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Managerial Leadership

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Managerial Leadership

Case Analysis: British Airways (“BA”)

Task 1 – BA SWOT analysis for the past (2003) Strengths | Weaknesses | CEO leadership | Low staff morale | Business class | Company image | Frequent flyer program | High debt | Cash liquidity | Lack of staff training programs | Innovation | Hierarchical management | Opportunities | Threats | Expansion into Middle East | Increase of aviation fuel prices | Alliance with other airlines | War in Iraq | Develop the workforce | Increase of debt interest rates | Improve customer satisfaction | Union strikes |

Task 2- BA SWOT analysis for the present (2011) Strengths | Weaknesses | CEO leadership | Company image | First and business class | Hierarchical management | Frequent flyer program | Use of liquidity for new fleet | Innovation | | Grouped resources (IAG) | | Opportunities | Threats | Alliance with other airlines | Increase of aviation fuel prices | Expansion into growth markets | War in Iraq | Develop the work force | North Africa & Middle East uprising | Improve customer satisfaction | Union strikes | | Weather conditions (ash cloud & snow) | Task 3 – Comparison of past and present situation of British Airways Strengths The ex-CEO, Eddington and present CEO Willie Walsh, are both highly experienced in the aviation industry but quite different in their leadership style. For example Eddington is seen as a theory Y leader, fostering potential in employees. The present CEO is a tough negotiator, authoritarian and perceived as a theory X type leader. Both leaders use expert power but also rely on their coercive power in times of emergencies. Walsh has successfully negotiated an end to the industrial dispute with the “Unite” union which has been ongoing for a number of years. BA is adapting to the advance in technology for example, passengers are able to check (via electronic boarding passes) in with mobile phones such as i-phones and blackberry devices. Previously this was not offered. BA implemented the flat bed in business class which set standard in business class. They still remain innovative by recently investing in new first class seating and new entertainment systems totalling £100M to capitalise on the growing premium market. Weaknesses Debt rates have been reduced from approximately 4% in 2003 to 1% at present, resulting in less debt payments. Net debt amounted to £5.2B in 2003 for BA compared to EUR 512M as at 31st March 2011 under International Airlines Group (merged companies of Iberia and BA). BA’s image has been damaged in the past due to excessive strikes, re-branding issues and problems with lost baggage for example loss baggage was 75% more frequent with BA compared to Air France and Lufthansa (Time Magazine). Under the re-branding of IAG, both Iberia and BA have an opportunity to change negative perceptions. Opportunities The One World alliance has increased in membership when compared to in the past, for example, Royal Jordanian Airlines is a recent addition which gives members and customers more direct routes to the Middle East, improving customer services and providing another source of revenue for the airline. There are now more training and leadership programs in place for employees. Programs of which were not offered previously. According to the BA’s website, 235,000 training days were completed during 2010. Threats Union strikes are always going to be a treat to the business. Recently, BA under the leadership of Willie Walsh has restored travel concessions to staff. This resolves a two year industrial dispute which has damaged the company’s image, impacted staff morale and customer satisfaction. Increase of aviation fuel prices, weather conditions such as ash cloud and snow are uncontrollable events which were present then but seem to be increasing in frequently going forward. BA lost £50M last winter due to the snow conditions and fuel prices have increased by 30% during the last quarter end. Task 4 - Company highlights Successful merger of BA and Iberia into a new company called International Airline Group (“IAG”). Given the merger, Iberia and BA will undergo new branding this autumn. CEO is expecting that IAG will generate EUR400M in synergies over the next 5 years. IAG will be investing more in new cabins and in-flight entertainment systems in first class totally £100M, targeting their premium customer base. New Mid-air email and text services offered on certain routes such as London City to New York (JFK). Willie Walsh announced plans to acquire 12 other airlines to gain more exposure in the emerging markets such as South America and Asia/Pacific. BA and the Union have come to an agreement by restoring travel concessions to staff. This resolves a two year industrial dispute. Successful segmenting of leisure markets within Europe for example doubling flights to Fargo, Malaga, Palma during the summer period. BA is now offering flights to Marrakesh competing against the low cost carriers. Task 4 - Company highlights (continued) BA fleet will benefit from fleet expansion from future delivery of 12 Airbus A380, 24 Boeing 787 Dreamliner by 2012, costing £5.5B. Expansion of the One World Alliance to 14 partner airlines flying to 145 countries in the world. Passenger revenue has increased by 15.4% during last quarter while total revenue increased to EUR3,6B year to 31st March 2011. Cash amounts to EUR4,3B while debts amount to EUR512M as at 31st March 2011.

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