British Airway’s Essay
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 the brand wouldn’t have received as much negative publicity. However, analysts said the airline’s savings on staff costs would far outweigh the losses from the strike and the outcome should reduce the likelihood of future stoppages (Groom, 2011). The ‘unfreezing’ phase (Lewin’s model) of this change was a gradual, drawn-out process.
As this was not a company in crisis there wasn’t a need to implement change reactively, British Airways had time to achieve their long-term strategy. Scope: British Airways did not require a transformation of the organisation as a whole. A realignment of the cabin crew’s operations and wage structure was the desired scope for this change. However, due to the industrial action taken by Unite the change had an impact organisation-wide.
It is important that BA preserves what makes British Airways, British Airways. This means they need to retain their brand identity, because this is one of their biggest selling points. It is also important to not destroy the business’ heritage and culture. Job security for the remaining cabin crew will be at an all-time low. Key members of staff need to be reassured of their position so that BA doesn’t lose these assets to competitors.
The change should not affect diversity between divisions. This means that the culture should remain consistent throughout BA, from pilots, to cabin crew, to administration staff. Capability: The individual within the cabin crew will need to be capable of adapting to the new operational requirements and be able to accept the change in pay structure. It is a managerial responsibility to help staff through this transition phase. The new BA chief executive, Keith Williams was praised for being “strong, brave and courageous” in reaching the agreement. These are the sort of capabilities required by the managerial team.
With the savings made in the long-term, BA will be able to invest in training for staff so quality of customer service will improve. The managers have shown devotion to this process by holding out for 18 months to ensure change was implemented. There must also be a number of people in the organisation with an adequate change capability.
The workforce was not aware of the need for change until it was announced that there would be 1,700 job cuts. As a result cabin crew members refused to commit to making the personal changes required of them.
The British Airway’s managerial team were the change agents containing the most power. As a trade union, Unite also contained considerable power, and this caused opposition for the implementation of change. The change management strategy, if any, as outlined by the BA management – have they addressed employee emotions or all focused on change process? The focus was placed mainly on the change process rather than employee emotions. The strategy appears to have been to implement the change at all costs.
Throughout the 18 month negotiation process BA refused to give into the union demands. Despite 22 days of strikes BA continued to refuse the people what they wanted. They were accused of “management bullying, press slanders, and legal gerrymandering”. A big factor in the two parties coming to an agreement was BA agreeing to reinstate staff travel concessions, as stated by the Unite general secretary, Len McCluskey – “I am particularly pleased that travel concessions will be restored” (Scott, 2011, May 12). However, this was used as a bargaining tool rather than as an empathetic gesture. Having said this, there were a few minor interpersonal strategies.
The personnel change of BA’s chief executive from “protagonist” Willie Walsh, to former finance director Keith Williams, contributed to the breakthrough. Union leaders described Keith Williams as a ‘genuine and honest man’, saying to cabin crew, ‘he values you’ (Smith, 2011, May 12). This is evidence of showing personal compassion in order to reduce resistance. However, many workers were unhappy with the praise he received. So if anything this strategy is likely to have hindered progressive rather than help it. BA also appointed an independent facilitator in the form of psychologist, Mark Hamlin to deal with the “fragility of trust” and act as a “long-term relationship builder” (Milmo, 2011, April 10).
Long-term the ‘hard ball’ strategy employed by BA has left them with integrity and respect. This will help the company move forward and rebuild relationships. Good relations prevent industrial action and hence operational interruptions (British Airways, 2010). The challenges and difficulties in implementing such changes – as experienced by BA. Resistance/Acceptance. 93% of cabin crew voted for strike action originally. Through collective action and collective resistance they forced BA to change the terms. The resistance received enthusiastic support from wide sections of the working class in Britain in form of donations from union branches and solidarity on their picket lines (Counterfire, 2011, June 24).