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2. Make recommendations as to how BA can effectively manage the changes needed to globally enhance and sustain gender equity. (50 Marks)

Module Title: International Human Resource Management and Change

Module Code: MOD005489

British Airways Case Study: 2017

Introduction British Airways (BA) (2017) is one of the world`s leading scheduled international passenger airlines, operating one of the most extensive airline route networks. A BA Board was established by the United Kingdom government in 1972 to manage the two nationalised airline corporations, British Overseas Airways Corporation and British European Airways, and two smaller, regional airlines, Cambrian Airways, from Cardiff, and Northeast Airlines, from Newcastle upon Tyne. On 31 March 1974, all four companies were merged to form BA. After almost 13 years as a state company, BA was privatised in February 1987 as part of a wider privatisation plan by the Conservative government. The carrier soon expanded with the acquisition of British Caledonian in 1987, followed by DanAir in 1992 and British Midland International in 2012. In July 2008 BA announced a merger plan with Iberia, another flag carrier airline in the Oneworld alliance, wherein each airline would retain its original brand.

The agreement was confirmed in April 2010, and the European Commission and US Department of Transport permitted the merger and began to co-ordinate transatlantic routes with American Airlines. In October 2010 the alliance between BA, American Airlines and Iberia formally began operations. The alliance generates an estimated £230 million in annual cost-saving for BA, in addition to the £330 million saved by the merger with Iberia. This merger was finalised in January 2011, resulting in the International Airlines Group (IAG), the world`s third-largest airline in terms of annual revenue and the second-largest airline group in Europe.

Strategic Report (BA Annual Report, 2017) The Directors present their Strategic report for the year ended 31 December 2016. British Airways Plc (‘British Airways’, ‘BA’ or ‘the Group’) is the UK’s largest international scheduled airline and one of the world’s leading global premium airlines. The Group’s principal place of business is London with significant presence at Heathrow, Gatwick and London City airports. Part of International Airlines Group (IAG) and together with joint business agreements, codeshare and franchise partners, British Airways operates one of the most extensive international scheduled airline networks. British Airways is a founding member of the oneworld alliance, whose member airlines serve more than 1,000 destinations to over 150 countries.

Management Review Overview  Total revenue: £11,443 million, up 1.0% (2015: £11,333 million)  Operating profit before exceptional items: £1,473 million, up 16.5% (2015: £1,264 million)  Passengers: 44.5 million, up 2.8% (2015: 43.3 million) In 2016 the Group operated in a challenging external environment, this included: low fuel prices and interest rates promoting the growth in market capacity and competition; uncertainty following the UK vote to leave the European Union (EU); terrorist attacks in key destination markets; and operational disruption due to adverse weather and air traffic controller strikes. During the year management action sought to mitigate where possible the impact of these challenges and the Group also directly benefited from a low fuel price compared to the prior year. As a result, the Group delivered a record pre-exceptional operating profit of £1,473 million (2015: £1,264 million) for the year, a 16.5% increase on last year. Due to Sterling’s depreciation, the Group’s revenues generated in overseas currencies benefited, but overall the impact of exchange was negative on the result. During the year there has been significant change in the senior executive team, including the appointment of a new Chief Executive Officer and Chief Financial Officer. A new business plan, Plan4, has now been developed. The Company’s new vision is: to be the airline of choice with personalised service, exceptional reliability, a digital mind-set and unique British style.

Outlook BA has set a solid foundation for the future, generating a £1,473 million pre-exceptional operating profit in 2016 (2015: £1,264 million). The Group has built a robust plan for the future, Plan4, which will build on this success. Plan4 targets a sustainable return on capital of 15 per cent, with a lease adjusted operating margin in the range of 12-15 per cent. Plan 4 is built around four key strategic pillars:  Customer – to invest and innovate where customers value it most  Operations – to be safe, reliable and responsible  Efficiency – to improve capital efficiency and have competitive costs  People – to unleash our true potential To invest and innovate where customers value it most In Plan4 the customer is at the beginning of everything that British Airways is going to do. The Group will make significant investment across all cabins, over the next five years, in order to enhance the customer experience. The programme to install Wi-Fi across the fleet will continue in 2017, with 90 per cent of long-haul aircraft complete by 2019. The first release of new British Airways app was launched in December, giving customers much more control of their journey, enabling them to rebook flights during periods of disruption, giving them more choice and more control. Further releases will be made through 2017. In Club World, the ambition is to create an experience that exceeds that of key competitors. £400 million will be invested in Club World to transform food and drink offered to customers, delivering a step-change in service. Improve the ‘sleep offering’ on key overnight flights by changing service routines and provide new bedding and amenities. On the ground, the First Wing in Terminal 5 will open in 2017, allowing First and Gold Executive Club members faster direct access to the lounges after check-in. The Group will also invest significantly in lounges at London Heathrow, Gatwick, New York JFK and Boston. Club Europe will also be reintroduced on UK domestic flights in 2017.

Informal Management Report You will work independently on this document. Over the last two decades, BA has undertaken major changes to attain greater organisational effectiveness, dramatically reduce costs and meet their long-term objectives to achieve a competitive advantage. This has consequently led to BA experiencing challenges in many areas of their human resources management due to strategically remodelling their recruitment, selection and HR planning, remuneration packages and pensions; leading to unrest, demotivation and lower lowers of customer satisfaction and employee engagement. During these periods of unease it appears that BA have not given enough consideration to the progress of workplace gender equality. A spokesperson from British Airways (2018) confirmed that only 6% of their pilots are woman, an indication that the gender gap still remains problematic. The Equality Act, 2010 (Gender Pay Gap Information) Regulations, 2017 made it mandatory for the all companies, with 250 or more employees, to publish their gender pay gap. Employers, from April 2018 have to publish the gap in pay between men and women on both a median basis (pay per hour based on the person ‘in the middle’ of the distribution of pay) and a mean basis (average hourly salary).

In addition, employers are required to disclose the distribution of gender by pay quartile – i.e. splitting the workforce into four groups based on their pay, and showing the proportion of men and women in each group. Employers are also required to disclose percentages of staff receiving bonuses by gender and the gender gap on bonuses. Assessment tasks:

1. Identify and analyse the challenges organisations face in introducing and enforcing a change in approach to gender quality. (50 Marks)

2. Make recommendations as to how BA can effectively manage the changes needed to globally enhance and sustain gender equity. (50 Marks)


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