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TABLE OF CONTENT

1. Title ................................................................................................................................................................................................ 2

2. Introduction .................................................................................................................................................................................... 2

3. Change management in British Airway in 2009 – 2011 ................................................................................................................ 2

3.1. Organizational context (2009-2011) ....................................................................................................................................... 2

3.2. The change management strategy ........................................................................................................................................... 4

3.3. The nature and extent of the strategic changes ....................................................................................................................... 5

3.4. The strategic change itself as outlined by its management. .................................................................................................... 6

3.5. The challenges and management difficulties of implementing such change strategy ............................................................ 7

3.5.1. Employees’ resistance to change and no communication between its

management and employees .................................................................................................................................................... 7

3.5.2. External challenge – competitors ................................................................................................................................... 8

4. Conclusion ..................................................................................................................................................................................... 9

5. Bibliography................................................................................................................................................................................. 10

1. Title: Research report of change management strategy of British Airways in the period of

2009-2011

2. Introduction

As the result of global financial crisis in 2009-2011, the revenue and operational profit of

British Airways which is the leading international airway in UK decreased dramatically. To

restore its profitability, British Airways implemented its change management strategy including

three steps such as Unfreeze, Change and Refreeze. But, the results are not as its expectation.

With the hurry of cutting cost and increasing the revenue, British Airways announced to cut

1,700 jobs in the 1st step and freeze pay until 2010. This action caused the 22-day strike of crew

members and the dispute between BA and its members lasting 18 months.

This research report will mention 5 points that help readers understand the change management

strategy of BA when facing the global crisis

- Organizational context (2009-2011): The reason why BA must implement the change

management strategy

- The strategic change made by BA management

- The nature and extend of change management: Evaluate about time, communication,

result and scope of change management

- The change management strategy: Steps to implement change strategy by BA

- Some difficulties and challenges that BA faced

3. Change management in British Airway in 2009 – 2011

3.1. Organizational context (2009-2011)

Background

British Airway was established as state-owned airway which gathered four other carriers

in the period of 1971-1974. Then, it was privatized in 1987 and now is the largest international

airway in UK and one of the leading global airways. With the joint venture or partnership with

other carriers, British Airway has extensive flight network in over 400 countries and destinations

in the globe.

Regarding to its financial situation, before the worsening world financial crisis in 2009,

British Airway showed many good financial signs in 2008/2009

- The growth rate of group revenue is 3.1% in comparison with the previous year.

- Compared with 2007/2008, the British Airway profit increases nearly 33.6%.

- While the operating margin in 2007/2008 is 7.1%, that in 2008/2009 is 10.0%

2007/2008 2006/2007

Revenue (£ million) 8,753 8,492

Profit (£ million) 883 611

Operating margin (%) 10 7.1

Earnings per share (pence) 59 25.5

Financial Statement of British Airway in 2007/2008

As being influenced by the global financial crisis in 2009 and the dramatically decrease

of revenue and profit in this period of 2009-2011, British Airway needed to change to ensure

long-term development, to restore its good signs in finance situation in the past and to continue

to be the leading international airway in UK.

Crisis in US influence to British Airway and its strategic management

There are some financial data as evidences of bad financial factor in British Airway in

2009 ~ 2011

- The revenue compared with the previous decreased £998 million (-11.1%)

- In comparison with the group operating loss in 2008/2009, that in this year decreased 11.1%

The reasons for this financial downturn in British Airway are the cost increase and the

revenue decrease influenced by the UK’s economic climate and global financial crisis. In 2009,

the cost of living was increasing 4% (inflation rate) which is much more rapid than the

employee’s income (2.3%). Hence, British Airway faced to the pressure from employee’s

requirements of pay increase. Moreover, in this period, the fluctuation of oil prices influenced

very much to this industry. While fuel costs usually account for 25% of total cost. In 2011, the

oil price increased to $110/barrel.

On the other hand, the revenue in the period of 2009-2011 decreased because of the lower

demand of international flights. Because of the increase of living cost and the decrease of salary,

the disposable income would be lower than the previous time. Hence, the withdrawing for one-

off purchases like holidays, especially foreign holidays was fewer than usual. - “A lot of people

are not touching their savings because they do not know what is round the corner” (Giles, Groom

& Bounds, 2011). This trend influenced the revenue of big airline, including British

Airway. Moreover, the rapid development of technology, some alternative communications such

as telecommuting giving customers more choices and more time-saving than usual can influence

the demand of using airline service.

For long-term survival and profit restoration, British Airway stimulated customers’

demand by downsizing the ticket fares. To do this, British Airway must cut down the employees’

pay to restore profitability as cost-cutting strategy. And the first action on this strategy is that on

6 October 2009, British Airways cut 1,700 cabin crew jobs as well as reduces the number of

long-haul flights from 15 to 14 to save 63 million of Euros per year. Moreover, it also introduced

freeze pay from 2010 and recruited 700 new crew members on existing routines. Beside the

reason of cutting cost, the higher employment rate in the globe, including US give British

Airways much more power to bargain and deal the lower salary with employees. After voting by

thousands of Unite members with the ratio of 9-1, British Airways continue to apply its cutting

cost strategy and removing the concessions from Unite members, Cabin crew announced 12-day

strike. Then, the strike continued to increase 22 days and the dispute lasted 18 months. So BA

was considered and called “management bullying, press slanders, and legal gerrymandering.”