Flying through disruption

For British Airways (BA) chairman and CEO Alex Cruz, fast-paced change has become the norm in what was already a competitive and constantly evolving industry. Since taking up his current role in 2016, he has experienced uncertainty caused by the UK’s decision to leave the European Union, faced changing customer expectations driven by new technology and dealt with increased competition from low-cost operators.

The carrier could easily have steered off course, but the confidence shown by its owner, International Airlines Group (IAG), suggests that BA can navigate any adverse conditions. For 2019, the airline will have £6.5 billion – nearly £2 billion more than originally announced in 2017 – to invest in new technology, aircraft, airport lounges and staff training. It also plans to hire 3,000 more people as part of its five-year investment strategy (2018 to 2022) to become the “airline of choice for everyone”. It’s a bold move for a carrier that, like all British businesses, has no idea how Brexit will affect the UK economy.

“From a financial perspective, we’re healthy,” Cruz says. “We have nearly £2 billion more than last year to spend on our customers, so that means investing in aircraft, airport lounges, training tools for our staff and in creating a working environment where we deliver the best possible service. We’re in a unique position, because next year will be full of confusion, questions, anxiety and doubt over the identity of our country. And yet we’re going to hire 3,000 people in that time.”

Leadership challenges

Cruz is used to disruption, having been an aviation industry leader for several years. After working with American Airlines, Sabre and Accenture, he founded Spanish low-cost airline Clickair in 2006 and, as CEO, steered it to success, culminating in its 2009 merger with Vueling. Cruz was then appointed chief executive and chairman of Vueling, turning it into one of Europe’s most profitable carriers. He joined BA in 2016, replacing Keith Williams as chairman and CEO.

Technology is the latest challenge for Cruz, with smartphones and tablets changing the relationship between carriers and customers. Using social media, customers can ask more questions and make complaints more easily – and they expect much quicker responses. Cruz believes companies in other industries face the same challenge: “We’re now operating in a completely different world to the one I grew up in. Consumers want to know the status of things, get quick solutions and receive some form of generosity.”

As Nader Tavassoli, Professor of Marketing at London Business School, points out when discussing customer expectations, passengers no longer choose one carrier over another for reasons of efficiency: “An airline might consider its perceived on-time arrival performance or leg room to decide whether a price premium is justified should they perform better than the competition (a point-of-difference), or a discount if they lag; i.e., a point-of inferiority. But, based on competitive benchmarking and diminishing returns, customers subjectively perceive most of these dimensions as points-of-parity. They award little credit to a safer airline because they wouldn’t consider flying with an unsafe airline in the first place. It’s important to the customer, but not in their choice of brand.”