●BA formed a short-lived marketing partnership with United Airlines in 1987
which lasted until BA invested US$300 million in USAir in 1992. This was the
first of a three-part investment to give BA a 44 per cent share for US$750
million even though to comply with US regulation, BA is only able to have 21
per cent of voting rights. Although USAir was the fourth largest US carrier,
with a hub in Pittsburgh serving secondary airports, it has the highest unit costs
of the US carriers and was losing money.
●In 1988, BA acquired British Caledonian after a fierce takeover battle with SAS
for control of the British carrier. The BA Charter airline was renamed
‘Caledonian’ to preserve its heritage, but was divested at the end of 1994.
●BA’s attempt to acquire 20 per cent of Sabena World Airlines of Belgium in
1989 with KLM was blocked by the European Commission.
Sustaining improved customer service
After privatization, the company-wide training events continued with, for
example, the ‘To be the Best’ event. This was designed to increase aware-
ness of the highly competitive nature of the airline business, with interac-
tive workshops and presentations to identify the strengths and weaknesses
of BA.
This was followed by ‘Leading the Service Business’, a week-long top
management residential course covering strategic issues such as customer
service, technology, management style, competitive threats and the post-
privatization political and economic environment.
Putting People First had been a major initiative, but the benefits were
difficult to sustain. The second wave of company-wide training, planned to
involve all BA staff over a three-year period, was ‘Winning for Customers’
and ‘Managing Winners’. The key issue for the programme was customer
retention. Learning from the ‘Putting People First’ programme, these were
run simultaneously for staff and managers. The commitment of senior
management continued, with Marshall and other directors attending every
session.
A key goal for BA had always been to emulate the success of its
Scandinavian competitor, SAS, and win business travellers. In 1986 busi-
ness class accounted for 35 per cent of BA’s scheduled tickets. Marketing
Director, Michael Batt, who had a background at Mars, had learnt the value
of branding and assembled a team with FMCG experience. In the business
market he attempted to move the basis of competition away from the price
wars of the 1970s, saying, ‘it’s now a quality elastic rather than a price
elastic market’.
Developing the BA brand
In November 1987, Club World and Club Europe were launched as inter-
national brands, at a cost of £20 million. Key features of the brands were
increased leg room, reclining seats, better food and service. These changes
464 Relationship Marketing