British Airways - US Operations
British Airways (BA) Company's expansion model outside UK was not based on acquiring old or forming new airlines, rather it was based on strategic alliances. It is the flag carrier airline of UK, formed in 1974 and headquartered at Waterside. After strengthening its presence in the home market, the company aggressively expanded itself in Europe, North America and the Pacific Rim. It first ventured into the U.S. market in 1988 by entering into an alliance with United Airlines. However, this partnership didn't last for more than 2 years.
By late 1992, BA attempted to purchase a stake in USAir Inc. but was blocked by American, United and Delta Airlines, some of its chief competitors in the U.S. Finally, in 1993-94 the company successfully bought a 25% stake in USAir and also received an approval for a code-sharing agreement that enabled the partners to offer their customers a seamless operation when they used both airlines to reach their destination.
The US civil aviation industry has revived after a dip in the beginning of this century, mostly due to scheduled passenger flights. The main challenges being faced by the industry are high fuel prices, over capacity, problems with ATS's reliability and operating performance, competition from low-cost carriers and increasing consolidation by legacy carriers that can lead to cartelization in the industry. The aviation sector is in the middle of restructuring itself through some fundamental changes like alliances with regional and global players, liquidation of assets to reduce excess capacity, launching their own low-cost carriers etc.
Strategies adopted by British Airways:
BA has had its own share of troubles in addition to the above mentioned economic and market conditions. The company has been embroiled in labor strife and legal suits for anti-trust acts in the U.S. However, in the recent past it has made several efforts to cope with market trends and other difficulties. It is the founding member of 'oneworld', the 3rd largest airline alliance in the world with its headquarters at NYC, USA. The alliance has adopted common engineering and maintenance specifications that help in reducing costs through bulk buying and parts sharing. oneworld is also a pioneer in launching interline e-ticketing across all member airlines' networks.
In January 2008, British Airways launched 'OpenSkies', its new fully owned subsidiary, to take advantage of the open skies agreement between the US and the EU and also to reduce its dependence on the Heathrow Airport hub. More recently, in 2010, BA entered into a merger plan with the Spanish airline- Iberia. The two have since obtained US DoT's approval to co-ordinate with American Airlines on fares and scheduling of transatlantic routes. This agreement will give their customers access to an international network of over 400 destinations, more convenient connectivity and better scheduled travel times.
Despite faltering alliance agreements and huge annual losses, British Airways has been innovating and changing its business strategies. However, it remains to be seen if these measures will be enough to take the company out of the cauldron of dropping revenues and traffic.