Is this really the story of near-monopoly power enabling a company to mistreat its customers with bad service? From last week's headlines, one might expect BAA's service levels to be among the worst in the UK. But if we leave the world of newspaper headlines and actually look at the market research, a surprising picture emerges.
Each year BAA surveys around 70,000 passengers, using an attitude scale to measure their satisfaction regarding waiting times and departure lounges. The results, published quarterly, are not as damning as one might expect. On a five-point scale, where five is 'excellent' and one is 'extremely poor', BAA's passengers rate their experiences around four (good) for most things. The lowest score for a single item in the past five years was 3.2 - signalling an 'average' performance. The evidence is overwhelming - BAA is not that bad. If you surveyed all your customers on a five-point scale, how many of you would achieve a four average?
So what is at the heart of BAA's troubles? First, BAA has significantly underestimated the importance of reputation management over the past 12 months. Baggage strikes and terrorist threats have combined to create a number of negative consumer experiences and critical media coverage.
A half-decent reputation strategy could have alleviated the damage done. Unfortunately, BAA chief executive Stephen Nelson appears to have missed CEO school on the day they taught media relations. According to Nelson, 'The problems of congestion and delay which affect passengers have their roots in lack of terminal and runway capacity, not the ownership structure of BAA.' To summarise: it's not us, piss off, everything will be alright when Terminal 5 opens. A more conciliatory stance could have alleviated most, if not all, of the ill will now aimed at BAA.
Second, BAA is guilty of enjoying what marketing guru Fred Reichheld calls 'bad profits'. With margins of 42% on revenues of more than £1bn for the first half of 2007 alone, no one could doubt BAA's current profitability. But how dearly does Nelson wish that when he took the helm 12 months ago he had diverted 20% of these profits into a re-investment in more service personnel, training, facilities and a decent PR agency?
Instead they were greedy and took short-term profits over a longer-term marketing strategy that would have provided a more sustainable future.
Nelson is now pushing the Civil Aviation Authority to double the levy that passengers pay to fly from Heathrow at a time when his company and his airports are being portrayed as the enemies of fair trade and customer focus, underlining his marketing ineptitude. While it may seem impossible to conceive, BAA and Nelson's reputation are about to get even worse, and most of the damage is self-inflicted.
Of course, it's much too late for any face-saving. Like an upgrade on a flight that has already touched down, there is very little value left now in pointing out where BAA went wrong. The media has its latest villainous corporation, most commuters have someone to blame for the long lines at check-in, airlines have a scapegoat for delayed departures, and marketers have a new addition to the big bad book of marketing mistakes.
To be more blunt, it's better to make £1bn a year for 30 years than to make £1.2bn for the next two and then face a regulation-enforced divestment.
The damage is irretrievable.
30 SECONDS ON ... BAA
- The British Airports Authority was founded in 1966 under the Airport Authority Act to take responsibility for four state-owned airports: Heathrow, Stansted, Gatwick and Prestwick.
- In 1986, under The Airports Act, the authority was dissolved and its assets passed to a new company, BAA.
- BAA owns and operates seven British airports: Aberdeen, Edinburgh, Glasgow, Gatwick, Heathrow, Stansted and Southampton.
- It also operates six airports in Australia, as well as Indianapolis International Airport in the US and Naples International Airport in Italy, and has a 75% stake in Budapest Ferihegy International Airport.
- About 1700 aircraft take off every day from BAA's airports, travelling to more than 700 destinations.
- In July last year, BAA was taken over by a consortium led by Spanish building group Grupo Ferrovial in a deal that valued the company at £10.3bn.