The aim of this report is to identify and analyse the issues that British Airways is encountering. One of the issues identified in this study is a shortage of staff. This issue was created as British airlines fired a large number of employees during Covid-19. This study finds that more than 10,000 employees were fired by this organisation during the pandemic. This created issues as British Airways was not able to adequately recruit employees in its organisation after lockdown and removal of travel constraints. This study discovers that managerial ineffectiveness is also a cause that led to this situation. Another issue that is identified in this organisation is IT outage. This airline was not able to continue its schedule for several hours due to this human error which led to passenger dissatisfaction. Moreover, employee strike is another issue that is found in this organisation faced by British Airways.
The reason for the strike is stated to be employee dissatisfaction as a result of unsatisfactory pay. The union of workers asserted that salary of employees was reduced by 10 per cent during the pandemic. However, after the lockdown was over and British Airways resumed its business the salary reduction was not increased. Behind some of these issues, ineffective management is found to be a factor. Next, this study discusses the purpose of this report which is to analyse root cause of issues in this organisation. The impact of this report is discussed in next section. This study identifies different internal and external stakeholders of this organisation. For instance, customers and investors are external stakeholders and employees and board of directors are internal stakeholders. The impact of this report on these stakeholders is positive. Then this report evaluates secondary data for the purpose of this report.
Evaluation and analysis of secondary data reveal that issues faced by British Airways are not only due to internal factors but also external factors such as Covid-19, rising oil prices and the Russian-Ukraine war. These internal and external factors led to monetary loss for this organisation and it is discovered that British Airways lost over 8 billion pounds and it has been unable to recover. Considering these issues some recommendations are provided lastly. This organisation is proposed four recommendations that would be appropriate. Effective management is first recommendation that is proposed as shortage of staff, strikes and IT outages occurred due to a shortage of staff. Besides, enhancing customer satisfaction, reducing operating cost and increasing employee satisfaction is also recommended.
Introduction
Issues exist in every industry and organisation that often require consultancy. This report deals with issues that British Airways is encountering. There will be an attempt in this assignment to identify key issues that this organisation is encountering. First issue that British Airways is encountering is IT outage. This airline experienced IT outage due to a power failure. The discussion of this report will contain an identification of the cause of this issue. Another issue that will be delineated in this report is a shortage of staff. British Airways has been encountering a shortage of staff that has resulted in immense losses for this organisation. There will be an attempt in this assignment to analyse factors that created this issue. The strike by workers is an issue that is identified and discussed in this report. An endeavour of this report will be to analyse the cause of a strike by workers.
This report will contain discussion regarding challenges and issues of this organisation. Next, there will be a brief discussion on purpose of this report. This assignment will then delineate the impact of this report on different internal as well as external stakeholders. Evaluation and analysis of secondary data to discuss purpose of the report in an elaborate manner will include next part of this report. In the end, conclusion will be presented and some recommendations will be provided appropriate to identified issues.
Challenges British Airways is facing
Existing problems caused by current affairs
Customer dissatisfaction due to IT outage
One of the challenges British Airways is facing is an operational meltdown. This operational meltdown has been adversely influencing crucial flight planning systems. The flight planning system functions to deliver information regarding routes and other critical information that pilots require before a flight takes off (BBC.com, 2022a). This operational meltdown has taken place due to an IT outage that mainly influenced long-distance flights that were to depart from North America for London. The airlines stated that the IT outage influenced flights that were in the airport and had not taken off, therefore, no unfortunate incident occurred. However, due to this IT outage flights remain in the airport and were unable to take off unless the issue was solved. British Airways spokesperson revealed that they were investigating the matter and they did not know when normalcy will be restored. The cause of this IT outage is due to power failure at data centres in West London (Forbes, 2022a). The power failure, on the other hand, was due to a human mistake as an engineer mistakenly disconnected the power supply and then connected the power supply again. This task was performed without command from anyone in an uncontrolled manner. As a result, the data centres in West London incurred physical damage. Due to this IT outage, several flights were delayed and several flights were not able to continue flights for a long time.
Shortage of Staff
Another issue that British airways are facing is a shortage of staff. Due to a shortage of staff, this organisation has been compelled to cancel many flights as well. British Airways, similar to other airlines fired employees in large numbers during Covid-19 pandemic as aviation industry was experiencing losses. Data reveals that British Airways fired more than ten thousand employees including ground staff, pilots, and cabin crew members during Covid-19. However, after the lockdown ended and situation normalised slightly, this airline could not recruit employees quickly enough after the ease of travel restriction (The guardian, 2022a). For this reason, one of the issues that British Airways has been encountering is a shortage of staff. Due to this shortage of staff crisis, this airline has been compelled to cancel several flights during the peak travel season. As a result, this airline has incurred monetary loss as well as reputational loss.
Threats of strike
The threat of strikes from employees is another challenge that this airline has been encountering. The cause of the strike is said to be employee dissatisfaction due to unsatisfactory pay. The union of workers revealed that salary of employees was reduced by 10 per cent during the Covid-19 pandemic (Theguardian, 2022b). However, after the lockdown was over and aviation industry resumed its business the salary reduction was not reinstated.
Besides this, another issue that this organisation is encountering is rising cost of fuel, tough competition from rivals and so on.
After analysing various issues that this organisation is facing it could be asserted that there are some managerial issues that have caused some of these issues. For instance, a crisis in the shortage of staff could have been avoided had management taken precautionary measures before the peak season.
Purpose of the report
The purpose of this report is to identify the challenges and issues that British Airways is encountering. The reason for evaluation of specific issues in this organisation is to analyse the root cause of the issues. Identification and analysis of specific issues that British Airways is facing will assist to provide befitting suggestions to this organisation. Therefore, the purpose of this report is to examine reasons that led British Airways to lose billions of pounds and different measures that this organisation could have taken to deal with this issue and actions that are necessary to resolve the issues.
Impact of research on stakeholders
Stakeholder Identification
British airways have been experiencing several issues in its business some of which are briefly discussed. These issues have greatly affected the airline company as well as its internal as well as external stakeholders. Internal stakeholders of this organisation include employees, the board of directors and managers. External stakeholders of this organisation consist of investors, customers and shareholders.
Connection of this project to different internal and external stakeholders
This project is connected to external stakeholders as this project identifies the impact of issues that British Airways is encountering on external stakeholders such as customers and shareholders. Issues that British Airways has been encountering have adversely affected the customers' satisfaction with this organisation as they encountered great difficulty and distress because of internal problems, particularly IT outages in the airlines (Wiboonrat, 2020). For instance, due to the IT outage in this airline more than 70,000 customers were affected. This airline was not able to continue its schedule for several hours which resulted in passengers with uncertainty and dissatisfaction. Moreover, many passengers also encountered difficulty in getting their luggage. The power outage caused by human error led to delay of flights for over two weeks. People that encountered prolonged delays lost their bags during their travel to Italy and they stated their experience with British Airways was completely woeful and disastrous (BBC.com, 2022b). Moreover, customers also encountered difficulty due to shortage of staff in this airline. Due to a shortage of staff, this airline had to cut more than 10,000 flights in the peak season which delayed the plans and schedules of passengers. Thus, customers are one of the external stakeholders that were affected due internal issues in this airline.
Investors and shareholders are also external stakeholders that were influenced due to internal issues. The power outage also affected the investors of the organisation as it was estimated the airlines will have to incur over 100 million pounds as compensation (Theguardian, 2022c). In addition, the share price of this organisation declined by 6 per cent after Ukraine was invaded by Russia (Theguardian, 2022d). A decline in the share prices of British Airways has adversely affected the shareholders of this organisation. Besides, the shares of “The International Consolidated Airlines Group” also fell sharply due to the inability of this airline to meet demand after the easing of travel restrictions. Thus, investors and shareholders have also incurred financial losses due to internal problems in this airline. This has also caused reputational damage to this organisation. Customer satisfaction is one of the key elements that enhance brand reputation (Karimzadeh, 2021). However, since internal issues in this organisation have led to customer dissatisfaction, the brand reputation of this organisation has been adversely affected.
Impact of this project on different stakeholders
This project will assist stakeholders to understand the root cause of problems that this airline is encountering. In case of customers, an external stakeholder, this project will provide insight into key factors contributing to issues within the organisation. Internal stakeholder consists of managers and the board of directors. This project will have a positive impact on this stakeholder as it will provide them with valuable and relevant information to understand major issues in the organisation and potential solutions. This project will have a positive impact on shareholders as well as they will be able to gain trust in British Airways after understanding the key causes of challenges that this airline is encountering. Thus, the impact of this project on different external and internal stakeholders is considered to be positive.
Evaluation and analysis of secondary data
Factors that contributed to customer dissatisfaction in British Airways
Customer satisfaction is crucial regardless of the kind of business and industry as scholars have asserted that without achieving customer satisfaction a business cannot survive. This is true for the aviation industry as well where competition is extremely high making customer satisfaction vital. The reason customer satisfaction is critical highly competitive business environment is that it assists to ensure brand loyalty. Setiawan et al. (2020), also argue that customer satisfaction in the airline industry is crucial. This author asserts that due to high competition in this industry there is a requirement for different airlines to improve the pricing and quality of their service. This is true in the case of British Airways as well as this airline company has been experiencing customer dissatisfaction due to poor services.
One of the factors that have contributed to poor services in this airline company is constant IT outages. The cause of this operational meltdown was due to power failure at data centres in West London (Forbes, 2022a). The power failure was caused by a human mistake as an engineer disconnected the power supply by mistake and then connected the power supply again. This action was done without an order from anyone in an uncontrolled manner. As a consequence, the data centres in West London incurred physical damage. Several flights were prolonged for an indefinite time and many planes were not able to depart for a long time. This operational meltdown negatively affected critical flight planning systems. The flight planning system operates to convey vital information regarding routes and other vital data that pilots require before the departure of a flight (BBC.com, 2022a). This operational meltdown has taken place due to an IT outage that mainly influenced long-distance flights that were to depart from North America for London. The airlines stated that the IT outage influenced flights that were in the airport and had not taken off, therefore, no unfortunate incident occurred. This major management failure caused extreme distress to passengers.
GMB union asserted that British Airways could have avoided this outage had this organisation not fired thousands of loyal and dedicated employees. As a result, the IT outage in this airline created problems for thousands of passengers (Li et al., 2022). This airline was not able to continue its schedule for several hours which led to passenger dissatisfaction. Moreover, many passengers also encountered difficulty in getting their luggage. The power outage caused by human error led to delay of flights for over two weeks.
Moreover, poor customer service is also a factor that contributed to customer dissatisfaction with this airline. Customer services play a significant role in solving issues of passengers in airline industry. Satisfactory customer service leads to customer satisfaction, therefore, ensuring effective customer service in the airline industry is considered to be critical for organisations. Customer services could be provided through social media platforms and this trend has been continuously increasing. Gunarathe (2018), opines that customer service through social media platforms provides assistance to customers on a real-time basis. However, this author shows that customer service through social media platforms has been ineffective to achieve customer satisfaction. This is due to the fact that on social media platforms customers receive different treatment in comparison with traditional customer service. Hirschman’s theory of exit voice could be introduced here. This theory has been the basis for several studies on customer satisfaction and complaint. This theory asserts that in case consumers are not satisfied with provided product or service, they decide to voice or exit. The voice here implies a complaint to an organisation directly (Ossandón, 2021). Exit, on the other hand, implies quitting the usage of a service or product of a particular organisation. The father of this theory, Hirschman, states that a consumer evaluates two different but somewhat connected factors in determining whether they would complain. These interrelated factors are the expected probability of success of complaint and the “worthwhileness of complaint”. During the operational meltdown due to power failure passengers of this organisation have been immensely dissatisfied with customer service. Due to customer dissatisfaction, the number of customers of British Airways has decreased significantly. Data reveals that customer number in 2020 was reduced to about 16 million. Thus, poor customer service in this airline has been a key factor contributing to customer dissatisfaction.
Figure 1: Number of passengers uplifted by British Airways plc from 2008 to 2020
(Source: Statista.com, 2022a)
Moreover, cancellation of flights has also contributed to the dissatisfaction of customers of this organisation. British Airways had to cancel several flights during the peak season due to which passengers have been compelled to change their plans and schedules. Data reveals that British Airways had to cut more than 10,000 flights that travel for short distances as a result of its airline’s schedule between the 8th and 10th month (Efthymiou et al., 2018). This declaration reveals that over thirty thousand flights were cancelled from this airline’s schedule in the same year. These cancellations influenced such busy airports as Gatwick and Heathrow. Besides, the cancellation of flights was not only caused by power failure but also a shortage of staff. The airline asserted that it had to cut more than 10 per cent of flights in 7 months, and it required more removal (BBC.com, 2022d). British Airways spokesperson stated that the airlines took precautionary measures and provided passengers with early notice, however, instead of these precautionary measures British Airways has not been able to deal with customer dissatisfaction. Thus, these are some factors that have led to customer dissatisfaction with British Airlines.
Factors that led British Airways to lose billions of pounds
The revenue of British Airways has decreased significantly over the years. Data reveals that the revenue of this airline company was more than 11 billion dollars in 2019. However, the revenue of this organisation declined sharply in the following years that are 2020 and 2021 (Statista.com, 2022b). The revenue of British Airways in the year 2021 was slightly more than 2 billion dollars. Thus, the total revenue of this airline decreased more than 8 billion dollars within one year. Several factors have contributed to this decline in revenue of this airline, for instance, travel restrictions across the globe.
Figure 2: Annual passenger revenue of British Airways plc from 2011 to 2021
(Source: Statista.com, 2022b)
Covid-19 pandemic
One of the factors that have contributed to the loss of this airline is travel restrictions due to Covid-19. The covid-19 pandemic caused lockdowns for almost a year in different parts of the world including Britain. The pandemic restricted the movement of people which prevented them from travelling to places by flight (Ryu et al., 2020). As a result of the lockdown, the airline industry experienced immense financial loss and British Airways is no exception. All firms operating in this sector encountered similar problems such as the cancellation of flights. The gravity of situation was such that some airlines declared bankruptcy, for instance, Thai Airways and Virginia Australia (Mustapha, 2020). The flights of British Airways remain entirely inoperational for several months and even after restrictions ease the passenger numbers were less than 40 per cent of the pre-pandemic era. As a result, the revenue, as well as profit of this airline, declined significantly.
Russia-Ukraine war
Data also demonstrate that the Russia-Ukraine war has also contributed to the loss of British Airways. The owner of this airline stated that the war has affected flights across Europe and contributed to a reduced number of passengers than expected. The IAG, the parent company of British Airways, stated that it had anticipated an optimistic outcome after the removal of Covid-19 travel restrictions. However, Russia’s attack on Ukraine resulted in a sharp decline in stocks of IAG (Theguardian, (2022d). Russia banned flights from UK carriers which also affected the airlines, although the impact was minimal British Airways said. Thus, this is one of the factors that contributed to the loss of British airlines.
Rising oil prices
Increasing prices of oil are one of the factors that have led to the loss of this airline. Several reasons exist that have increased the price of oil globally. The Russia-Ukraine war is a factor that has increased the prices of oil across Europe. European countries, as well as the USA, have imposed several sanctions on Russia. Moreover, Oil Petroleum Exporting Countries (OPEC), also cut down their production (Forbes, 2022b). As a result, prices of oil and gas have increased tremendously across Europe and worldwide. This has adversely affected the operating cost of all airlines including British Airways.
Shortage of Staff
British Airways fired over ten thousand employees including ground staff, pilots, and cabin crew members at the time of pandemic. However, after the removal of travel restrictions and the normalisation of the situation British Airways could not recruit employees quickly enough after the ease of travel restriction (Theguardian, 2022a). Therefore, one of the problems that this airline faced was a shortage of staff. Due to this crisis, this airline has been compelled to cancel several flights during the peak travel season. As a result, this airline has incurred monetary loss as well as reputational loss. British Airlines could have prevented this with the help of effective management. Dynamic capability theory could be introduced here to examine this issue in further detail. The father of this theory is David Teece who provided dynamic capability theory. This theory deals with the ability of an organisation to adapt to changing environment with the help of its internal and external resources (Gruchmann, 2019). British Airways failed to adapt to changing environment by integrating its internal and external resources. This airline could have started an extensive recruitment programme to resolve a shortage of staff issue. This was possible as this airline has years of experience and it had knowledge regarding the arrival of peak season. However, despite such knowledge and years of experience, this airline failed to take preventive and precautionary measures. As a result, this airline faced tremendous staff shortages during peak season and was not able to fulfil demand. Therefore, British Airways was compelled to cancel several flights leading to losses.
Strike of Workers
Paais and Pattiruhu (2020), opine that employee satisfaction plays a crucial role in increasing performance as well as productivity in any business. Employee satisfaction, on the other hand, depends on timely and satisfactory salary of employees (Memon et al. 2020). However, the salary of employees of this airline was reduced which led to employee strikes.
The cause of the strike is said to be employee dissatisfaction due to unsatisfactory pay. The union of workers stated that the wages of employees decreased by 10 per cent during the Covid-19 pandemic (Theguardian, 2022b). However, after the Covid-19 pandemic and lockdown British Airways resumed its business the salary reduction was not increased. As a result, the cabin crew members and check-in staff launched a strike. This strike resulted in some loss to the organisation as its operations were affected. Therefore, the threat of strikes from employees is another challenge that this airline had been experiencing.
After analysing various issues that this organisation is facing it could be asserted that several factors exist that contributed to a loss in one of the most successful airlines.
Ineffective management
Ineffective management is considered to be one of the causes that have placed British Airways in this situation. Several instances existed that lacked managerial interventions to control and manage the situation (Santana, 2019). For instance, a shortage of staff is one of the incidents that occurred due to ineffective management. The shortage of staff could be effectively prevented if the managers of this airline had taken adequate action to recruit employees before the commencement of peak season. However, due to ineffective management and poor decision, they could not meet demand and suffered losses.
Thus, some of the factors that have contributed to the losses of this organisation include not only internal factors but also external factors. Internal factors that have created challenges for this organisation include poor management that created employee strikes, as well as a shortage of staff in the organisation after the easing of travel restrictions.
Recommendations and conclusions
Conclusion
After analysing the case of British airways thoroughly with the help of secondary data, it is concluded that internal as well as external factors exist that have created issues for this airline. One of the internal factors includes ineffective management and employee dissatisfaction. The IT outage in the organisation created chaos for the organisation as well as for its customers resulting from those two mentioned internal factors. The Union of workers claimed that the IT outage occurred due to employee dissatisfaction, which in turn was the outcome of ineffective human resource management. Moreover, this study also discovers that employee strike is one of the issues that British Airways has been encountering. The strike of workers including important ground staff and check-in staff was the result of employee dissatisfaction. Employees of this airline were neglected. Their salary was reduced during Covid-19, however, after normalisation of situation and resume of business operations payment of employees was not reinstated. Thus, neglect of payment of employees resulted in employee dissatisfaction and strike. However, it was possible for British Airways to evade this situation had the human resource management taken precautionary measures.
Failure of management department to take adequate steps to avoid employee dissatisfaction is a factor that created such circumstances. IT outages and strikes were not key reasons for the losses of this organisation. One of the key driving factors was shortage of staff that resulted in financial loss for this organisation. Shortage of staff in the organisation during peak period crippled the organisation and it was not able to meet increasing demand in post-covid time. Due to this crisis, British airways was compelled to cancel several flights during the peak travel season. As a result, this airline incurred monetary loss as well as reputational loss. British Airlines could have prevented this with the help of effective management. These were some internal factors that created challenges for this airline and led to huge financial losses. This study discovered that external factors also exist that created issues for this organisation. Some of the external factors include Covid-19 pandemic that shut down entire industry operations. Russian-Ukraine is also an external factor that has contributed to detrimental situations in airline industry leading to rising in oil prices. Rising oil prices inflated operational cost of this organisation, therefore, it was unable to make a profit or increase revenue. Thus, these are some of the issues that this study found British Airways has been encountering.
Recommendations
Effective management
Effective management is a recommendation that is proposed to this organisation. This study discovers that it is managerial ineffectiveness that has created some of the challenges in this organisation. This recommendation is appropriate to British Airways as some of issues that this airline encountered could have been avoided with effective management. Effective management in this airline will ensure that issues that could arise in future are predicted in advance. Prediction of issues that could occur will aid this organisation to take adequate measures to avoid and prevent issues (Stone, 2020). Therefore, effective management is a recommendation that is proposed for this organisation. Effective management will also include human resource management to avoid issues with human resources that were discussed in this study. This recommendation is considered to be useful and effective for British Airways. Besides, this recommendation is also feasible as it would cost a huge amount of money or resources to implement this recommendation.
Employee satisfaction
Employee satisfaction is vital for success and performance of any organisation. This has been a major issue in airline industry after Covid-19 pandemic as several employees were fired from their job or their salary was reduced. Tahanisaz (2020), shows that employee satisfaction is critical in airline industry to improve service quality. This study also reveals that employee satisfaction also facilitates saving money and time. Therefore, employee satisfaction is crucial for airline industry to improve its service quality as well as save money and time. Dissatisfaction of employees from reduced pay was a major factor that created challenges for this organisation (Yilmaz, 2022). Therefore, British Airways is recommended to focus on employee satisfaction to improve its service quality, performance as well as productivity. This recommendation is feasible as it would not require excessive resources. Employee satisfaction could be achieved by providing adequate salaries and creating a positive work environment. Therefore, employee satisfaction is a recommendation that is proposed to Britsh Airways.
Reducing operational cost
Reduction of operating costs is highly crucial especially in airline industry as this industry is a cost-intensive industry. One of the elements that are found to increase operational costs for British Airways, similar to other airlines, is the increasing cost of oil. Since it is not possible to reduce the cost of oil prices British Airways will have to reduce operating costs in other supply chain management.“A-la-carte options” is one of the effective ways to reduce operating costs in airline industry (Hbr.org, 2022). The specialty of this measure is that it does work without hampering customer satisfaction. This measure utilises reward method instead of punishment method. Besides, British Airways could also utilise best industry practices to reduce its operating cost and facilitate growth and profitability. This recommendation is feasible as it would not require extensive resources. Therefore, British Airways could is recommended to utilise this strategy to reduce operating costs.
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