers (British Airways 2008).
4. SWOT ANALYSIS OF BRITISH AIRWAYS:
(Source: Johnson et al., 2008, page 81)
Strong Brand Image
Partnerships and Alliances
Monopoly over Terminal 5.
Poor employee satisfaction within the organisation.
Lack in reliability and trust prime reason high ratio of baggage loss.
Slow innovation and change.
Reliance on established revenue sources.
4 Star rating by Skytrax Quality System.
Competitors forces to exit.
Emergence of new markets like India, Africa etc...
Uncertain fuel costs.
Fluctuating Exchange rates.
Fear of double dip recession.
Lower cost competition
5. REVIEW OF THE QUALITY STANDARDS OF AIRLINES:
An independent website Skytrax gives an objective view of BA’s quality of service in comparison to other competitors. This helps in highlighting the operational issues that need to be addressed.
Fig 4- Competitive Spider Index (data sourced from Skytrax 2008):
All the ratings taken from the website are based on a scale of 1 to 5 where 5 is website.
British Airways has overall rating of 4. Apart from KLM all its competitors scored 4.The most similar airline to BA is Virgin Atlantic in all the mentioned categories.
Virgin Atlantic is a quality approved airline where as British Airways is not. British Airways need to improve a lot in its operational areas to outperform its competitors like passenger interaction across all classes, in-flight entertainment, regular break downs, employee satisfaction, baggage recovery etc. Six of its competitors have a five –star rating with an independent evaluator.
5.1 BRITISH AIRWAYS AND TQM:
British Airways came into existence in 1935, when a small privately owned airline merged. The British Overseas Airways Corporation was formed when the government nationalised British Airways and Imperial Airways resulting into change in the organisation.
In 1946, British Engineering was formed which looked after domestic operations as a different entity. In 1973, the BOAC and BEA merged to form British Airways. Due to overstaffing due to the merger between 1981 and 1983 there was a downsizing of 40% of its staff. British Airways had a reactive style of operational and personnel management till 1984.
In the late 1987, the senior management of BA’s technical workshops formed a view that the TQM program will assist them to improve and contribute to the success of the organisation. Thus, during this period British Airways became a highly competitive global company respected worldwide for its performance.
In order to practice TQM the main focus of the management involved transforming BA from engineering to a market- driven organisation. There are four key factors that contributed to the success of BA:
Ongoing cost reduction
Focus on delivering excellent customer service at a premium price.
Increasing market coverage through alliances and partnerships.
To maximise yield on individual flights BA invested in computerised reservations.
5.2 Applying Porter’s Generic Strategy:
Porter’s generic strategy gives us the perspective that British Airways focuses on the broad scope of the market. British Airways uses a combination of focus and differentiation. Due to the efficiency of the service delivery process British airways as attained a competitive advantage with addition of their supplementary services that enhance the customer experience.
Porter’s Generic Strategy:
All the factors are achieved by British Airways through an integrated and centralised supply chain. The quality of customer service and the service that it offers thorough its partnerships and alliances differentiate British Airways from the other players in the industry; this gives them a sustainable competitive advantage.
British Airways focuses on being a customer led organisation. It organises continuous improvement training s for the employees to deliver a unique experience to its customer on their travel. British Airways focuses on differentiated service for the business class customers as it is the most profitable segment for e.g. the executive lounge at Terminal 5. To maintain a competitive advantage it focuses on diversification of services such as rail.
5.3 Implementation of Total Quality Management in British Airway’s:
British Airways did not follow any of the quality measures since its inception till 1987 due to lack of competition. In 1987, the senior management believed that to be best and a world class organisation they had use strategies and processes that must create vision and inspire the employees and gain their commitment and this would only be possible by the implementation of TQM.
In order to do so they conducted a diagnostic survey, laid emphasis on the problems and issues faced by the staff. The broader perspective of the survey looked at the customer and supply chain. Hence, there were seven identified areas of improvement and British Airways when through a cultural change to adopt TQM.
British Airways launched their TQM programme in September 1988 and by the end of 1999 the benefits of the programme were visible. The management carried out various workshops like LEANER TO FITTER; PUTTING PEOPLE FIRST ETC. British Airways carries out market research with its customers every month in order to improve their services.
British Airways has a program for its employees “SPEAK UP". British Airways conducts programs for employees to know their workplace better like “CUSTOMER FIRST" team program, Ineffective attitude of employees, employees treated as internal customers;" WE FLY TO SERVE" motto, “A DAY IN THE LIFE" , “GOLD IN THE HOLE,’ENGINEERING EXCELLENCE’, ‘MONEY MATTERS’ etc. BA offered MBA Degree to its employees, established permanent training centre, created emotional support, organizational hierarchy was flattened, profit sharing bonus schemes, performance appraisal system, performance based compensation system and data driven feedback system on management practices.
British Airways sets yearly targets for itself for themselves in terms of continuous improvement .The have pattern breaking, experimenting processes, visioning like introduction of alternative fuel and bonding.
6. SERVICE DELIVERY PROCESS OF BRITISH AIRWAYS:
Most service companies carry out market research to measure the service quality or customer satisfaction. These programs allow the management to manage service provision and relationship building initiatives. Hence, providing customers with the service that will help ensure their continued patronage. British Airways is the one of the apt examples of the service delivery process.
British Airways has always believed in restructuring since its formation. British airways has adopted SOA built around Sonic ESB in 2009,through which they provide the customer all information about the underlying services via customer touch-points like hotel and car providers on BA.com giving it a competitive advantage .British Airways has jumped on the mobile bar code bandwagon through which customers have an access to all the information about its flights and services .The website offers a other languages section through which customers can access information in their respective languages. BA.com provides all the information that a person needs to follow during his journey.
British Airways contact centre and colleagues are given adequate training to provide the right product to the choice of the customers and giving them information of the services that they get flying with British Airways.
Online booking being the most preferred mode of reservation, some people still have problems booking over the internet. In fact, it has been observed that most online bookers are young or middle aged or above average educated people. British Airways trains it contact centre staff at regular intervals to deal with situations like these.
British Airways have been focused on long term relationship with its customers. On delays and cancellations of the flights passengers are given refreshments and meals in a reasonable relation to their waiting time as well as means of contacting the two people outside the airport. In terms of long delays the passengers are given hotel accommodation and transport facilities from the airport to the accommodation and arrangements for refreshments are also made. Passengers can claim refund on connecting flights in case of delayed carriers.
6.5 SAFE KEEPING:
British Airways spend more than 100 million pounds each year on security measures as at BA security and safety of customers and staff is of highest priority. It has a team of trained security auditors who carry out security checks worldwide. The ground and flying staff are given security training .BA does criminal and background checks of ground and flying staff. BA has a lot of covert security in place for their customer’s safety. BA, the BAA and the Metropolitan Police meet on regular intervals to confer on matters of security.
British Airways provides mobility assistance at the airport and in-flight for the disable passengers .BA flights which are longer than five hours have additional facilities on wheelchair toilets etc. For the deaf and blind BA provides escorts to and from the aircraft. Personalized safety briefings and assistances are provided during the flight. Braille cards for the visually impaired and headphones with standard hearing aids are a part of in flight facilities. Certified Assistance dogs are provided free of charge. There are a lot more facilities like seat preferences, food preferences etc. given to all passengers.
Apart from cheques BA accepts all the major credit cards as mode of payment for the tickets.
PROCESS BREAK DOWN:
Below we will look at the ticket booking process from beginning to the end. Here we are looking at a customer buying the ticket online.
RESERVATION & PAYMENT
TRANSPORT TO TOWN
ON BOARD PHONE
ON BOARD MOVIE
TRANSPORT TO THE AIRPORT
BEFORE TIME FRAME OF AN INTERNATIONAL FLIGHT
TRAVELLING (REAL-TIME SERVICE USE)
(TIME DIMENSION IS AUGMENTED PRODUCT FROM LOVELOCK AND WIRTZ 2007)
7. COMPARATIVE STUDY OF BRITISH AIRWAYS AND RYAN AIR:
7.1 INTRODUCTION TO RYAN AIR:
Ryan Air was formed in 1985 with 57 workers and one 15 seated turboprop plane in Dublin. It transformed into a lost cost Airline in 1991 on the LOW COST LEADERSHIP MODEL of Southwest Airlines (Ryan Air Website). In 2008 Ryan Air was ranked World’s Number 1 Airline by IATA on the basis of traffic. Ryan Air flies to 148 destinations across 26 European Nations (European Low Fare Airline Association, 2009).
7.2 OPERATIONAL CONTROL:
Since 1991, Ryan Air has just focussed on cutting operational cost to be a low cost airline. It gives non-stop point to point services. Direct online booking of tickets eliminating commissions. It uses secondary airports to cut down charges and turnaround times. It ahs uniform aircrafts models which reduces the maintenance costs. The aircrafts have high density seating arrangement to reduce costs.
7.3 CONTINUOUS INNOVATION:
Ryan air practices TQM by continuous investment in innovation leading to low operational costs. Ryan Air focuses on punctuality and baggage performance to increase the turnaround time of its flights. Ryan Air has online check-in which eliminates the long queues taking the customer directly to the boarding gate. Ryan Air is now working on how to mitigate the transition time between the airport terminals.
Ryan is considered to be more dependable and trustworthy in terms of punctuality and baggage handling.
CAA PUNCTUALITY STATS
Within 15 mins (%)
Table 1 Annual 2008 Punctuality Statistics
7.4VALUE CHAIN ANALYSIS OF RYAN AIR:
8. SWOT ANALYSIS OF RYAN AIR:
Low Cost Leadership.
Innovative Cost Reduction
Established Market Share.
Strong Public Image
Range of Ancillary Services
To use regional airports gives them the first mover advantages
100% bookings through internet reducing its costs
Using just one model of aircraft.
Bad reputation in the media.
Restricted expansion possibility because of niche market.
Poor customer service
Highly sensitive to fluctuations in charges.
Volatile customer relationships
Refuse to recognise unions.
Less geopolitical pressures due to restriction in Europe
Emergence of new markets
Fears of recession: people not willing to shed money out.
Low cost still has scope of growth.
Competition between low cost airlines.
Increase in bargaining power of regional airports
Antagonistic attitude of the European commissioners.
British Airways claims on practicing TQM but as we have seen in the past and present it has had a customer led approach and the employee satisfaction has been relatively low. I recommend that British Airways should lead employee motivation trainings and programs. I propose that there should be changes made in the service delivery process that ensures the improvement in the customer satisfaction.
10. IMPROVEMENT OF SERVICE DELIVERY PROCESS:
I recommend that BA should religiously follow the TQM concept to be successful. This would streamline continuous development, employee motivation and would lead to increase in customer satisfaction and conduct trainings for the employees.
The procedures that the customer has to go through before and after the flight are time consuming. To enhance the quality of the service delivery process has to modify in accordance with customer needs. Therefore I suggest to get the service delivery closer to the customer so I recommend that BA to use smaller airports this would in turn reduce the travel time of the customer.
To improve flying experience on short distance flights time gaps are the major bottlenecks and hence in order to improve the procedures at the airport like security checks, boarding passes should be streamlined to make the service delivery efficient.
British Airways is losing value in the customer s as there are regular complaints regarding baggage losses. The logistics department plays a significant role in the same .Hence, BA should have efficient workers to ensure that the right baggage should be given at the right place.
In order to practice TQM is essential to have employee engagement programs to motivate the employee who in turn enhances the performance of the employees and satisfied customers.
11. CRITICAL REFLECTION:
When I joined this module, according to my knowledge quality was a variable sense which changed from person to person. However now I can analyse Quality to be a standardised process and I have realised through this assignment and this module that quality can be controlled by an organisations operational activities.
In the present era, companies seek to achieve a competitive position in the industry by continuously trying to deliver products and services at higher quality and at a lesser price.
Companies achieve to deliver higher quality product to increase the level of customer satisfaction and reduce customer complaints. I have also realised that quality can be controlled in a quantitative mannerism by performing actions such as statistical process control and sampling techniques.
In pursuit of quality, when I first started to search for a company that implements quality control processes I found British Airways to be a company incorporated in the aviation industry for around seventy five years. However I was astonished to see that the company started to follow quality control practices only after the privatisation process in 1987.
Through the practice of TQM a company is able to keep a watch on its processes through continuous improvement. Also the employee perspective is a mandate in TQM practices. What also came up as a matter of interest was the fact that British Airways proclaims to follow TQM practices, however the company ranks low on prospects of employee motivation. There has been proof of highly unsatisfied employees due to strikes and high attrition rate in the company. This has affected the company’s profitability considerably. On the other hand Ryan Air follows TQM on its aspects of gaining cost leadership and thereby has increased profitability.
Hence at the end of the assignment what I propose is that the company must enhance its TQM practices through a better employee motivation perspective. This assignment has also helped me to discover the employee motivation perspective in more detail. I have studied new concepts such as Maslow’s theory of hierarchy of needs and Hertzberg’s two dimensional theories.
11.1 Personal Experience from the module:
Prior to joining this module I had a vague idea of operations. I thought that it just about mere concepts of logistics and delivery of products. But the module has helped me change my whole perception and how broad and wide the subject is. Operational management is the key driver of an organisation. If the operations of an organisation are not formulated in the right way this could also lead to failure of the organisation.
The Operational Management module has helped me to structure my thinking. This module had taught me different parts of operational views like Quality, Organisational structures and how they affect the competences of the organisation. I have learnt to broaden my way of thinking and think in a formulated way.
The aspects that have been taught like how the organisational behaviour of the organisation and how people lead the company. It has made me aware of how the layout of the organisation affects the efficiency of the organisation. The lay out can increase and decrease the effectiveness and efficiency of the organisation.
Hence, operational module has helped me to build my confidence in understanding the structure of the organisation and enhancing its efficiency.