Mapping British Airways

Mapping British Airways 1

MAPPING BRITISH AIRWAYS

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Mapping British Airways 2

Table of Contents

Executive Summary ........................................................................................................................ 3

1.0 Introduction ............................................................................................................................... 4

1.1 Stakeholders .......................................................................................................................... 4

2.0 British Airways ......................................................................................................................... 5

3.0 British Airways Stake Holders.................................................................................................. 6

3.1 Customers .............................................................................................................................. 6

3.2 Employees ............................................................................................................................. 6

3.3 Competitors ........................................................................................................................... 6

3.4 Suppliers ................................................................................................................................ 7

3.5 Media and Financial Institutions ........................................................................................... 7

3.6 Shareholders .......................................................................................................................... 7

3.7 Local Communities ............................................................................................................... 7

3.8 Government Policy and Legislation ...................................................................................... 8

3.9 Environment/Climate ............................................................................................................ 8

4.0 British Airways Stakeholder Map ............................................................................................. 8

4.1 British Airways Stakeholders Map According to Current Orientation versus Criticality to

Success ........................................................................................................................................ 9

4.2 British Airways Ethical Concerns with Stakeholders ......................................................... 11

4.2.1 The Heathrow Terminal 5 problem: Customer Aspect ................................................ 11

4.2.2 Problem ......................................................................................................................... 11

4.2.3 Solution ......................................................................................................................... 11

4.3 The 2008-2009 Global Financial Crisis and Oil Prices: A Suppliers and Environment

Problem ..................................................................................................................................... 12

4.3.1 Solution ......................................................................................................................... 12

4.4 British Airways Workers Strike in March, 2010: An Employee Problem ......................... 12

4.4.1 Solution ......................................................................................................................... 12

Reference List ............................................................................................................................... 14

Mapping British Airways 3

Executive Summary

The paper is a discussion regarding the various stake holders of the British Airways.

Business ethics define how a business relates with individuals at employee level, corporate and

communities in the national level. They represent the values owed to the stake holders. British

Airways is the largest airline operator in the UK in terms of fleet. It is a member of the

International Airline Group together with Spanish Iberia airlines. The major shareholders in

British Airways are can be classified into two: the primary and the secondary. The primary stake

holders have a direct impact on the company’s performance and wellbeing, while secondary

stake holders have an indirect impact. The stake holders include customers, employees,

governments and related regulatory bodies, the environment, suppliers, shareholders, financers,

community and competitors. The different shareholders present different levels of influence, as

well as criticality to success of the company.

In addition, the stake holders show different orientations with the company at different

times, ranging from total support to neutrality and total resistance. British Airways has had

positive and negative moments with various stake holders. A customer related incidence was the

Heathrow Terminal 5 problem experienced in 2008. The company responded through vigorous

publicity campaign in which customers were informed of the reformed Terminal and excellent

service. The company also experienced a worker related incident in 2010 when workers went on

strike. The company handled the situation through customer reassurance and charters of other

airlines to handle the customers who are not satisfied, while a long term solution was worked out

with its employees.

Mapping British Airways 4

1.0 Introduction

The Applied Corporate Governance website defines Business Ethics as the application of

an enterprise’s code of conduct to achieve its strategic and operational mandate. The intended

achievement should be met at the three levels of business. For instance, on the macro level

involving the contribution of the business output to the national agenda, the corporate level

involving fulfillment of the corporate social responsibility and the individual level, which

governs the behavior of an individual in the organization (“Applied Corporate Governance”

2012). Broadly stated, business ethics are the behavior pattern that steers a business towards

realization of its individual, corporate and macro- economic responsibilities. Business ethics is

important in a business as it governs how the entity will relate with other businesses and the

society, as well as how well it will nurture individuals within the organization to optimize

productivity and avoid losses and tainted reputation. Business ethics is a good tool to project

future growth and profitability of a business.

1.1 Stakeholders

Stake holders is a collective term for any individual, group, organization other party

which can affect or be affected by the actions of a business entity. The US department of

commerce identifies customers or consumers, agents and employees, service providers and

suppliers, shareholders and owners, lenders and investors, governments and related agencies

among other entities as stakeholders (Post 2002). Apart from the listed ones, there are other

additional stake holders and the number is unique for each business. It is a central concern for

any business to take good care or its stake holders since they determine its success or failure in

their different ways. This paper will study the case of British Airways in a way to explore its

different stake holders, its business ethics structure and how this affects the stake holders, as well

Mapping British Airways 5

as how successfully the company has in the past dealt with ethical concerns of at least two of its

stake holders.

2.0 British Airways

British Airways (BA) is United Kingdom largest international airline in terms of fleet and

second to Easy jet in terms of passenger volume, which operates domestic and international

charter and scheduled services for carriage of passengers, mail and freight as well as ancillary

services. BA flies more than 600 destinations across the globe and is one of leaders in airline

industry. Established in 1971, the airline has largely grown from the domestic market to the

international markets thus being able to compete with other notable airlines such as American

Airways, Lufthansa Airline, Qatar Airways among other notable global airlines (Campbell-Smith

1986). The firm is a founding member of Sky team, One world and Star alliance airlines, along

with airlines such as Qantas, Cathay Pacific and American airline. In the year 2009, the firm

merged with Iberia airline, making the two airlines to create the third largest global airline with

regard to annual revenue. After the merger, the firm constituted FTSE 100 Index under title of

the international airline group. BA, whose headquarters is in waterside, Heathrow Airport has it

operations across the globe (The Guardian 2012).

The British Airways has many stake holders, but this paper will list the ten most

significant or influential ones. These include customers, competitors, employees, suppliers,

media, government and related regulations, shareholders, local communities, financial

institutions, and environmental or climate issues (The Guardian 2012). Stake holder management

is delicate and difficult since the different stake holders’ interests may conflict, even as the

company tries to uphold good relationships with all the stake holders. For instance, government

Mapping British Airways 6

regulations may lead to profitability decline, thereby affecting shareholders interests. In addition,

good customer service may result in employee strain, reducing customer satisfaction. A company

must therefore come up with a balance stake holder map to remain profitable in a sustainable

manner, such as the stake holder circle (Bourne 2009). This section will briefly discuss the stake

holders.

3.0 British Airways Stake Holders

3.1 Customers

Customers are perhaps the most important stake holder for British Airways as they have

helped the company to remain profitable both in the short and long-run. Although the most

important, customers actually have little influence on direct policy formulation except in the few

cases where major shareholders are also customers. The significance of customers will be

analyzed later during the Terminal 5 incidence involving poor customer service in BA.

3.2 Employees

A particular bone of contention for the British Airways, employees have a direct impact

on a company’s performance. The employees have frequently voice their concerns through

strikes, paralyzing BA’s operations and lowering its rating nationally and internationally. They

also have a strong union which may threaten the company’s policy implementation.

3.3 Competitors

British Airways has several major competitors, including Easy Jet and Virgin Atlantic

who affect its profitability in the market, and therefore greatly influence its strategy formulation.

Without a balanced strategy, BA would be likely to lose to competition

Mapping British Airways 7

3.4 Suppliers

The major suppliers for BA are Airbus and Boeing, both aero plane manufacturers. In

addition, BA has a fuel supplier. These suppliers have control over costs and pricing, which are

directly transferred to BA’s budget. This aspect has an influence in BA decisions especially in

cost management policies, which may lead to reduced fleet purchase and thus poorer service

delivery.

3.5 Media and Financial Institutions

Like with any other popular company, British Airways has to contend with media

scrutiny and publicity. Consequently, the decisions made by the company are sometimes made

for public image and not for genuine policy improvement or growth. The investment and

commercial banks are the most used lenders to big companies. Access to finance is an important

factor for company expansion and therefore lenders have a significant influence on BA’s

strategic decision making. An important scenario to review was the influence of finance on

company performance in the 2008/09 global financial crisis.

3.6 Shareholders

For a company publicly traded such as BA, shareholders interests have a considerable

influence on the way the company is run. The ultimate objective for shareholders is

maximization of profit, regardless of how the company will achieve this, and what other

violations in stake holder interest there are likely to be.

3.7 Local Communities

This is the first category that is more reactive than incidental in BA,s operations. The

communities expect support, ethics and consideration when dealing with BA, even though they

Mapping British Airways 8

have no direct link with the company. The important measure here is British Airways impact on

community policing (social responsibility) as an important measure of people’s readiness to

support the company.

3.8 Government Policy and Legislation

This encompasses local and international regulations that affect BA’s operations. For

instance, bi or multi-lateral agreements between nations or trade blocks may limit the routes

operated by BA’s fleet, thereby affecting revenue and growth.

3.9 Environment/Climate

Environmental issues have in the past contributed to business loss for BA especially in

areas of volcanic activity, heavy mist/fog presence among other extreme occurrences. This factor

is the only non- man originated influence on its operations. In addition, the airline’s operations

may also contribute to climate damage through emissions and pollution. International regulations

have stringent requirements for new airline products in accordance to pollution control.

4.0 British Airways Stakeholder Map

This map is based on the interactive approach, an approach that BA assumes in which the

company continually tries to engage the various stake holders in open talks geared towards their

involvement in policy formulation and implementation. The famous strike in 2010, for instance,

Mapping British Airways 9

as the last resort of a lengthy deliberation between the company and its workers.

4.1 British Airways Stakeholders Map According to Current Orientation versus Criticality

to Success

Stake holder

Criticality to success

Current orientation

Degree of influence

Environment

medium

neutral

medium

Competitors

high

resistant

high

Community

low

supportive

low

Government

medium

supportive

medium

Secondary stake

holders

primary stake holders

British Airways

Financers

Share holders

Customers

Suppliers

Distributors

Employees

Community

Government

Environment

Competitors

Mapping British Airways 10

Employees

high

Resistant/ divided

medium

Customers

high

neutral

high

Shareholders

medium

neutral

high

Financers

high

supportive

medium

Suppliers

medium

supportive

medium

The table above shows the relationship between the various stake holders. The stake

holders with a high rating in the column criticality to success are those which, if their support is

withdrawn, there is a great possibility that the company’s performance or profitability will

greatly decline. In this categorization, competitors are rated highly, as are customers, employees

and financers. Competitors may put the company out of business, in extreme cases like was

witnessed prior to the 2010 employee strike when Budget company presented significant

competition. Similarly, most companies rely on financing for capital acquisition, and therefore

financers are an important stake holder for business success. Customers are probably the most

important because they provide the profits. Employees steer the daily operations of the company

in order to realize profit. Governments, shareholders and suppliers have moderate influence on a

firm’s success, while community has low rating in criticality of success.

The next category is the current state of relations between the stated stake holder and the

company. Those stake holders rated supportive are in favorable relationship with the company.

They include community, government, suppliers and financers. The environment, customers and

share holders have neutral orientation, while a percentage of employees, as well as the

competition, is resistant to its strategic formulation. The last column is with reference to the

degree of influence a stake holder has in the company. The employees and shareholders have a

high influence on the company. In addition, the competitors indirectly affect the company’s

Mapping British Airways 11

decision. Financers, suppliers, government and the environment have medium influence on a

company’s operations, while the general community has low influence.

4.2 British Airways Ethical Concerns with Stakeholders

Having more than 40 years of experience, the company has had to solve various ethical

issues with stake holders. This section discusses a few of the major incidences.

4.2.1 The Heathrow Terminal 5 problem: Customer Aspect

This problem was in relation to customers. The Heathrow Terminal 5 is a £4 billion

project completed in 2008 in London as one of 3 International Airline Group global hubs, and

was intended to boost customer volumes with support of up to 35 million passengers a year. It is

also equipped with ultra modern facilities for improved customer experience (Bokaie 2008).

4.2.2 Problem

Upon opening in March, 2008, the Terminal experienced major service failure with more than 30

flight cancellations, luggage losses, and confusion in operations, stranded customers and bad

public perception.

4.2.3 Solution

BA engaged in an extensive campaign dubbed ‘Heathrow Terminal 5 is working’ in order

to restore customer confidence in the airline. To this end BA launched a website where

customers could share their experience in Terminal 5, elaborate pictures and videos of satisfied

travelers in T5 were showed, traveler experience surveys were documented with positive rating

of T5 and operational road maps of T5 were provided to aid in faster clearance. The combined

effect of these strategies restored customer confidence and BA’s positive image.

Mapping British Airways 12

4.3 The 2008-2009 Global Financial Crisis and Oil Prices: A Suppliers and Environment

Problem

In 2009, British airways made a pre-tax loss of £ 401 million (British Airways 2009). The

CEO stated, in the report, that the loss was majorly attributed to global increase in fuel prices as

well as the receding global economy. Fuel supply is a factor outside the airline’s control, just as

is fluctuations in the global economy.

4.3.1 Solution

The British Airways finalized a merger with Spanish company, Iberia in 2010 which

consolidated their resources and strengthened their stand against the effects of the global crisis.

In addition, the group acquired financing from banks and other institutions amounting to £4

billion payable in long term (British Airways 2009). This factor also emphasizes the need for

proper relationship with financers as stake holders.

4.4 British Airways Workers Strike in March, 2010: An Employee Problem

In March, 2010, more than 12,000 members of Unite, the largest trade union in UK went on

strike over proposed cuts of $90 million in budget expenses in British Airways which would

result in job loss, as well as poor working conditions and bad management. During the double

strikes launched in March and April, 2010, about 1950 flights were cancelled and thousands of

customers stranded, leading to revenue losses for the group (British Airways 2009).

4.4.1 Solution

The airline’s first response was a press statement in which the senior management

expressed its regrets over the uncontainable strike, saying that fuel costs, reduced customer

volumes and sharp competition was forcing the airline to opt for budget cuts. The company also

Mapping British Airways 13

ensured customers of 60% flight operations aided by non-striking workers as well as from

chartered airlines, which would reduce the effects of the striking workers.

Mapping British Airways 14

Reference List

“Applied Corporate Governance” 2012, Define Business Ethics -Discussion and Debate, viewed

29, Nov.2012,

<http://www.applied-corporate-governance.com/define-business-ethics.html>

Bokaie,J. 2008, Heathrow Terminal 5: retail destination or gateway to Britain? viewed 29 Nov

2012,

<http://www.brandrepublic.com/News/790908/Heathrow-Terminal-5-retail-destination-gateway-

Britain/>

Bourne, L 2009, Stakeholder Relationship Management: a Maturity Model for Organisational

Implementation. Farnham, Surrey, UK: Gower

British Airways 2009, Annual Reports, viewed 29 Nov 2012,

<http://media.corporate-ir.net/media_files/irol/24/240949/AnnualBA/BA_AR_2008_09.pdf>

Campbell-Smith, D 1986, The British Airways Story: Struggle for Take-Off, Hodder and

Stoughton

Post, J 2002, Redefining the Corporation: Stakeholder Management and Organizational Wealth,

Stanford University Press.

The Guardian 2012, British Airways, viewed 29 Nov 2012,

<http://www.guardian.co.uk/business/britishairways>

Welle, D 2012, British Airways employees launch massive strike, viewed 29 Nov 2012,

Mapping British Airways 15

http://www.dw.de/british-airways-employees-launch-massive-strike/a-5373841

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