Reinventing the Airline Industry

This essay will identify and evaluate the resource requirements to implement strategies and also propose targets and timescales for achievement to monitor the strategy. It will compare and contrast how this varies between that of British Airways (BA) and easyJet and how strategic implementation differs between the two. The airline industry is very competitive and is constantly changing; this means that these two organisations will have to have a strategy where they continually adapt to the ever-changing external environment. Therefore a strategic planning tool such as SWOT is needed to identify the internal and external environment.
Strategy Implementation can be defined as:
“Managing stakeholder relationships and organisation resources in a manner that moves the organisation towards the successful execution of its strategies, consistent with its strategic direction” (Harrison, 2003:20)
The product that easyJet and BA offer is quite different. EasyJet’s philosophy is the earlier you book the cheaper the prices; leave it until the last minute and you could pay four times as much as someone who booked early. They offer a wide range of departure points throughout the UK and various destinations throughout Europe. EasyJet are able to keep their flights cheap because they cut down overheads by not printing tickets, not offering in-flight meals and entertainment (The Guardian, 2004).
BA offers a full service with all the frills. These frills include in-flight meals, extra legroom, ‘bed’ chairs and entertainment. They offer flights all over the world and even offer ‘around the world’ tickets. BA sells their flights online, over the phone and through tour operators and travel agents. They offer flat beds in business class and also offer other benefits to their business class customers with the BA executive Club.
BA often use the strategic demand orientated pricing. They price their seats according to demand, when demand is high the prices are slightly higher and when it comes close to the departure date of the flight and the demand has fallen and all the seats are not sold they will reduce the price. It is better for BA to sell all their remaining seats at a reduced price because once the flight has left with empty seats they cannot get them back as they are perishable. If BA did not sell the remaining seats they would not have got any money for them. The seats are priced higher in summer because there is more demand than in winter and they are more likely to sell all their seats at the higher price (Holloway, 2002).
EasyJet may have problems with price perceptions, because they are a low cost airline people may assume that all their flights are cheap whenever they book them.. EasyJet offer cheap flights if you book early, the closer you book to the departure date the more expensive they will become. EasyJet have found that demand for flights is higher closer to the departure date, which is why they operate like this.
EasyJet is not part of an alliance whereas BA are part of the one world alliance along with other established airlines that represent the country e.g. American Airlines, Qantas and Cathay Pacific. This helps them to have global computerisation and reservation system linkages, provide a service to customers through code sharing and develop a dominant market. The process needs to be as simple and easy for the customer as possible. EasyJet is an internet based company so if there is any technological problems it will cause chaos and passengers do not actually see anyone until they get to the check-in desk at the airport whereas BA use many different methods to sell their flights-tour operators, travel agents, travel shops and internet.
Strategy implementation has a close relationship with stakeholder relationships and resource requirements so that organisations such as BA and easyJet successfully move towards their strategic directions (Harrision, 2003). However some stakeholders, such as competitors can cause problems for organisations. For example, the low cost airlines can cause BA to falter and have to reduce their costs, which can significantly reduce their discounts or economies of scale costs with their suppliers. Therefore it may mean that BA has not reduced their prices to consumers enough if competition from low cost airlines is still a threat. This has led to increased competition, which has meant that organisations have to work with each other, as strategic alliances, rather than against each other. BA is currently focused for future development of relationships within the one-world alliance, and its new members. It believes in community relations to help put faith back into the airline industry after terrorist attacks. This is done through education, employee support,
sustainable tourism and heritage/environment awareness (BA, 2006).
For example, BA strategy could be considered to carry fewer passengers and charge them for more money, where as easyJet will carry more passengers and remove the extra ‘frills’.
As highlighted in easyJet’s mission statement, they have a responsibilty to offer a reliable product and fares that appeal to both leisure and business travellers. Therefore easyJet must implement their strategies whilst ensuring they keep to their mission statement. They are considered to have an effective cost saving strategy by using the internet for the majority of its business operations. This low cost distribution channel allows easyJet to provide better prices to customers and this is one of the main reasons they encourage their customers to book online. EasyJet also has the responsibility of ensuring that their customers who book online are able to review back or even alter their bookings. This has made easyJet one of the first low cost airlines to enable customers to view their bookings online, make flight transfers and ammend names (easyJet, 2007).Their strategy therefore relies on pricing policies on the internet, and they encourage their customer to book this way to get the better deals. Unlike BA, easyJet now sells around 95% online every week, which is much higher than any other airline (easyJet, 2007).
“easyJet has aggressively pursued its strategy of encouraging passenger to book their seats online.” (easyJet, 2007)
Again, easyJet have implemented cost saving strategies which have been effected as it has given traditional airlines such as BA major competition. They have done this by disposing of the ‘frills’, and opting for a basic price which only includes the flight itself. Their cost saving strategy involves the use of the internet to reduce distribution costs, which means they do not have to provide tickets, as everything is completed in confirmations through emails and booking references. This reduces the cost of issuing, distributing, processing and reconciling millions of tickets each year. They maximise the utilisation of the substantial assets by maximising the utilisation of each aircraft significantly reducing the unit cost (easyJet, 2007).
EasyJet also ensures rapid turnaround times, which enables efficient use of airports and shows that the organisation is using the resources efficiently. They have also reduced the turnarounds to half an hour and under, that can help easyJet achieve extra rotations on the high-frequency routes, resulting in maximisation of the utilisation rates of the aircraft (easyJet, 2007).
As highlighted earlier, they have also cut back on paper resources. This has enabled a simpler strategic working practice that enables them to offer better prices and stay competitive. This also works internally, as the mangement and administration of the company is worked on via IT systems which can be used anywhere in the world (Cooper et al, 1998). This again is highly effective and is a significant competitive advantage compared to BA. EasyJet is also more of a team build company, the culture is considered informal, with a ‘very flat management structure’ that eliminates the unneccessary layers of management.
BA on the other hand, has more corporate managers than easyJet, which means that BA’s strategy will be more expensive to implement. As highlighted by Harrison (2003), strategy implementation involves envisioning, activating, supporting, installing, controlling, and recognising. This can also be related to the strategic planning process, which will be discussed later. Resource planning at corporate level is very important. Planning is not just undertaken by the public sector tourism organisations, because larger tourism organisations such as BA, will develop mission statements to inform those with interests in the organisation what they are about and what they will set out to do (Youell, 1998).
If BA were to implement a strategy where they were looking to improve the turnaround time, then the Airbus would be seen as an efficient aircraft to invest in. This is because it is a larger and wider aircraft that would enable a wider aisle to allow the people to move around more easily and get them on and off the aircraft more efficiently. This could help speed up the turnaround time, which also gives more time to clean the plane and refuel. Again this would enable BA to compete with easyJet with efficiency of turnaround times.
To strategically compete with low cost airlines, BA could engage in more strategic alliances to gain a larger market share, and promote more brand awareness giving a strong network presence. Another strategy to compete with low cost carriers would be to simplify economy class, introducing online reservations, cut out Travel agents commissions, less cabin crew and introduce more seats on flights, although this would mean less space, which could compromise what BA is about and what they promote (British Airways, 2006).
Growth strategies can be achieved by expanding and adding more flights, increasing the variety of customers and diversifying the routes it takes. As mentioned earlier, BA are not as profitable with the shorter routes, but gain significant earnings from the long haul flights.
The cost reduction strategies may differ from easyJet’s because BA are appealing to a different market segment. They cannot cut back on the ‘frills’ as this is what they are known for, a high quality service which aims to provide for passengers needs and wants. Therefore the cost reduction strategies will include, rationalising routes, disposing of non-core activities, and re-negotiating contracts with suppliers, and reducing employee numbers. BA can also successfully reduce marketing costs by the repeat custom through improving their frequent flyer programme (Page et al, 2000). By improving this they wont need to spend as much on marketing and will promote their brand through word of mouth via the frequent flyer programme.

The Strategic planning process for commercial tourism enterprises:

The figure above shows a basic five-stage chart that BA could use to achieve and monitor the strategy. The first stage clearly states the aims and objectives, which will give BA a clear picture on where they want to go. A competitive strategy is vital for BA as the airline industry as a whole is constantly changing and will need to adapt to the ever-changing environment in order to compete. Stage two will then analyse BA’s current position by using SWOT analysis that looks at both the internal and external environment. It could also use PEST analysis, which is another strategic analysis tool that could identify BA’s future activities. Once this has been completed, action plans can then be developed which include detailing things such as budgets, how BA intends to fight off competition and marketing activities. Stage four and five then consists of the implementation of the strategy which will involve measuring the actual result against the planned performance and then adapting or adjusting them after they have been implemented to make them more successful (Youell, 1998).
If BA were to undergo a strategy involving broad objectives such as competing, typically this type of strategic planning would be over a medium term, on a three to five year timescale. However, short-term policies are vital to meet specific targets or developing particular projects. For example, this could involve a specific aspect of competition perhaps by introducing lower fares to some destinations by using cost saving strategies such as less facilities and ‘add ons’, aiming for a similar degree of ‘no frills’ for less money. This could perhaps be effective to short-haul destinations where BA is not as competitive against the low cost airlines such as easyJet (Youell, 1998).
This essay has highlighted some of the strategic implementation differences between that of BA and easyJet. It has concluded that there are some major differences in terms of the strategies because both organisations are offering a different product. However, both could learn some strategies from one another, in order to remain competitive in this rapidly changing industry. It has also discussed how strategy implementation is part of the wider strategic planning process and needs to be constantly evaluated in order to survive. Shorter-term strategies are very useful for more instant effects, but some of the major strategies will take longer to implement but will be worthwhile in the future.