Flying Into a Storm - The Bob Ayling Era at British Airways

After a sweeping and sustained transformation effort spanning 15 years, British Airways had firmly established itself in 1996 as a leading airline. From a loss-making state-owned carrier to the world’s most profitable airline, British Airways was widely recognized as a world-class customer-focused organization when Bob Ayling took over as CEO. Ayling faced a difficult choice: ride out the good times or forge ahead with new initiatives to ensure the airline’s continued competitiveness. He firmly chose the latter and after four years was pushed out by the board. Professor Jean-François Manzoni and Jean-Louis Barsoux review Ayling’s four-year odyssey, highlighting his leadership style and the business strategy that seems to have worked for the airline but not for him.

by Jean-François Manzoni, Jean-Louis Barsoux
Last Updated: 23 Jul 2013

In 1980, the news could not have been much worse for British Airways (BA). It had been voted the number one airline to avoid at all costs, ahead of Aeroflot and Nigeria Airways. And it had the dubious distinction of being the most unpunctual airline in Europe out of its own home base. Even Margaret Thatcher got in on the act, launching an appeal in 1980 to privatize the airline. Led by Sir John King, and later Sir Colin Marshall, BA experienced a complete turnaround between 1981 and 1996, transforming itself from a loss-making state-owned carrier to a world-class customer-focused organization. By 1996, the chief architect of the turnaround passed the baton to his heir apparent, Bob Ayling. It was a hard act to follow for Ayling who faced the daunting challenge of managing an airline that was seemingly at the top of its game. Should he ride out the good times or risk rocking the boat with new initiatives?

In this case study, Jean-François Manzoni, INSEAD Associate Professor of Management, and Jean-Louis Barsoux, INSEAD Senior Research Fellow, follow Ayling’s trajectory, reviewing the choices he made, the consequences he faced, and his response to outside forces bearing down on both BA and the airline industry. In the end we have a clear understanding of Ayling’s personal style, his successes and missteps, and the events that eventually lead to his resignation in 2000.

The case begins early in Ayling’s tenure, when, in looking ahead, he recognizes that industry competition is set to intensify. Convincing internal stakeholders of the need to do even better will be difficult given their recent efforts and accomplishments, but he moves ahead anyway with an aggressive four point strategic plan aiming to: sustain BA as “the world’s favorite airline”, improve customer service, extend BA’s network through alliances and be the best-managed company in the UK. One of his first acts is to launch a cost reduction plan with target savings of £1 billion. Simultaneously, he negotiates industry-changing alliances, establishing himself as a visionary.

But the following year BA runs into significant trouble, including a consumer backlash and increasing internal unrest, which eventually leads to a cabin-crew strike. In a surprising move, Ayling goes against his image as a reasonable, down-to-earth leader and bears down hard on employees. The resulting fission within the company is so deep, Ayling must invest in an internal marketing campaign, informally referred to as “hearts and minds” to try to restore staff morale.

With internal relations on the mend, Ayling soon faces unforeseen external pressures. Travel agents are angry about their commission cuts, the Asian crisis hits, and regulators demand strong measures to approve the planned alliance agreements. An ill-advised £60 million corporate image revamp in 1997, involving adorning the fleet’s tailfins with ethnic art (a nod to the 60% of customers who live outside the UK) leads to internal and external furore, marking the start of Ayling’s slow decline in the eyes of BA shareholders and employees. The report of a loss in third quarter 1998 serves as another nail in Ayling’s coffin.

The case offers a starting point for a debate on the leadership style of Ayling: Was he a visionary, or did he over-manage a healthy company? Why did BA’s staff ultimately refuse to follow him? Was he simply unlucky, or did he make some fundamental mistakes?

The case presents fertile ground for discussion on change management and the challenges faced by the new person in charge when the previous one enjoyed a position of strength, both internally and externally. More specifically, the case can be used to spotlight the issues of succession, leadership and change management in the absence of visible crisis, in MBA as well as in executive development programmes.


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