NHÓM 9:

Nguyễn Hồng Anh

Mai Hương Giang
Nguyễn Mỹ Thành Phát
Lương Thanh Xuân
Phạm Bùi Khánh Linh

DISCUSSION

1. In 1990s, the deregulation of the European airline industry opened the way for new
budget airlines to undercut BA on short-haul flights. Give your explanation for this
statement.

- The new rules that BA will no longer be the exclusive airline in the UK created
opportunities for new airlines to gain more customers. As passengers are now able
to choose from a wider range of airlines, they may be more compelled to choose
airlines with more reasonable prices and an acceptable level of service, instead of the
more costly BA with ‘unnecessary’ extra services in their opinion. Therefore, BA
would lose passengers and profits due to their inflexibility in modifying their services
based on customers’ willingness to spend instead of current prices.
- With more rival airlines showing up, they are bound to compete with each other by
lowering the price of their services in order to attract more customers. This further
reduced BA’s ability to retain customers, as they simply cannot compete head-on
with other airlines with their current cost structure and full-service position.
- The core airline’s decision to extend global reach and the subsequent PR campaign
had a side effect of alienating British-based business passengers, as they were
already displeased with the increasingly overcrowded BA hubs of Heathrow and
Gatwick; alongside a simultaneous drop in service quality. The deregulation, IMO
allowed those passengers to choose directly from a wider pool of competitive
airlines, causing BA to lose those customers to rivals.
- Related to the second mistake in BA's recovery solution is cutting on labor costs,
causing unprofessional training consequences, so that the customer care staffs
handle and respond to customers in industrial and unprofessional ways.
- The advertising campaign "an acknowledgement that 60% of BA's passengers now
hailed from outside the UK" made an airline known as the national airline of Great
Britain lose its personal brand value. of a political firm -> lose the trust of customers
and especially British-based business passengers.
2. In response to the first-time ever loss in 1996, the company's management introduced a
plan, but the plan turned out to be a misguided recovery plan. Give your explanation for this
statement

- The first strand of the plan was to build market share by targeting European transfer
passengers transiting through BA's second hub at Gatwick Airport. BA intended to
launch 'Go', a no-frills airline of its own, based at Stansted Airport with the intention
to allow BA to compete directly on the short-haul routes without compromising the
integrity of the full-service core brand. However, the standalone subsidiary would go
on to cannibalise some of BA's core business, turning high-margin passengers into
low-margin ones and therefore creating losses for BA itself by reducing potential
profit of BA itself. As a result, in June 2001 the company confirmed its intention to
withdraw completely from the short-haul budget market with the sale of 'Go'.
- The second strand of the plan involved an aggressive programme of cost cutting,
which was deeply unpopular with BA staff. The subsequent drop in morale and
industrial action undertaken by staff in protest caused a drop in service as a result,
further irritating British-based business travelers - those who were already
displeased by the effect of the increasingly overcrowded BA hubs of Heathrow and
Gatwick on their travels. With more competitive budget airlines around since the
deregulation, their patience with BA may have ran out as they switched to other,
more reasonably-costed airlines. The alienation of those business travellers had
adverse effects, as while they only represented a small part of the BA’s total volume,
most of BA’s profit came from them.