The paper is a discussion regarding the various stake holders of the British Airways. Business ethics define how a business relates with individuals at employee level, corporate and communities in the national level. They represent the values owed to the stake holders. British Airways is the largest airline operator in the UK in terms of fleet. It is a member of the International Airline Group together with Spanish Iberia airlines. The major shareholders in British Airways are can be classified into two: the primary and the secondary. The primary stake holders have a direct impact on the company’s performance and well being, while secondary stake holders have an indirect impact. The stake holders include customers, employees, governments and related regulatory bodies, the environment, suppliers, shareholders, financers, community and competitors. The different shareholders present different levels of influence, as well as criticality to success of the company.
In addition, the stake holders show different orientations with the company at different times, ranging from total support to neutrality and total resistance. British Airways has had positive and negative moments with various stake holders. A customer related incidence was the Heathrow Terminal 5 problem experienced in 2008. The company responded through vigorous publicity campaign in which customers were informed of the reformed Terminal and excellent service. The company also experienced a worker related incident in 2010 when workers went on strike. The company handled the situation through customer reassurance and charters of other airlines to handle the customers who are not satisfied, while a long term solution was worked out with its employees.
The Applied Corporate Governance website defines Business Ethics as the application of an enterprise’s code of conduct to achieve its strategic and operational mandate. The intended achievement should be met at the three levels of business. For instance, on the macro level involving the contribution of the business output to the national agenda, the corporate level involving fulfillment of the corporate social responsibility and the individual level, which governs the behavior of an individual in the organization (“Applied Corporate Governance” 2012). Broadly stated, business ethics are the behavior pattern that steers a business towards realization of its individual, corporate and macro- economic responsibilities. Business ethics is important in a business as it governs how the entity will relate with other businesses and the society, as well as how well it will nurture individuals within the organization to optimize productivity and avoid losses and tainted reputation. Business ethics is a good tool to project future growth and profitability of a business.
Stake holders is a collective term for any individual, group, organization other party which can affect or be affected by the actions of a business entity. The US department of commerce identifies customers or consumers, agents and employees, service providers and suppliers, shareholders and owners, lenders and investors, governments and related agencies among other entities as stakeholders (Post 2002). Apart from the listed ones, there are other additional stake holders and the number is unique for each business. It is a central concern for any business to take good care or its stake holders since they determine its success or failure in their different ways. This paper will study the case of British Airways in a way to explore its different stake holders, its business ethics structure and how this affects the stake holders, as well as how successfully the company has in the past dealt with ethical concerns of at least two of its stake holders.
2.0 British Airways
British Airways (BA) is United Kingdom largest international airline in terms of fleet and second to Easy jet in terms of passenger volume, which operates domestic and international charter and scheduled services for carriage of passengers, mail and freight as well as ancillary services. BA flies more than 600 destinations across the globe and is one of leaders in airline industry. Established in 1971, the airline has largely grown from the domestic market to the international markets thus being able to compete with other notable airlines such as American Airways, Lufthansa Airline, Qatar Airways among other notable global airlines (Campbell-Smith 1986). The firm is a founding member of Sky team, One world and Star alliance airlines, along with airlines such as Qantas, Cathay Pacific and American airline. In the year 2009, the firm merged with Iberia airline, making the two airlines to create the third largest global airline with regard to annual revenue. After the merger, the firm constituted FTSE 100 Index under title of the international airline group. BA, whose headquarters is in waterside, Heathrow Airport has it operations across the globe (The Guardian 2012).
The British Airways has many stake holders, but this paper will list the ten most significant or influential ones. These include customers, competitors, employees, suppliers, media, government and related regulations, shareholders, local communities, financial institutions, and environmental or climate issues (The Guardian 2012). Stake holder management is delicate and difficult since the different stake holders’ interests may conflict, even as the company tries to uphold good relationships with all the stake holders. For instance, government regulations may lead to profitability decline, thereby affecting shareholders interests. In addition, good customer service may result in employee strain, reducing customer satisfaction. A company must therefore come up with a balance stake holder map to remain profitable in a sustainable manner, such as the stake holder circle (Bourne 2009). This section will briefly discuss the stake holders.
3.0 British Airways Stake Holders
Customers are perhaps the most important stake holder for British Airways as they have helped the company to remain profitable both in the short and long-run. Although the most important, customers actually have little influence on direct policy formulation except in the few cases where major shareholders are also customers. The significance of customers will be analyzed later during the Terminal 5 incidence involving poor customer service in BA.
A particular bone of contention for the British Airways, employees have a direct impact on a company’s performance. The employees have frequently voice their concerns through strikes, paralyzing BA’s operations and lowering its rating nationally and internationally. They also have a strong union which may threaten the company’s policy implementation.
British Airways has several major competitors, including Easy Jet and Virgin Atlantic who affect its profitability in the market, and therefore greatly influence its strategy formulation. Without a balanced strategy, BA would be likely to lose to competition
The major suppliers for BA are Airbus and Boeing, both aero plane manufacturers. In addition, BA has a fuel supplier. These suppliers have control over costs and pricing, which are directly transferred to BA’s budget. This aspect has an influence in BA decisions especially in cost management policies, which may lead to reduced fleet purchase and thus poorer service delivery.
3.5 Media and Financial Institutions
Like with any other popular company, British Airways has to contend with media scrutiny and publicity. Consequently, the decisions made by the company are sometimes made for public image and not for genuine policy improvement or growth. The investment and commercial banks are the most used lenders to big companies. Access to finance is an important factor for company expansion and therefore lenders have a significant influence on BA’s strategic decision making. An important scenario to review was the influence of finance on company performance in the 2008/09 global financial crisis.
For a company publicly traded such as BA, shareholders interests have a considerable influence on the way the company is run. The ultimate objective for shareholders is maximization of profit, regardless of how the company will achieve this, and what other violations in stake holder interest there are likely to be.
3.7 Local Communities
This is the first category that is more reactive than incidental in BA,s operations. The communities expect support, ethics and consideration when dealing with BA, even though they have no direct link with the company. The important measure here is British Airways impact on community policing (social responsibility) as an important measure of people’s readiness to support the company.
3.8 Government Policy and Legislation
This encompasses local and international regulations that affect BA’s operations. For instance, bi or multi-lateral agreements between nations or trade blocks may limit the routes operated by BA’s fleet, thereby affecting revenue and growth.
Environmental issues have in the past contributed to business loss for BA especially in areas of volcanic activity, heavy mist/fog presence among other extreme occurrences. This factor is the only non- man originated influence on its operations. In addition, the airline’s operations may also contribute to climate damage through emissions and pollution. International regulations have stringent requirements for new airline products in accordance to pollution control.
4.0 British Airways Stakeholder Map
This map is based on the interactive approach, an approach that BA assumes in which the company continually tries to engage the various stake holders in open talks geared towards their involvement in policy formulation and implementation. The famous strike in 2010, for instance, as the last resort of a lengthy deliberation between the company and its workers.
4.1 British Airways Stakeholders Map According to Current Orientation versus Criticality to Success
||Criticality to success
||Degree of influence
The table above shows the relationship between the various stake holders. The stake holders with a high rating in the column criticality to success are those which, if their support is withdrawn, there is a great possibility that the company’s performance or profitability will greatly decline. In this categorization, competitors are rated highly, as are customers, employees and financers. Competitors may put the company out of business, in extreme cases like was witnessed prior to the 2010 employee strike when Budget company presented significant competition. Similarly, most companies rely on financing for capital acquisition, and therefore financers are an important stake holder for business success. Customers are probably the most important because they provide the profits. Employees steer the daily operations of the company in order to realize profit. Governments, shareholders and suppliers have moderate influence on a firm’s success, while community has low rating in criticality of success.
The next category is the current state of relations between the stated stake holder and the company. Those stake holders rated supportive are in favorable relationship with the company. They include community, government, suppliers and financers. The environment, customers and share holders have neutral orientation, while a percentage of employees, as well as the competition, is resistant to its strategic formulation. The last column is with reference to the degree of influence a stake holder has in the company. The employees and shareholders have a high influence on the company. In addition, the competitors indirectly affect the company’s decision. Financers, suppliers, government and the environment have medium influence on a company’s operations, while the general community has low influence.
4.2 British Airways Ethical Concerns with Stakeholders
Having more than 40 years of experience, the company has had to solve various ethical issues with stake holders. This section discusses a few of the major incidences.
4.2.1 The Heathrow Terminal 5 problem: Customer Aspect
This problem was in relation to customers. The Heathrow Terminal 5 is a £4 billion project completed in 2008 in London as one of 3 International Airline Group global hubs, and was intended to boost customer volumes with support of up to 35 million passengers a year. It is also equipped with ultra modern facilities for improved customer experience (Bokaie 2008).
Upon opening in March, 2008, the Terminal experienced major service failure with more than 30 flight cancellations, luggage losses, and confusion in operations, stranded customers and bad public perception.
BA engaged in an extensive campaign dubbed ‘Heathrow Terminal 5 is working’ in order to restore customer confidence in the airline. To this end BA launched a website where customers could share their experience in Terminal 5, elaborate pictures and videos of satisfied travelers in T5 were showed, traveler experience surveys were documented with positive rating of T5 and operational road maps of T5 were provided to aid in faster clearance. The combined effect of these strategies restored customer confidence and BA’s positive image.
4.3 The 2008-2009 Global Financial Crisis and Oil Prices: A Suppliers and Environment Problem
In 2009, British airways made a pre-tax loss of £ 401 million (British Airways 2009). The CEO stated, in the report, that the loss was majorly attributed to global increase in fuel prices as well as the receding global economy. Fuel supply is a factor outside the airline’s control, just as is fluctuations in the global economy.
The British Airways finalized a merger with Spanish company, Iberia in 2010 which consolidated their resources and strengthened their stand against the effects of the global crisis. In addition, the group acquired financing from banks and other institutions amounting to £4 billion payable in long term (British Airways 2009). This factor also emphasizes the need for proper relationship with financers as stake holders.
4.4 British Airways Workers Strike in March, 2010: An Employee Problem
In March, 2010, more than 12,000 members of Unite, the largest trade union in UK went on strike over proposed cuts of $90 million in budget expenses in British Airways which would result in job loss, as well as poor working conditions and bad management. During the double strikes launched in March and April, 2010, about 1950 flights were cancelled and thousands of customers stranded, leading to revenue losses for the group (British Airways 2009).
The airline’s first response was a press statement in which the senior management expressed its regrets over the uncontainable strike, saying that fuel costs, reduced customer volumes and sharp competition was forcing the airline to opt for budget cuts. The company also ensured customers of 60% flight operations aided by non-striking workers as well as from chartered airlines, which would reduce the effects of the striking workers.