IT has come to take a central strategic role at British Airways as the carrier continues to borrow from the simplicity of the low-cost model
A year ago BA unveiled a brave new strategy designed to cut through the layers of complexity built up in its business. At its heart was a pledge to learn from the ferocious low-cost competition and create a simpler fares structure capable of winning the online sales battle for BA's beleaguered short-haul business.
In the early days the project was known simply as the "the big idea", says chief information officer Paul Coby. But as he also points out, it is one thing to talk about simplification and quite another to put it into practice. Yet one year after BA unveiled its famous Future Size and Shape strategy, the carrier appears to be delivering on its promise, and IT has played an integral part.
"I would be extremely foolish to claim that was an IT achievement. It was an airline achievement," says Coby, but that itself speaks volumes about how closely IT has become integrated into the board's overall strategy. Indeed, back in September 2001, Coby himself was invited to sit on the leadership team.
The core of the IT achievement has been to deliver what Coby enthuses is "some really good technology" for online calendar selling, using its new Fare Explorer booking engine. A customer on the BA website can now choose a departure date with accompanying fare from a two-week spread and then a return flight, again with a choice of prices. It is the sort of transparency that low-cost carriers have lived by, but which BA had not dreamed of. "It's a fancy bit of technology and no one else has got it, but it wouldn't be any use if we didn't get the fares right," adds Coby.
Fares restructure
The starting point was a legacy fares structure with such ingrained complexity that it was understood by precious few within the company, let alone among customers. Coby is only half joking when he says that BA had thousands of staff whose sole job it was "to translate the complexity of the airline" for the customer. The central question, he says, was to ask: "How could we enable our customers to serve themselves? It's about forcing yourself to simplify."
A project team, under the name Evesham, was set up to implement a transparent fares structure. And only 10 weeks after the February 2002 strategy announcement these new fares - minus the hated Saturday night stay requirement - were rolled out for domestic UK routes on the new web booking system. By June, the experiment was feeding through to the European network.
BA's prime objective was to fight back on the short-haul point-to-point routes that had been haemorrhaging money under intense competition from low-cost rivals. The target, says Coby, was to get half of the bookings on these routes online by the end of the carrier's financial year in March. That goal had already been reached by the end of last year with BA today notching up more than 150,000 online bookings a week. "In the New Year we were setting records every day and I think that it is just the beginning," says Coby, a man clearly brimming with enthusiasm for the potential that the "big idea" has unleashed.
The impact of the Evesham fares on BA's operating statistics is less clear, although Coby notes some encouraging signs in the second half of last year that suggest that the airline is starting to hold its own in the intra-European market. Certainly BA looks a more credible challenger than it did a year ago.
"The challenge that I give to my guys is to think about how much an easyJet spends on IT per passenger and see how we could get there, while adding back those things that distinguish us such as loyalty programmes, lounges and flexibility," he says. "The starting point couldn't be 'where we are today' because that was too complex and expensive."
And the same systems that have freed the customer are also being put to use to free BA's own staff. One of Coby's new "ground rules" is that technology that is good enough for customers should also be good enough for the airline to use in-house. Why, he asks, should call centres still be using "ancient" scripting technology when BA has "the world's best online booking tool"?
He explains that staff should be solving problems rather than spending time guiding mystified customers around a complex booking procedure. "It cuts to the grain of the airline because we're using technology to free the people to do what they are good at and to add value.
"The aim is to understand the value of our product but you can't do that when you're cursed with millions of fares and multiple channels," he says. He acknowledges, however, that BA has remained "acutely aware" of the need not to let yields collapse in the fervour to simplify revenue management.
Culling sacred cows
Nevertheless, much conventional wisdom once held dear at headquarters has been overturned along the way. "There are several sacred cows with their feet in the air around Waterside," he says. And Coby's own department has culled more than a few. One of them has been the BABS booking system, lovingly developed in-house for more than three decades. In February 2002 booking was moved out to Amadeus with departure control and inventory following.
Coby confesses that he hates the term outsourced. "It's an emotive word and it doesn't describe what we've actually done," he says, preferring instead to talk about sourcing "strategic suppliers". He adds that BA's IT skills were most needed, not in keeping BABS alive, but in developing Fare Explorer at the front end: "We used our skills to do the new stuff and let Amadeus run the steam engine at the back." The true role of the IT department, he argues, is to "make the best calls" for the business and "build the good stuff". His team, he says, can handle that strategic role better than any third party consultants.
In fact, BA has shed an astonishing number of outside IT contractors over the past five years. The airline regularly employed over 700 at any one time and the number was still above the 350 mark going into 11 September 2001. But four weeks after the crisis hit, their number had been slashed to just 30. The in-house numbers too have fallen, dropping from 3,400 four years ago to some 1,900 today, while IT costs as a percentage of group revenue have been trimmed by 15% over the last year and should be down another 10% in the year ahead.
Coby is passionate about the commitment of his team. "People are highly motivated to look after the airline," he says. "IT is as much a people department as customer services." And topping his list of New Year's resolutions for BA's IT department is the most simply stated of goals: "to make a difference".
Source: Airline Business
