BRITISH AIRWAYS
CASE STUDY BACKGROUND

British Airways was formed in the 1970s as the result of a merger between BOAC (British Overseas Airways Corporation) and BEA (British European Airways). Although the company’s strengths appeared to complement one another the merger was hardly an unqualified success as two companies with very different traditions and cultures were never fully integrated into a coherent whole. The end result was a company with a ‘bureaucratic and militaristic’ culture, in public ownership, and which by the late 1970s was experiencing some severe problems.
Customer perception of BA was generally poor, and the epithet ‘Bloody Awful’ often used as a description of what the initials stood for. Furthermore, it faced pressure from low-cost operators on its prized transatlantic routes from Laker Airways and People Express (both of which have long since collapsed), and from a combination of recession and rising fuel prices. The combination of these factors led to mounting financial losses by the early 1980s, recording a single year loss in 1981 of 140 millions pounds.
Predictably, the company responded by cutting costs, with staff cutbacks of 22,000 in the early 1980s, and with 14,000 in 1981 alone. These cutbacks were achieved with the help of generous redundancy packages but they did little to alleviate the deeper malaise afflicting the workforce. The cost-cutting exercise, though probably necessary, achieved little, with limited resulting improvements in efficiency and productivity. Indeed, any improvements that did take place in performance were largely the result of favourable exchange rate movements.
Significantly, by 1983 BA, under pressure from the government to prepare itself for privatisation, began to realise that future changes needed to focus upon securing employees’ ‘positive involvement and support’ and with this, a more