British Airways

British Airways

Introduction

In 1987, British Airways was privatised, and over the next decade turned from a loss-making nationalised company into "The World's Favourite Airline" - a market-leading and very profitable plc. The strategy that transformed the company into a marketing-led and efficient operation was conceived and implemented by Lord King as Chairman, aided by Sir Colin (subsequently Lord) Marshall: two tough businessmen who confronted staff inefficiencies and so improved service effectiveness that BA was rated international business travellers' favourite airline for several years in the 1990's.

A New Face

In May 2000, Rod Eddington joined BA as Chief Executive. He was previously Managing Directory of Cathay Pacific and Executive Chairman of Ansett, an Australian airline.

Eddington's immediate actions were designed to restore profitability to BA's operations - and to restore the Union Flag to BA's planes! He set about reducing the fleet, moving to smaller aircraft, cutting clearly unprofitable routes. He also targeted "high-yield" customers, the traditional mainstay segment for BA. Matching supply with demand was the overall concern, to restore positive cash flow.

Strategically, BA's longtime search for a merger partner was resumed. A link with American Airlines, the first choice partner, was out of the question after US regulatory authorities squashed the idea. A proposed merger with KLM, the Dutch flag carrier, was discussed in some depth, but that foundered on doubts over the long-term financial benefits, and arguments over the relative shares each airline would have in the merged company.

Low-Cost Airlines

Meanwhile, the airline industry was undergoing a seismic shift with the rise of low-cost "no frills" airlines. Ryanair and easyJet had, at first, demonstrated the existence of a new market for cheap airline travel which had not been tapped by traditional airlines. But then they began to expand and to compete for passengers that normally would have gone to BA - ...