British Airways can safely be considered an industry veteran in the Middle East. Over the past 74 years, it has flown millions of passengers between the UK and various Middle East countries. However, instead of resting on its laurels, the airline has announced a major restructuring programme, aimed at strengthening its position throughout the region.
‘Newby’ Paul Starrs, the nickname given to expatriates recently settled in Dubai, has been tasked with leading the new organisational structure for British Airways in the Middle East
After joining the airline in 1999 as trade account manager, Starrs quickly climbed the corporate ladder, holding a number of management roles overlooking the marine, humanitarian and student markets. Only seven years later, and he’s British Airway’s commercial manager for the Middle East and Pakistan – fast career progression by anyone’s standards.
Of course, Starrs faces a number of challenges in his new position. British Airways recently reported a downturn in travel trade operations, after the sector dropped from a 9% commission to 0% commission. “This meant the travel trade had to justify whatever value it added to customers,” he explains.
The situation resulted in a higher level of specialism in the industry, with different types of agents focusing on different markets, such as corporate consumers. By targeting such special customers, the travel management companies could find ways to increase their revenues. “The corporate customers wanted 24-hour service and needed a travel agent who could mandate their staff to travel on specific carriers. By providing these added value services, agents increasingly found they could charge a premium,” says Starrs, who expects these trends to continue throughout the region.
The trend of consumer online booking is another example of how agent’s have analysed the needs of specific consumer markets and created specialised solutions. The creation of impartial websites offering a “one stop shop” for customers to compare the airline prices of various carriers has proved a massive success. “As the income for airlines decrease, the industry needs to explore different methods of increasing revenue,” explains Starrs. “The increasing demand for online bookings has highlighted the ability of agents to specialise and create added value.”
As part of British Airway’s restructuring, a number of sales executives were appointed in the region, covering everything from corporate sales and direct sales to trade sales and consumer sales. The team is housed in the company’s offices on Dubai’s Sheikh Zayed Road.
On a functional level, Starrs believes the restructure has brought a variety of advantages to British Airways, including a faster speed to market. “As competition increases, companies must improve their speed-to-market. This is important for British Airways and we’re being responsive to market changes, especially with a more focused team on board. We can focus on key consumer groups and develop sales teams for specific markets, instead of general ones.”
Despite immense competition in the region from heavyweights such as Emirates and Etihad, Starrs is focused on developing a stronger relationship with the Arab community to encourage them to “love the BA product”. He has employed someone to focus exclusively on developing business that comes through the Arabic speaking population, such as governments, ministries, hospitals and universities.
Another key segment is the leisure market. Observing the huge growth in traffic to the region attracted by the year-round sunshine, Starrs wants to exploit the strong aspirations that Dubai, Muscat and Abu Dhabi have in growing their leisure propositions. “We want to help these regions, where possible, to bring in as many people as we can,” he says.
However, instead of placing the spotlight exclusively on the Middle East, Starrs is also responsible for Pakistan – an important country for British Airways, especially considering the large Pakistani community in the United Kingdom and the increasing number of British companies doing business in Pakistan. “We are investing big time in the emerging markets,” says Starrs.
Whilst the market for Pakistan appears fairly small, British Airways is predicting that demand for premium services on this route will substantially grow in the future. As a result, the airline has invested in more premium seats and upgraded from Boeing 777s to the bigger 747 aircraft. It is also expected to upgrade its club world service, although Starrs is reluctant to divulge any details, only stating that approximately US$190 million will be invested into the new business class product.
“I really want to develop a personal relationship with these customers and understand the market trends,” says Starrs. “We want to specialise in our work with corporates, particularly those with an ability to mandate travel to preferred carriers, tailoring agreements for them. That’s why we have specialist teams managing these customers.”
Starrs is keen to understand the smaller corporate market too and in the next couple of years he wants to create products for this segment. “This is seen as having a big market, particularly for some smaller firms that don’t necessarily have robust travel policies and keep their travel management inhouse,” he says.
Corporate customers, and the consumer market too, can benefit from a number of unique selling points, according to Starrs. “Our hard product on the plane is a really big differentiator for us and we have a strong network through London particularly on the North America routes and also into Europe. That’s something that stands us in good stead and allows us to compete with the other emerging European and Middle East carriers. We do extremely well in this market currently.”
To increase passenger volumes, Starrs is looking at a number of options, including the supplementary sale of ancillaries, such as travel insurance, hotels and car hire, which has already proved successful to various airlines, especially in the budget market. “As competition and capacity increase, there is a downward trend in yield, so we want to maintain strong profit growth,” he says. “We need to derive income from other sources which is why we are investing heavily in the ancillary market.”
The airline is heading in the right direction with its online shopping basket functionality, which allows customers to log onto the website and buy flights, hotels, car hire and insurance from one destination.
The investment in technology will continue at full pace, explains Starrs, starting with a new WWDS (worldwide dealing solution), which holds all corporate data and helps British Airways to understand, in great detail, each of its corporate customers’ flight requirements, such as where they’re flying to, how often and in which class they prefer to travel. The system also houses essential corporate sales information, such as how much revenue is derived through each BA employee’s corporate customers portfolio.
“It tells me how much corporates are spending, how much of my corporate revenue is derived from the oil and gas market, how much is derived from the Arabic government ministries, how much from finance and banking and so on,” he says. “It’s about identifying trends and understanding our business by breaking it down into different components, such as the Arab community, oil and gas sector, or something similar. WWDS helps us craft deals and meet each customer’s requirements better.”
Revenue analysis simplification (RAS) is another useful tool, allowing Starrs and his team to interrogate the travel agency information in the same way. These selling tools fit perfectly with BA’s functional approach – providing them with a tool for the corporate and trade channels, as well as ways of measuring them. Through this approach, Starrs believes it becomes very easy to get the information from Dubai for the whole of the Middle East because “we have all the numbers at our fingertips.”
However, one of the biggest challenges British Airways faces is the increase in fuel costs – with an estimated fuel bill of $4.1 billion this year. As Starrs himself admits, the carrier has no control over this and has to look elsewhere to reduce their costs.
There is also increased competition in Middle East and European carriers in premium class and non-premium cabins. “We recognise the competition is upping its game. We’re stepping up our core product too. In World Traveller class we’re investing in inflight entertainment with audiovisuals for example. The A380 poses another challenge.”
Although British Airways has a relatively young fleet of aircraft, Starrs will eventually start thinking about future fleet decisions, because the lead times are so long.
With no plans currently for aircraft orders, the airline is focusing largely on solving some of its cost issues. “This will enable us to make fleet decisions and we’re hopeful that we can do this by the end of the year,” he says.
The ultimate goal for Starrs is to achieve a sustainable 10% operating margin. “Being able to achieve this means we can continue to get all the investment we require, keep our costs controlled and continue to be a viable business in the future by investing in new products, new planes and pay our staff,” he says.