British Airways hits turbulence

Between 1981 and 1996, BA went from a stodgy state-owned carrier – truly one of the worst airlines in the world – to a world-class customer-focused organization. In 1995-96, BA becomes the most profitable airline in the world and wins prestigious industry awards for the 7th year in a row. The company has come to live up to its self-billing as “The World’s Favourite Airline”. This is the moment chosen by Sir Colin Marshall, seen by all as the main architect of this remarkable transformation, to pass the CEO baton to heir apparent Bob Ayling and move to a part-time Chairman position. A clear strategic thinker, Ayling realizes before anyone else that (a) industry conditions are going to become increasingly competitive and (b) that the airline’s cost base is too high for this likely future. As a result, he initiates a demanding efficiency programme hailed by the business press as visionary. Initially viewed as both strategically astute and very personable, Bob Ayling becomes increasingly criticized, and his tenure increasingly marred by tension and conflicts first with employees, but soon after with the press, regulators and politicians, and ultimately most constituencies interested in the airline. The turning point is the cabin crew strike in mid-1997, after which BA’s stock price begins a slide that will see the company lose over half its market capitalisation in two years. The case concludes with Ayling resigning and Marshall explaining that the new CEO would keep pursuing the strategic directions set by Ayling.

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