[FDOS_UK]

I’ve been practising business strategy for many years and learned a little on the way.

In a broad focus market, there are two viable positions – cost leadership or differentiation. People commonly believe that this means cost leadership means poor quality or that differentiated products work regardless of cost, but this is not my experience.

British Airways has neither a cost leadership nor a differentiated position on short haul services, it is rapidly becoming a high cost, me too product, the main arguments for which are providing easy add ons to long haul flights and the route network from Heathrow. NB: O&D business is very different to Hub and Spoke and BA needs to support the latter, too.

The cost cuts initiated over a number of years can be seen in the profitability recently, but the strain is starting to show and the latest set of mixed fleet strikes is a dreadful reflection on the business. Only a few years ago, this new crew organisation was a fresh start towards providing better service and now they are in the middle of strike #8 in six months.

Having been given a generally supportive receiption in the media (with the exception of the Daily Mail), the mood music has changed in recent months and BA’s brand reputation is starting to be trashed. Whilst cost reductions have instant impact, brand damage takes far longer and the effects can be insidisous – the anecdote about boiling a frong comes to mind.

Your argument

That’s not the same as BA incorporating those improvements into their operating model and increasing ticket prices accordingly. The result of which would be a further shift to the competing LCCs operating from nearby airports.

is simply false logic, because BA has not removed features of the product and reduced prices permanently/across, it has removed features and either run short term campaigns with limited, but lower, pricing or done nothing at all (e.g. moving to BoB).

BA, with a high cost base, cannot compete with LCCs on price alone, it will simply run out of items to cut. Companies like Ryanair have inherently lower cost business models and BA cannot get anywhere near these (nor should it try to, IMO).

BA needs to understand the factors for which travellers will pay premium prices (and many people still will) and then provide a product that matches these needs. That is not to say that BA should not apply cost controls, any decent business will do, but this is not a strategy, it’s just part of competent general management.

If customers are going to desert BA and choose another carrier on price alone, they will anyway and attempts to retain these people by reducing product features/benefits, e.g. densification in CE will ultimately prove to be wrong headed and missing the point, as can be seen in the USA where the premium airlines are now reintroducing features and accepting that people who want a really cheap deal with go to Spirit.

[GrahamC]

To pretend the majority of passengers are willing to pay for the return of previous service levels ignores the commercial reality experienced by practically all legacy carriers in the last couple of decades.

It may have historically been possible to impose those service levels (and associated costs) on passengers but it just doesn’t work that way any more. The home fortress advantage has lost a large chunk of its power.

Barring any seismic changes in the competitive landscape, I expect the current trend of decoupling the enhanced services from the headline fare to continue, with the likelihood that some parts will return as charged add-ons.

The world (and previous business models) move on.

[FDOS_UK]

[quote quote=817057]To pretend the majority of passengers are willing to pay for the return of previous service levels ignores the commercial reality experienced by practically all legacy carriers in the last couple of decades.

It may have historically been possible to impose those service levels (and associated costs) on passengers but it just doesn’t work that way any more. The home fortress advantage has lost a large chunk of its power.

Barring any seismic changes in the competitive landscape, I expect the current trend of decoupling the enhanced services from the headline fare to continue, with the likelihood that some parts will return as charged add-ons.

The world (and previous business models) move on.

[/quote]

You are completely missing the point; Cost leadership companies try to attract the masses, differentiated companies cannot and should not.

The low cost business model is changing, the premium airlines are fighting the last war, against the wrong enemy.

[GrahamC]

[quote quote=817058]
You are completely missing the point; Cost leadership companies try to attract the masses, differentiated companies cannot and should not.

The low cost business model is changing, the premium airlines are fighting the last war, against the wrong enemy.

[/quote]

BA are just too large to be the boutique airline you long for. They need to attract at least some of those masses.

[Tom Otley]

And meanwhile the fight continues on Twitter…

#ToFlyToStarve #BAlowpaynoway @British_Airways @qatarairways pic.twitter.com/7hZfEPwa7a

— Operation Greedbird (@BAsolidarityMF) July 3, 2017

[FDOS_UK]

[quote quote=817059]

FDOS_UK wrote:

You are completely missing the point; Cost leadership companies try to attract the masses, differentiated companies cannot and should not.

The low cost business model is changing, the premium airlines are fighting the last war, against the wrong enemy.

BA are just too large to be the boutique airline you long for. They need to attract at least some of those masses.

[/quote]

BA could only be a boutique airline in the context that Fawlty Towers is a boutique hotel!

BA does and will continue to retain some of those mass market segments, but they are not the same as others in the mass market. Y and W sales can be very lucrative.

As you seem to have a fixed position based on dogma, there is probably no point continuing this discussion.

Tom Peters once said “companies look at who was the market leader five years ago and try to use the same model to gain leadership five years in the future – it is not an Olympian aspiration’.

[FDOS_UK]

[quote quote=817060]And meanwhile the fight continues on Twitter…

[/quote]

Classic 🙂

[GrahamC]

[quote quote=817061]Tom Peters once said “companies look at who was the market leader five years ago and try to use the same model to gain leadership five years in the future – it is not an Olympian aspiration’.

[/quote]

Did Tom Peters say anything about looking at business models from 20 years ago?

[FDOS_UK]

[quote quote=817064]

FDOS_UK wrote:

Tom Peters once said “companies look at who was the market leader five years ago and try to use the same model to gain leadership five years in the future – it is not an Olympian aspiration’.

Did Tom Peters say anything about looking at business models from 20 years ago?

[/quote]

20 years ago? You mean like the Go model that BA is now using?

[Tallinnman]

Only Go had better management and coffee 🙂

[FDOS_UK]

[quote quote=817135]Only Go had better management and coffee ?

[/quote]

Very true.

[andrew.gill]

Hi everyone

I flew on a wet-leased plane on Sunday night.

BA705 VIE LHR was operated by Qatar on A7-ADI, an Airbus 320.

Business was three rows in 2 x 2, but there was no lay-flat bed or personal TV as had been suggested on other forums, and the loose armrest between 1D and 1F let me see a significant build-up of food crumbs 🙂

Announcements were BA style, being read from printed notes and it did look as if there were just four cabin crew.

I didn’t get to see the food offer in Economy, but I don’t believe training / equipment for Buy on Board had been provided, but in Business it was the usual BA tray set

best

andrew

[canucklad]

An interesting rally of points between FDOS and GrahamC and not sure who’s serving the best volleys so will simply stay on the side-lines on the main points made.

What I would say, when it comes to BA, I’m now one of a growing group of people who associate the company with two words………Rip Off!!

When a company starts from a low reputation point and gets better, people forgive them and see value for money based on price point expectation.
When a company starts from a high reputation point and continually strips back service levels, people very quickly lose faith until eventually they find alternatives that restore their value for money based on price point expectation. .

[SimonS1]

[quote quote=817172]Hi everyone

I flew on a wet-leased plane on Sunday night.

BA705 VIE LHR was operated by Qatar on A7-ADI, an Airbus 320.

Business was three rows in 2 x 2, but there was no lay-flat bed or personal TV as had been suggested on other forums, and the loose armrest between 1D and 1F let me see a significant build-up of food crumbs ?
[/quote]

Imagine what they will be like after BA has leased them for 2 months as I don’t think BA does cleaning these days. They will all need a deep clean when they return to Doha.

[SimonS1]

[quote quote=817177]An interesting rally of points between FDOS and GrahamC and not sure who’s serving the best volleys so will simply stay on the side-lines on the main points made.

What I would say, when it comes to BA, I’m now one of a growing group of people who associate the company with two words………Rip Off!!

When a company starts from a low reputation point and gets better, people forgive them and see value for money based on price point expectation.
When a company starts from a high reputation point and continually strips back service levels, people very quickly lose faith until eventually they find alternatives that restore their value for money based on price point expectation. .

[/quote]

Indeed it’s the catch 22 really.

The LOCOs started from a zero base and could build their cost base from the bottom up.

BA started from a legacy base and if they want to compete head on they can only do it by trying to reduce costs down from legacy levels. Of course every cut to lounges, staff wages, seat densification, cleaning, flowers in the F loos etc just looks petty and mean spirited.

Of course BA will never get to a like for like scenario with the LOCOs, particularly with LHR overheads, so the only way is to match off the costs it cannot cut with petty savings in other areas such as trying to deny customers legitimate EC261 claims and similar.

At the other end of the scale they can’t compete with ME3 on proposition either as those airlines are light years ahead.

So basically BA ends up in a sort of no mans land, an average airline charging average prices for average service. The classic 5/10 mediocrity model. WW has done a job in recent years by acquiring other airlines and taking out costs but that won’t go on for ever.

I took a BA flight last week to US, the first one in over a year. After travelling almost exclusively with the ME3 and a few gap fills it was like a step back in time. Minimal food, IFE screen about 6″ x 4″ with limited content (ironically it did have an episode of ‘Are You Being Served’ – presumably the rights are cheap?), knackered old 777 in grubby condition. Positives were a good crew who were trying hard to polish the proverbial, and 9 across seating in economy.

I wish BA well but I can’t see much light at the end of the tunnel.

[Author]

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