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For British Airways (BA) chairman and CEO Alex Cruz, fast-paced change has become the norm in what was already a competitive and constantly evolving industry. Since taking up his current role in 2016, he has experienced uncertainty caused by the UK’s decision to leave the European Union, faced changing customer expectations driven by new technology and dealt with increased competition from low-cost operators.
The carrier could easily have steered off course, but the confidence shown by its owner, International Airlines Group (IAG), suggests that BA can navigate any adverse conditions. For 2019, the airline will have £6.5 billion – nearly £2 billion more than originally announced in 2017 – to invest in new technology, aircraft, airport lounges and staff training. It also plans to hire 3,000 more people as part of its five-year investment strategy (2018 to 2022) to become the “airline of choice for everyone”. It’s a bold move for a carrier that, like all British businesses, has no idea how Brexit will affect the UK economy.
“From a financial perspective, we’re healthy,” Cruz says. “We have nearly £2 billion more than last year to spend on our customers, so that means investing in aircraft, airport lounges, training tools for our staff and in creating a working environment where we deliver the best possible service. We’re in a unique position, because next year will be full of confusion, questions, anxiety and doubt over the identity of our country. And yet we’re going to hire 3,000 people in that time.”
Cruz is used to disruption, having been an aviation industry leader for several years. After working with American Airlines, Sabre and Accenture, he founded Spanish low-cost airline Clickair in 2006 and, as CEO, steered it to success, culminating in its 2009 merger with Vueling. Cruz was then appointed chief executive and chairman of Vueling, turning it into one of Europe’s most profitable carriers. He joined BA in 2016, replacing Keith Williams as chairman and CEO.
Technology is the latest challenge for Cruz, with smartphones and tablets changing the relationship between carriers and customers. Using social media, customers can ask more questions and make complaints more easily – and they expect much quicker responses. Cruz believes companies in other industries face the same challenge: “We’re now operating in a completely different world to the one I grew up in. Consumers want to know the status of things, get quick solutions and receive some form of generosity.”
As Nader Tavassoli, Professor of Marketing at London Business School, points out when discussing customer expectations, passengers no longer choose one carrier over another for reasons of efficiency: “An airline might consider its perceived on-time arrival performance or leg room to decide whether a price premium is justified should they perform better than the competition (a point-of-difference), or a discount if they lag; i.e., a point-of inferiority. But, based on competitive benchmarking and diminishing returns, customers subjectively perceive most of these dimensions as points-of-parity. They award little credit to a safer airline because they wouldn’t consider flying with an unsafe airline in the first place. It’s important to the customer, but not in their choice of brand.”
‘Nations around the world have identified aviation as a cornerstone of development’
Cruz says that BA has to continue investing in the latest tech to be recognised by travellers as the world’s leading carrier. In 2017 it became the first airline to operate self-service biometric gates at Los Angeles airport on international flights out of the US. The gates reduce the time it takes to board an aircraft by half. BA has since introduced the gates for flights from Orlando and is trialling the same technology in Miami and New York. Other US destinations will come on stream in 2019.
Self-service boarding gates with facial recognition technology are now available to BA customers flying domestically from Heathrow Terminal 5. The airline also has self-service bag drop facilities at the UK airports it flies from.
“The most uncomfortable part of air travel is going through the airport and coming out the other side,” Cruz says. “You never know how many pieces of clothing you’ll need to remove when going through security. A great deal of our time and energy goes into wanting to remove some of those barriers.”
“Technology helps people board planes faster by reducing the number of paper and passport checks. We can now get people onto an A380 in 20 minutes, which is pretty unusual. We’re interested in adopting tech that addresses inefficiencies for people travelling through an airport.”
Another tech-related first for the industry has seen BA introducing remote-controlled devices that push its short-haul planes into position at airports. Operated from a safe distance, the machines have reduced pushback delays by more than 70%.
BA is now trialling the devices on its long-haul aircraft. “It’s happening at Heathrow,” Cruz says. “This is just one of our tech projects – at any point, we have up to 50 running.”
They include trialling driverless buses that travel between the terminal and aircraft, introducing WiFi on all short-haul and 80% of long-haul aircraft by the end of 2019, and ramping up facial recognition technology throughout airports to improve efficiency.
While dealing with disruptive technology, executives of larger, established airlines also face an ongoing issue that has affected them for several years: budget carriers. When working at American Airlines, Cruz saw no-frills operators emerge to challenge the established US players.
Many budget airlines have since taken to the skies, forcing the likes of BA to look at their operations. “Ryanair and EasyJet revolutionised air travel in Europe and some budget airlines are now operating long-haul flights,” Cruz says. “Nations around the world have identified aviation as a cornerstone of economic development, so they’re investing heavily in their own airlines and creating competition for us.”
He adds: “Over the last five to 10 years, the US carriers and some in Europe have adopted baggage-only fares, where you travel from A to B and can buy extras if you want them. That’s given us the opportunity to compete on price. At the same time, we’ve become more efficient and can, for example, offer £189 fares to Fort Lauderdale – which include food, drink and our great service – that we make a profit on.”
In 1998 BA launched its own low-cost carrier, Go, which ran for four years before its sale to easyJet. “BA is a premium airline and we can’t get away from that fact,” Cruz says.
More recently, it has created summer and winter schedules to encourage fliers to travel with BA from Heathrow to leisure destinations. The airline is operating its largest route network for more than a decade, having introduced more than a dozen new routes in 2018. A further 11 new routes have been announced for this year.
The investment in technology and services will continue in the coming years as BA looks to establish itself as the world’s number one carrier. “We have a fantastic brand, which we must continue to develop,” Cruz says. “We’ve won several awards this year for our short-haul operation and our cabin crew. We also have shareholder support and a project plan involving new aircraft, catering, services and ways to engage with partners and customers.
“Our strategy right now is all about delivery and getting things done. We’ll continue to refine our service and listen to our customers, which is very important. We want to make BA the world’s best airline by sticking to our plan and doing the things that we’ve committed to.”