This case covers Bob Ayling’s efforts to cut costs at British Airways even as the airline was reporting record profits. Having secured equivalent savings elsewhere in the airline, British Airways management encountered difficulties getting its cabin crew to cut its costs by £42 million per year. The case considers the steadily deteriorating relationship between BA’s top management and its cabin crew union – and highlights the self-fulfilling and self-reinforcing nature of the dysfunctional dynamic that develops between the three key parties. We concentrate on the cognitive, motivational and behavioral mechanisms that drive the parties toward an avoidable stalemate.
The airline ultimately got its way, but at the expense of a three-day strike estimated to have cost £125 million. In the process, it also inflicted huge damage on employee morale and corporate reputation. The strike proved to be a turning point in BA’s fortunes, sending the once soaring share price into a long decline – as measured against its direct competitors. Although Ayling’s radical cost-cutting strategy was in many ways farsighted, it was implemented in a way that alienated staff and angered the unions – moves that ultimately sent the company crashing out of the FTSE100.
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