British Airways

Airline industries and carriers are facing a very hard time because the recession has affected the business and the industries have to reduce their prices and are not making a good profit as compared to the past. As it is a worldwide fast-growing industry making airlines more complex and challenging. Because of the recession and increased unemployment in the aviation industry. British Airways is the UK's largest international airline, flying to 6 domestic destinations over 148 international destinations multiple times, to the all best-located airports. The major place of business is Heathrow, one of the world's premier airport locations. BA also operates a worldwide air cargo business. But still, British Airways had to restructure and make some serious strategic changes to avoid bankruptcy or closure. BA had its vision to achieve its goal and took effective and reasonable steps to compete in the market with its performance and operation over the last couple of years. The market fell from more than 30 per cent in 1998 to about 20 per cent in 2005. This year, BA announced the worst half-year losses in its history. During the six months to September 2009, the company face a 292m ($485m) loss, compared with 52m profits during the same period a year earlier. To survive and to make an easy recovery in this competitive environment and to attain leadership in the industry BA has taken strong steps to upgrade the systems and technology, to increase the fleet size British Airways ordered 36 new long-haul Aircraft on 27th September 2007 which includes 12 A380s, and 24 Boeing 787s. British Airways also ordered on 1st February 2008 Airbus A318s to run a premium service out from London City Airport to New York. This fitted luxury 32-lie flat beds in a business class cabin. The increase in technology like online ticketing, and online checking also enhances the BA business. Because the customer does not need to stand in the queue. Innovative flight services such as sleeper services will attract more customers. Introduction of the terminal 5 on the HEATHROW AIRPORT will help to increase the flights of the BA and be able to provide a more relaxed environment to its customers. A possible merger of the BRITISH AIRWAYS and QANTAS AIRLINE could be a great opportunity to become the absolute market leader of the world. Willie Walsh stated that British Airways had reduced 1,450 staff members since March 2009. They also reduced the overtime and 500 redundancies were made. Twenty percent of future capital expenditure is reduced this year from 725 million pounds to 580 million pounds and it will be the same throughout this year. Mr Willie Walsh also admitted that this BM4407-strategic-management-examination-May-2022/EB Page 2 of 3 structural change of British Airways is necessary for survival and long-term success. British Airways managed with its comprehensive and proactive strategy to accelerate its return to profitability and economic welfare well in advance of its rivals. The airline announced that it is planning to raise 680 million of liquidity through a 350 million convertible bond issue and by gaining access to bank facilities which are currently used to provide guarantees to its pension funds. This will increase liquidity to approximately 2 billion.

Question 4

Explain why British Airways executives perform a combination of Incremental Innovation and Radical Innovation and how this can influence a Blue Ocean Strategy.