THE BRITISH AIRWAYS

TRANSFORMATION:
A SYSTEMIC APPROACH

BACKGROUND
The transformation of British Airways from one of the least favored, most underperforming and unprofitable international carriers in the world the late 1970s and
early 1980s into the world's most profitable airline and one of the most admired
airlines by 1996 is, indeed, remarkable. This turnaround has been chronicled over
the last twenty years in management literature and business press as solely or
predominantly attributable to a pervasive culture change effort within the airline.
In truth, the culture change efforts were a strong driver of the transformation and
perhaps the most visible to the public, but certainly not the only driving force.
In fact, careful examination of the history of the transformation (in which we
played a part) shows that British Airways under the bold leadership of Colin
Marshall (now Lord Marshall of Knightsbridge) from 1983 to 1995, took a
systemic approach to transforming its world wide operations, including
downsizing, aircraft fleet replacement, improved infrastructure (e.g. computer
reservations systems, hub and spoke operations, IT decentralization, competitive
pricing, improved terminal facilities including the opening of Terminal 4 at
Heathrow), the innovative branding of the airline's classes of service, and
devolution of decision making authority to line managers. The performance
management system and management bonuses were restructured, with 20% of

Achieving Post-Merger Success. Copyright 2004 by John Wiley & Sons, Inc.
Reproduced by permission of Pfeiffer, an Imprint of Wiley. www.pfeiffer.com
-1-

salary available calculated 50-50 on achieving measurable objectives and on

demonstrating desired values and management practices.
In addition, BA engaged in a series of alliances, mergers and acquisitions,
perhaps the most notable being the acquisition of British Caledonian, to strengthen
their dominant position at London's Heathrow Airport prior to privatization in
1987.
It was a complex and comprehensive process that lasted for roughly twelve
years and involved a number of key initiatives, including but not limited to the
much vaunted culture change initiatives. If any of these key initiatives had been
left out, the transformation may well not have succeeded. It was clear to Marshall
and his team from the beginning that neither culture change not structural change
alone could transform the airline.

THE NEED
When Marshall arrived at BA in 1983, he found an airline that was losing
something on the order of 140 million per year - or 200 per minute, 24 hours a
day seven days a week. "BA" as the saying went at the time, stood for "Bloody
Awful". A 1980 survey by the International Airline Passenger Association placed
BA at the top of a list of airlines to be avoided at all costs. The basic attitude of the
airline's staff was reflected in the words of a senior manager in 1984 when he said
"We could run a damn fine airline if it wasnt for all those bloody passengers.
Further, Prime Minister Margaret Thatcher wanted the airline privatized within five
years as part of her government's privatization movement.

THE RESPONSE
Perhaps the most fundamental decision that Marshall made over the transformation
was that British Airways was no longer in the transportation business, but rather in
the customer service business, which served to refocus the company's strategy.
While many structural changes were in order, it was clear to Marshall that the old
quasi-governmental/military culture would not support this shift in focus and
strategy, and that it would have to be changed. The transformation would require
that the airline's approximately 50,000 staff change think differently about British

Achieving Post-Merger Success. Copyright 2004 by John Wiley & Sons, Inc.
Reproduced by permission of Pfeiffer, an Imprint of Wiley. www.pfeiffer.com
-2-

Airways, their jobs, and especially about their day-to-day behavior. This was the
impetus for the culture change initiatives.
One of the first actions in the transformation did not, however, have to do with
the organization's culture and had begun before Marshall arrived. It was a radical
downsizing of the airline's bloated staff numbers by 40% by the end of 1983.
Marshall accelerated this process and included senior management, terminating
approximately 150 senior managers in what became know as "the night of the long
knives". In addition to significant savings in cost and reduced inefficiency, it
certainly got the attention of managers and staff remaining with the airline.
The British Airways culture change effort consisted of a number of initiatives
undertaken to transform the organization into a customer focused, cost conscious,
and profitable airline. An important component of the culture change initiatives
was Marshall's "lead from the front" style. He seemed to be everywhere and to
never forget the name of a staff member. When he flew, he arrived early and talked
with the ground staff, flight crew and cabin crew. He was known to downgrade
himself from First Class to Business or Coach class or off load himself from the
flight based on customer demand. He attended nearly every Managing People
First session for a Friday afternoon no-holds-barred question and answer session
with the participants, and of the rare occasion that he could not attend, had the
participants meet with him in the Board Room at BA's Speedbird House
headquarters with days after the course ended. He was even known to pitch in with
meal service - and the staff loved him.
The major culture change initiatives and programs from 1983 to 1995 included
the following:
Putting People First (1983) Often described incorrectly as the only culture
change initiative, this one day program attended by all staff world wide to
achieve focus upon becoming a customer service company. Colin Marshall
personally attended 95 percent of these programs, describing his vision for
BA and engaging in open discussion with participants
A Day In The Life (1984) a one day program attended by all staff world
wide to familiarize them with other areas of the airline, what it is like to work
there, and the criticality of all in the organization being sensitive to their
impact upon others in the company as well as the customers.

Achieving Post-Merger Success. Copyright 2004 by John Wiley & Sons, Inc.
Reproduced by permission of Pfeiffer, an Imprint of Wiley. www.pfeiffer.com
-3-

 Terminal Supervisor Development Program (1984-85) A thirteen-day

residence program for all supervisors in the BA terminals. With a new focus
upon customer service there were implications for the focus and required skill
set of all front line supervisors in customer service areas. All terminal
supervisors went through this program which covered the new focus and
required skills for the re-defined terminal jobs. After this program all those
who wished to continue as supervisors in the terminals went through an
assessment center as part of re-applying for their jobs.
Managing People First (1984-1990) A five and a half day residence
program for all managers in the company worldwide up through the executive
levels. This program provided crystal clear clarity on the new strategy and
the implications for management. It included 360 feedback for all managers
on the new values management practices that were expected going forward.
Managers revisited each aspect of their jobs and reformulated how they
would go about their jobs in this new environment.
Cabin Crew Fleet Director Programs (1985-86) - To support the change in
the way Cabin Crew were rostered into teams that worked the same flights
and shift patterns, a new Fleet Director position was created to provide
leadership, support and management on the ground and in the air. This
program equipped the newly-appointed Fleet Directors with the required
skills to do the job.
Leading The Service Business (1986) A five day residence program for the
top 150 senior managers focusing upon the leadership requirements and
unique management aspects of being at the top of an organization focused
upon service. This program also covered the leadership requirements of an
organization undergoing transformation, and included customized 360
feedback for all attending.
Performance Appraisal (1985) With a new strategy, newly defined jobs and
newly defined management practices the importance of the performance
appraisal system in keeping the focus and demeanor of all staff and
management in alignment became critical and a new system was devised and
implemented with management training sessions. 50% of the management
bonus was tied directly to demonstrating the new organizational values and
practices on the job.

Achieving Post-Merger Success. Copyright 2004 by John Wiley & Sons, Inc.
Reproduced by permission of Pfeiffer, an Imprint of Wiley. www.pfeiffer.com
-4-

 IT Reorganization (1984) In line with the new strategy the entire IT

organization needed to be completely reorganized and decentralized, with
many of the measures of success radically redefined and all staff refocused in
terms of purpose. A large scale change management exercise was undertaken
to accomplish this changeover within 30 days.
In 1995, Colin Marshall resigned as CEO of British Airways and become
Chairman of the Board, replacing the irascible Lord King. Robert Ayling was
promoted to the CEO job. Under Ayling, the culture change initiatives continued,
including:
Customer Service Leadership Programs (1988-89) An important piece of
the new strategy was the introduction of the innovative concept of branding
the airline's four classes of service, based on extensive marketing research.
This necessitated a series of 5 day programs that were run in Europe, North
America, South America, the Middle East, Africa and Asia for all ground
management staff on delivering upon brand promise or value proposition to
the customer.
Winning For Customers (1990) - A one day all staff program to reemphasize
the importance of customer focus and customer service. It made extensive
use of computer-based simulations of various customer scenarios which
involved staff teams in their resolution.
Managing Winners (1992-93) A three day residence program towards the
end of the transformation period attended by all managers and supervisors
worldwide covering the needs for enhanced quality, cross system cooperation, and personal development if the improvement patterns and
successes were to continue and expand.
Leadership 2000 (1998-99) - A follow up to the benchmark Managing People
First leadership program which ran from 1984-1990. This program utilized a
battery of individual psychometric instruments and an Outward Bound type
component in addition to its strategic and organizational focus. It addressed
the current and anticipated leadership needs of the airline at the start of the
new millennium.

Achieving Post-Merger Success. Copyright 2004 by John Wiley & Sons, Inc.
Reproduced by permission of Pfeiffer, an Imprint of Wiley. www.pfeiffer.com
-5-

THE RESULTS
Significant changes in results in terms of costs reduction, revenue generation,
customer satisfaction and preference, and staff morale were perceptible within the
first two years of the effort. By the end of 1996, in a dramatic reversal of fortune,
British Airways was the most profitable major carrier in the world, the most
favored carrier for international travel by business travelers, and voted the
company that most college graduates would like to work for. By 2000, it was the
second most admired company in Europe. Further, the 1987 privatization had been
successfully completed and UK shares were trading briskly on the world's stock
exchanges.
Again, prevailing wisdom not withstanding, these results cannot be attributed
solely to the significant culture change program that Marshall led, but rather to an
integrated organizational system approach that saw many structural changes
implemented over 1983-1996 as well. Further, the success of culture change effort
cannot be attributed to a single program, but rather to a carefully-planned and
implemented sequence of culture change initiatives.

EPILOGUE
It is no secret that British Airways has fallen far from the grace that it had achieved
by 1996, and that it currently languishes well down in the league tables of
profitable and preferred carriers. Many factors were involved in BA's decline,
including the emergence of low cost airlines like Ryanair and Easyjet, which could
seriously undercut BA's fares, the creation of alliances among competitors like the
Star Alliance which includes BA rivals United and Lufthansa, and pressure on BA's
dominance of slots at Heathrow. Under Robert Ayling's leadership, BA set out on a
long and distracting and ultimately abandoned attempt to forge its own alliance
with American Airlines.
Ayling set in motion a 1 billion internal cost savings program, most of it to
come from reduced labor costs, and embarked on a tiered wage scheme that would
see cabin crew flying on the same aircraft and doing the same job receiving
significantly different compensation. This prompted threats of a Cabin Crew strike
in 1997, and when negotiations broke down with the Transport and Government

Achieving Post-Merger Success. Copyright 2004 by John Wiley & Sons, Inc.
Reproduced by permission of Pfeiffer, an Imprint of Wiley. www.pfeiffer.com
-6-

Workers Union (TGWU) , the union called for a series of 72 hour strikes by Cabin
Crew beginning on July 9, 1997.
BA management reacted very heavy handedly to the situation, with threats of
job loss, suits for damages. Union picketers reported being videotaped by BA
management. On the first day of the strike, 300 Cabin Crew declared themselves
officially on strike but another 2,000 called in sick on the day. Some 70% of BA
flights out of Heathrow were canceled. Management's negotiating position and
reaction to the strike seemed to all BA staff a direct contradiction of the caring and
supportive culture that had been the basis of BA's success, and Ayling's popularity
plummeted. Cost of the strike was estimated at 125 million, staff morale was
never recovered, and profits nose dived 61 percent from 1998 to 1999. BA posted
a loss of 244 million its first loss since privitazation nearly a decade ago.
Ayling was further embarrassed by having to withdraw the new aircraft tail fin
design that he had launched at considerable expense, in due to the publicly
expressed displeasure of Margaret Thatcher and the British public. Robert Ayling
resigned on March 10th, 2000, leaving the formidable task of recovering the hearts
and minds of BA's staff and returning the airline to success and profitability to his
successor, Rod Eddington.

Achieving Post-Merger Success. Copyright 2004 by John Wiley & Sons, Inc.
Reproduced by permission of Pfeiffer, an Imprint of Wiley. www.pfeiffer.com
-7-