On the 50 year resort lease proposal I wish to make a comment.

Honorable Members of the Parliament and dear country men,
If you are keen in extending the resort lease from a maximum period of 35 years as it now stands to a maximum of 50 years, allow it only for 100% locally owned and managed and operated resorts as at the day of the bill fullstop

The Maldives has grown and so have its citizens with aspirations of their own. But will the citizens achieve all that they deserve from the available resources. Without the necessary diversity in the country’s economic portfolio, the Maldives knows none other than the tourism as a sizable industry. In tourism, scholars postulate that systems have failed generally in all aspects. Isn’t it time that the Maldives did something about it? An emphasis on optimal and sustainable outcomes for tourism and the community, and setting acceptable ranges within which tourism occurs, may be a good point to start with, don't you think? 

TOMM process which focuses on an integrated approach to tourism management and alleviates concern regarding limitation of tourism growth, by: avoiding use of the terms “impact” and “limits” which the tourism industry interpret as discouraging growth and thus business; focusing on the entire tourism system rather than just its ecological and market components; providing for the involvement of all stakeholders, through a partnership approach and grounding the systems within community processes; and serving a multitude of stakeholders, operating at a regional level over a range of protected area and private land tenures (Twyford et al, 2001).

Help yourself at http://www.tomm.info/

Provided herein is a polarised arguement that I prepared for a debate organised amongst MA Tourism 2006/7 students. Thanks to Shahuru and Saud who bombarded me with great thoughts and hypothesis.

I couldn’t resist adding my perspective to the article I came across on Daily Mail, UK.

Tourism, more specifically in the developing countries, is justified over economic prosperity that it brings. It is therefore vital to know the extent that such economic prosperity spreads.

A bed tax of $ 10 per guest per night is levied all accommodation establishments, resorts, hotels and safari boats. In 2004 the tourism bed tax generated $ 33.8 million. Income from lease rents of resort islands amounted to $ 48.2 million. A departure tax is also levied on travellers departing from Male International Airport, i.e. both tourists and travelling residents/citizens and revenue from the 616,716 tourist arrivals in 2004, of which 101,161 arrived during November and December, was calculated at $ 6.4 million. These add up to $88.4M in government revenue, corresponding to 34.5% of the total Government revenue (Ministry of Planning and National Development).  In the more recent times, particularly with the release of more islands for tourism development, these numbers must have risen.

Gaps in regulations, allow easy transfer of ownership and management in manners that impact the country’s multiplier. A major implication is the growth in the number of foreign companies owning and operating resort islands. Foreign owned businesses in the Maldives have historically employed expatriates in relative majority, import their supplies direct, and repatriate profits. Hence, foreign owned resorts provide significantly low economic benefits to the host community and/or local citizens. This is while social impacts of tourism are increasingly becoming negative to local employees with knock-on effects to their immediate family.

Therefore, contrary to the presumptions that Sir Philip contributed to the Maldives economy, as suggested by some readers, if anything, I feel that the event caused unworldment (loss of identity and placelessness). It is more about Sir Philip Green’s self focus (ego) and Four Seasons doing anything for reward.

Opposition parity (see www.dhivehiobserver.com ) rushed to criticize the ruling party over this event that cuts across the local culture. Just as in their previous attempts to have the Maldives boycotted from tourism, they are exploiting the occurrence for political gains. Using tourism for political gains, as is the case here isn’t good, or is it?

back in 2004, I conducted an analysis over future challenges faced by tourism developers on three key areas of planning, environment and sustainability, and human resources, from the root causes against relevant literature that are believed to be driving essential national objectives.

Of course I know that things have moved-on since then, and that presently there is a new format of CCT in place. I also know that the same company that developed the Second Tourism Master plan is now working with the Ministry for the Third Tourism Master Plan. Yet for those who are interested in learning from past mistakes, this paper has the potential to provide some different perspectives and flavour. Please do not use this article for political play as I prohibit it. No part of this article should be published or distributed without my written consent.

While an abstract is provided as below, the complete paper is now available for download from the downloads section.

Abstract
In 1995 the direction of the present Second Tourism Master Plan 1996-2005 (STMP) was set. The areas outlined in the STMP, no doubt, require attention but scholars and entrepreneurs alike argue that such will only prove beneficial when root matters such as CCT and related guidelines provided a conducive environment for entrepreneurs to present futuristic proposals let alone worrying about the increased entrepreneurial risks arising from cloning the single concept of sun, sea and sand knitted around an European value system, a rising bed rent to the government as a result of competition toward winning development projects,  and its ever reducing social benefits to the host community.

Dichotomies that stem from the compulsory competitive tentering (CCT) guidelines are its merit point system that carries half the total score towards the proposed rent per bed per year fixed for a ten year period; and its call for a specific and poor format of business plan, with a disjointed aspect of proforma financial statements.

Planning and development in the 21st century emphasize governments's role in re-regulating so as to increase benefits and decrease costs. Such policies do not bare fruit without integrating political, social and economics in such a way that it creates sustainable competitive advantage.

When CCT guidelines are laid partial and titled, entrepreneurial instincts tend to take advantage of favouritism instead of venturing productive projects.

Additionally, exercising the right to develop tourism projects, pursue economic reward, and venture into social and economic endeavours can be hampered by a state of mind created by the existence of 'easy ways to get around'. Once individuals are convinced that there are loose ends it becomes irrational, for the smart one, to take the hard approach! Structured thinking and considered views cannot be graded except on the top priorities as a pre-requisite for enabling policies.

1st March 2007

Tourism Concern,
Stapleton House : 277-281 Holloway Road : London N7 8HN
info@tourismconcern.org.uk
http://www.tourismconcern.org.uk/

Dear Sir/Madam,
 
I happen to visit your site and see a campaign targeted at the Maldives. As a Maldivian student reading for MA in Tourism Business Administration at Birmingham College of Food and Tourism, I am honestly saddened by the superficial ideas presented on your website.

Of course the Maldives is a poor country and its citizens are also poor. But how poor? A per capita of $ 2500 is unlikely to be regarded as living in poverty. People live an ordinary life and it takes time and effort to get to where we ideally like to reach. Of course one would desire living a better life and there is more that could be done differently for better results.

If UN found health issues related to poor diets, it is rather likely to be a cultural issue than anything else. Vegetables are available in ample supplies and attitudes toward fruits and vegetables among newer generation are relatively better.

Freedom of thought and expressions do exist but we, as citizens, are only learning to act responsibly. Matured and considered thoughts, views and expressions will take the time it takes to mature before any good can be captured.

Thanks to fisheries and tourism industry that has allowed ways and means to build the country’s economy and as well to pave a road for education and knowledge. Noteworthy is that the first batch of Maldivian students to attempt O’ level and Ph.D are still alive and live a healthy life, suggesting how young the country is; relate this to any country of your choosing.

Of course the Maldives could do better; improve the quality of life through tourism, and increase benefits and reduce costs from tourism. Again, this requires knowledge across the board from policy makers and entrepreneurs to managers and employees in an industry. Harnessing knowledge and improving systems require support and assistance from everyone. TourismConcern, if interested, must positively contribute to real issues and processes, with clear goal and intention of doing good.

Abdulla Yasir

According to Prof. Brian Wheeler common sense will tell sustainability is a waste of time and that it only feeds one's ego to say that one acts sustainably.

Below are some of the views presented, the fact that we see what we only want to see.

"We look at things the way we see it and the way we see is influenced by the level of education of the person and his background and culture." - Brian Wheeler -

"The eye see what the heart cries." - Brian Wheeler -

"Where you stand changes how you feel and what you see from a picture." - Brian Wheeler -

"I have opinions of my own. Strong opinions. But I don't always agree with them." - George W. Bush -

"If you begin to think you're lost" - D. Fergusin (Footballer), Times 19/11/95

Very true, aren't they? It is also true that we are in a society where people do not like questions without answers. People just don't like questions or do they?

After much research in the sphere of sustainabilty and tourism, Wheeler's (2007) most recent views are:

"Don't believe anything (positive) that you are told about eco/sustainable tourism, but believe that you are not told everything" - Brian Wheeler -

"Tourism broadens a broad mind but narrows a narrow mind." - Brian Wheeler -

"We ignore our environment becasue it suits us"- Brian Wheeler -

He surfaced many critical questions over eco-ego/sustainable tourism and also questioned how one could build sustainable tourism without sustainable transport.

I too bare very similar views and agree with him in full. A question that has long remained unanswered is over our idea of claiming to have established a sustainable tourism in the Maldives. Are we hoping to prove to the world that we are smarter by doing what other country could do? Will anybody buy the idea anymore? Will we be perceived as we project  to appear or are we being foolish? Are we being ignorant over the very concept?

Apparently over the next few years politics will let go off the idea of sustainabilty in exchange of climate. ie climatology will take over. Is the Maldives ready to embrace a new format? When we seem to have failed in our approach to include social impacts as an important part of evironmental impacts model, are we looking at increasing the negative impacts?

Ohhh by the way, what is 'presidents green award' about? does it serve any purpose or to that effect, is it meaningful?

I recently had the wonderful opportunity to listen to Pam Roberts-Powis - Chairman of The Accreditation Board of The Institute of Tourist Guiding (ITG), registered tourist guide trainer and examiner. She was the chosen guest speaker for the day and focused on 'The changing role of the professional tourist guide'.

Apparently, apart from seminal papers by Holloway (1981) and Cohen (1985) little has been written on the role of the tourist guide in tourism literature. Cohen (1985 p9) stated "A review of existing, rather meagre, literature reveals two principal conceptualisations of the role of the tourist guide: as a 'leader' and as a 'mediator'."

However, Pond (1993) believes 'tour guides, long the orphans of the industry, are now entering the spotlight' and McDonnell (2001, p2) in a recent paper on 'The role of the tour guides in transferring cultural understanding' stated:

"...tourist guides are the 'spin - doctors' of tourism as it is through their interpretation of the facts that tourists form impressions and understandings of the host culture."

Two very interesting books that concentrate on this topic are Interpreting Our Heritage (Chapel Hill Books) and Interpretation for the 21st Century: Fifteen Guiding Principles for Interpreting Nature and Culture, (Second Edition).

Modernity is strctured, organised, rational state of society. Postmodernity is the end of modernity. Emphasis on choice, plurality of ideas, image, eclecticism, reality gives way to representation, and ephemeral.

What then are the driving forces of postmodernism and tourism? Are they technology-GDS, e-business; media saturation/pop-colonisation; symbolic consumption, phantasms; slow movement; irrationality/unpredictability; deregulation; experiences; or experience economy?

What are postmodern landscapes, consumers, motivations and products?

Earlier literature on what tourism is or when exactly a person becomes a tourist were considerably narrow. Should a person leave his country, stay overnight, or travel to 30 miles to be a tourist anymore? I guess not.

Today's definition of tourism reflects many changes that have occured in the recent times and is reasonably broad and reads as follows:

Tourism comprises the activities of persons travelling to and staying in places outside their usual environment for not more than one consecutive year for leisure, business and other purposes not related to the exercise of an activity remunerated from within the place visited (www.world-tourism.org).

Under the assistance of foreign specialists, the government has carefully calculated its tourism earnings [bed tax and lease rent] back in 2004 and found that the $ 250M or so per annum is insufficient. Subsequently a significant number of islands have been newly contracted for tourism development, and with expert postulations the bill for corporate taxation is gaining momentum. Scholars that I was fortunate to have a chat with, also weigh the idea of taxation provided it is connected with an uncontestable social welfare system for the citizens, together with a demostratable accountability.

Quite unfortunately the country is home to only a few regularised businesses. Among them, privately owned businesses are categorically in tourism or are liked somehow. The unorganised businesses mainly within the fisheries sector are small and may not stand audit worthiness or to that effect, efforts to regularise could result in insolvency. Corner shops, teashops, and some of the garment stores fits neatly to this tiny-businesses profile. These businesses rely on local population for their sale while the country holds one third a million people scattered across two hundred little islands with Male', the capital being home for about a ninety thousand.

Tourism businesses that are the then likely targets for corporate taxation have their heroes represented relatively well in key public posts postulating dual interest.

Can we out wit the businesses in extracting anything substaintial from a corporate tax policy just yet. Will such a taxation cover the costs of a new social welfare system and the demand for accountability? Will such a taxation help increase the government's earnings?

Should the country tax the private sector now, axe the tax for now, or wax the system and its processes and tax?

Is Maldives standing up to the realisation that the dynamics of trade has rapidly changed in the last couple of years? For instance, the Maldives is heavily reliant on Britain, and most if not all resorts compose a significant room allotment to the giants like Thomas Cook, KUONI and many others, sometimes to a bait of interest free loan (varying between 500k to 1000k). This is while UK tour operators are struggling to survive at source. In the UK, it is no longer an edge for having a high street travel shop as online booking have exceeded a ten year projected forecast in less than two years with online bookings generating more than 50 % of the total revenue. Among the many other changes that are occurring, more Britons are ready to appreciate responsible tourism, a tourism where significantly better treatment is offered to actors involved and greater consideration of the every aspect of the trade, are more valued.

Our refusal to adapt to these changes in trend provide opportunities for major tour operator to blind us again by feeding us from the on-line world that is equally in our reach. Differently, how would we ever reap the benefits of on-line business when responsibility is either passed on to the junior most employee or is dealt by the CEO himself with a budget of US $ 2000 to 3000? Inorder to adapt successfully, businesses needs to seriously consider investing substaintial amount of time and money or face exitinction sooner rather than later. Initial processes must proceed with consultancy, consultancy and consultancy as it is only what a business is able to strategically plan, will it materialise in its ultimate offerings as on-line applications. Another is the economies of scale to a high cost approach; will clusterisation of several resorts on the internet-front, help?

Mega-trends will affect shareholder values over the next five years. An in-depth report into driving shareholder value in the hospitality sector, (Deloitte report): a five year wake up call postulates specific changes in the sphere of brand choice; where emerging markets, human assets and technology are likely to affect shareholder values. This paper examines the Deloitte report from the context of the Republic of Maldives.

The Republic of Maldives, lies about 420 miles south west of Sri Lanka, and consists of a chain of 26 natural coral atolls comprising some 1,190 islands. 200 of these islands are inhabited, 87 are designated tourist islands, and 20 are industrial islands. There are a total of 208 tourist establishments offering 18,765 beds of which 87 are tourist resort islands. There were some 560,000 tourists in 2004, and the annual growth rate averages 8%. One quarter of the tourists come from Italy, over 16% from the UK, 14% from Germany and 9% from Japan.

Tourism is the single biggest industry accounting for more than a third of the country’s GDP, it is a lucrative business for many, and a lifeline for the ordinary citizens; a prayer is, if only tourism inflows would stay put.

Deloitte in-depth report postulates mega-trends in the area of brand choice as opposed to location choice, where emerging markets, human assets and technology will affect cash flow and asset value. In today’s fast-changing and complicated business environment decision-making is a complex process and businesses only survive by making enough of the right decisions (TBA lecture notes, 2006) and considered decisions are only a product of structured problem solving methodologies and decision-making models.

According to Kolb (1983) the central characteristics of an organisation are that they are problem-solving systems whose success is measured by how efficiently they solve routine problems associated with accomplishing their mission and how effectively they respond to emergent problems associated with survival and growth in a changing world.

Aside from tourism being an integrated product, tourism is a very fickle industry and involves factors that are external and internal to an organisation, creating gaps in very many ways and according to Van Gundy (1988) any situation in which a gap is perceived to exist between what is and what should be can be termed a “problem”. Problems can be structured into two types as “hard” and “soft”.

A “Hard” problem is one which is well defined and structured and one where an outcome is normally predictable (MA TBA lecture notes, 2006). The Deloitte report predicts that the world population will rise sharply to around 9 billion by 2050, the population aged 65 and over in Europe will increase to 25% by 2015 and the increased travel by the ‘silver’ segment will keep Europe as the number one tourism exporting region delivering some 730 million travellers by 2020. America will double its domestic and outbound travel spend to $ 1.6 trillion by 2015 paving the way for luxury consumption, and the dual axis of software and product convergence to provide greater opportunity for guest interaction, guest service and brand differentiation. What these “hard” issues entail for the Maldives, that is solely reliant on tourism, are positive ciphers. To businesses, these positive ciphers reinforce the hypothesis to clone the existing resort concepts to boost organisational revenue, which is a hard problem. “Hard” problems are simple, bounded, well-defined, and tamed and hence choices for the Maldives are clear, easy to measure success, and are expected to occur over a set timeframe. This said, seldom does such pristine divination exist in the real world business and as much as it is rare to find a case that is solely based on “hard” issues with no “soft” issues.

A “soft” problem on the other hand, is a problem which is complex in terms of structure, is not well defined, and involves the social system: interaction of people and the outcome cannot be predicted (Hicks, 1991). The emergence of India, China and the Gulf States is one among many “soft” issues that the Maldives is likely to face because endeavours from these emerging markets to create presence and/or to capture a bigger chunk of the global tourism flows could potentially cast shadows over the Maldives tourism product and/or swing tourists away from sun, sea and sand. Other “soft” issues include the likelihood of the Maldives being able to capture any shares of the forecasted growth in Chinese outbound travel, reduction of the local labour force and continued and increased reliance on expatriate labour. The report also portrays a critical shift in customer lifestyle for brand choice as opposed to location choice; the need to connect with the four different generation segments that are also technology savvy. These trends surface a distinctive and critical divide. A divide that outlines how ready a business is with a brand choice, inclusive of loyalty membership and internet presence.

Soft issues as outlined above are complex, unbounded, ill-defined, and messy hence, the problem is not so clear; objectives and priorities are not clear; there are gaps in knowledge and involve many people. In structuring a previously unstructured situation, during the 1960s and 1970s Peter Checkland and his students at Lancaster University developed soft systems methodology (SSM). Checkland’s (1981) SSM consists of seven main stages that proceed from the problem situation unstructured; the problem situation expressed; root definitions of relevant systems; deriving conceptual models; comparing conceptual models with the “real” world; defining feasible, desirable changes; and taking action. The methodology is thus, aimed at understanding human activity systems in a way that is meaningful to the actors in the system. Checkland (1981) recommends a Rich Picture as a representation for use in the first and second stage. The case for Maldives is unstructured and relevant information and relationships are expressed as a Rich Picture in diagram 1.

A rich picture can be constructed by interviewing and brainstorming and certain components are deemed as necessary for inclusion in a rich picture, expressed in CATWOE (MA TBA Lecture notes, 2006). As rich pictures can be sketched quite easily during an interview and/or brainstorming session, ideas can be captured without unduly disrupting or constraining a necessarily creative, unstructured process. Where a case study such as this is concerned, drawing a rich picture of the prevailing condition (Appendix 2) and another as an eventuality, enables good understanding of the gap or otherwise, the problem.

It is evident that growth in inbound tourism to India, China and the Gulf States could potentially dilute the indifferent sun, sea and sand product that the Maldives has had on the shelves for so long. This in part, is an external matter in its entirety and is something that the Maldives will have to provision for, as long as it matters.

With the advent of the internet across China, the Chinese will make up the largest group of travellers within ten years; this entails opportunities as well as challenges. An increase of Chinese outbound travel would mean a relative growth in the niche segment but with less than one per cent of Chinese tourists visiting Maldives and that too during the off-peak periods, the opportunity is grim. One of the biggest challenges that the Maldives face is that the Maldives product has been developed and knitted with western values for sun, sea and sand holidays which stand as a mismatch for the Chinese. The overwhelming demand for room allotments allows resorts to compose the right geographic segment and to exclude the Far Eastern markets, as part of a stimulated yield management strategy. Where the Chinese niche is concerned, the situation arises where exclusive alcohols such as Louis XIII cognac are required, although no resort in the Maldives stocks this product at present, it can be turned around over night to cater to the palates of the discerning, but what about the Casinos and late night action?

The rich picture also depicts the shift in European lifestyle for brand choice as opposed to location choice, the formation of four different generation segments, becoming more technologically aware, and an increase in interest for loyalty memberships. This shift in lifestyle causes a challenge for the Maldives, should the country pursue its present direction in relying on the European market.

Another critical finding from the rich picture is that aging population in the developed economies will pull human assets from the developing countries causing the expatriate labour that are currently filling important vacancies to vanish. This is while local participation in the tourism labour market is fast declining, thus understanding of the root cause for this decline in local participation in the tourism labour market is crucial. Root causes can be examined using cognitive mapping and are covered separately in this paper (see cognitive mapping).

A rich picture can therefore be used as an important tool to express, record, reason about, communicate, and negotiate for, within soft systems methodology and helps everyone involved in its construction to take a consistent view of the problem situation without demanding that they all agree on what the problem is. Said differently, a rich picture, as examined, makes explicit the stakeholders, their interrelationships, and their concerns. Drawing a rich picture is, however, an iterative process of understanding and refining that understanding.

As portrayed in the rich picture (above), as a result of an ageing population in the developed economies they will source their human assets from the developing countries. Better perks being offered from the developed countries, both Bangladeshi and Sri-Lankan expatriates that are currently filling vacant and/or critical jobs in the tourism labour market could disappear from the Maldives for ever. The situation is further amplified by the dying trend in local participation in the tourism labour market.  This low local turnout in the tourism labour market can be examined via the technique of cognitive mapping and is illustrated in diagram 2. Cognitive mapping is a technique used to structure, analyse and make sense of problems (Ackermann, 1994) and involves the drawing of a map showing links between different elements of a problem (TBA Lecture notes, 2006).

It is apparent is that loosely fitted regulations allow businesses to trade-off local labour for expatriate labour that settles for low pay and harsh living conditions. This short term agenda provides much desired financial gains for the business, whilst in contrast local labour is forced to shy away forever. Recognising that short term fixes are not solutions, the government, through institutional policies, and businesses through their actions, must embark on a comprehensive process of unleashing the abilities of indigenous people.

Thus, cognitive mapping elaborates key issues and possible root causes of the problem, establishes the likely consequences of the problem, and highlights the effects of possible solutions.

In addition to the four different generation segments from Europe, a critical shift in customer lifestyle to brand choice as opposed to location choice, and the delivery of enhanced technology driven applications (see also rich picture) calls for a paradigm shift for the Maldives, i.e. clustering individually owned resorts to sizable groups . Morgan (1993) claims that through his process of imaginization, metaphors can be used as a vehicle for organisational change interventions, as demonstrated in
diagram 3.

Diagram 3 – Metaphor

“MERGERING AND/OR CLUSTERING RESORTS”
Economies of scale
Greater strength
More adaptable
Cost sharing
Elimination of white elephants
Greater and shared responsibilities amongst executives
Fewer competitors
Price control
Newer Brand identity
“a change forever-life”

Morgan (1993) offers the process of imaginization as a key managerial tool to assist managers in their bid to face future challenges. Imaginization, as demonstrated above, allows the development of alternative ways of thinking about organisations so that replacement management styles and organisational structures can be introduced.

Extensive examinations postulate that the Deloitte report presents major problems for the Maldives and further application of various problem solving methodologies entail opportunities as well as challenges. Double digit growth in outbound travel from the Americas means a relative growth in the luxury segment, but distance is a problem. Europe will remain as the number one tourism exporting region but changes in lifestyle call for a paradigm shift for the Maldives, should the country pursue its current direction. Aging populations in developed countries will pull human assets from the developing countries and if the Maldives do not embark on a comprehensive process of attracting and retaining locals in the tourism labour market, the Maldives tourism industry could go unmanned. With the continued growth of the internet, the Chinese will become the largest group of travellers but there is sufficient room to doubt whether the country’s religious taboos would permit sufficiently to capture this niche.

Advise on how a decision should be made is the subject of decision-making models and ‘Normative’ could be of good use here. Phases of normative decision making model include recognition of the need for a decision, identification of the objectives, search for reasonable alternatives, evaluation of alternatives, selection of the best alternatives, and implementation/evaluation of the outcome (TBA Lecturer notes, 2006).

Conclusion: Deloitte report postulates specific changes in the sphere of brand choice; emerging markets, human assets and technology are likely to impact shareholder values. Examining the changes outlined in the Deloitte report from the Maldives context surfaces several gaps. Gaps or otherwise call problems can be classified into hard and soft. A “Hard” problem is one which is well defined and structured and one where an outcome is normally predictable. A “soft” problem on the other hand, is a problem which is complex in terms of structure, is not well defined, and involves the social system.

In structuring a previously unstructured situation, Checkland’s (1981) developed soft systems methodologies consisting of seven main stages that proceed from the problem situation unstructured; the problem situation expressed; root definitions of relevant systems; deriving conceptual models; comparing conceptual models with the “real” world; defining feasible, desirable changes; and taking action.

Application of various problem solving methodologies entail opportunities as well as challenges and advise on how a decision should be made is the subject of decision-making models. Normative decision making model include recognition of the need for a decision, identification of the objectives, search for reasonable alternatives, evaluation of alternatives, selection of the best alternatives, and implementation/evaluation of the outcome.

In the growing competitive market British Airways (BA) has made shifts in its business strategy, which has altered its marketing communications. It now appeals directly both to the corporate and leisure customers and sells mostly directly to the corporate customers. They are also trying to penetrate the small and medium enterprise market directly where they expect to get market share. This has brought about a shift in the channels of distribution. With rising costs and pressures to compete with low-cost carriers, it has eliminated intermediaries in various functions. This includes the use of travel agents and advertising agents. By reducing commissions of travel agents, they have not only reduced the cost of selling but now also have a direct approach to the end consumers. Airlines differ in the ways in which they use the marketing communication and the marketing mix in terms of their expenditure and the style. This paper evaluates the marketing communications employed by BA in its strategy.

The four major marketing communications mix according to Kotler are advertising, personal selling, sales promotion and public relations. Intensive selling is the most important marketing communications factor (Avlonitis & Papastathopoulou, 2000). BA adopts, alters and changes the marketing communications mix as the market demands. It keeps introducing new products from time to time as innovation today is a necessity rather than a strategic option in the turbulent market with shorter product life cycles. There is a shift in the marketing communication targeting only the customers. Marketing communication should reach a range of stakeholders and other players peripheral to the target market and which influence the business success (Clulow, 2006). Benefits and pitfalls of stakeholder responses should be anticipated and used to advantage.

Its public relations strategy of ‘BA Way’ is supported by values and goals. BA claims to provide “service that matters to people who value how they fly”. While BA in its philosophy serves the clients who value service, according to Long & Schiffman (2000), there are many who give importance to financial values. Personal values influence consumer decision making. Thus, different segments of consumers may perceive different kinds of benefits and have differing degrees of commitment to different programs. However, BA’s approach is now more towards direct selling and they try to appeal directly to the consumer in the leisure market, or the corporate customer, or the consumer in the business market. One of the ingredients on which the success formula is based is on ‘understanding customers better than competitors’. This is line with marketing communications theory which suggests that it is not enough to listen to the customer, it is essential to understand the customer (Olorunniwo, Hsu & Udo).

Direct selling or personal selling is an important marketing communications tool. Services are intangible, invariable, perishable and inseparable (Long & Schiffman, 2000). Their new products like Club World have created a new market while Club Europe has forced many competitors out of the market. British Midland too has downscaled their interest in the premium short haul market. BA’s product World Traveler Plus appeals to business and leisure customers. These products have to be reached to the direct customer and not through intermediaries. The Executive Club, the customer loyalty program or the frequent flyer program is designed to attract, grow and retain customers. Their loyalty is recognized in the form of additional benefits and mileage rewards.

BA is attempting database marketing as they have collected personal details of more than two million people. They feel that an effective database strategy coupled with an effective website is a significant opportunity for them but according to FitzGerald and Arnott (1999), airlines’ advertising of frequent flyer programs are seen to be male oriented but in reality it is diverse. Men and women process advertising messages differently with the women being more sensitive to the product of risk. Advertising should reflect the changing needs of the women to which they respond positively. Product positioning has to be done keeping in mind that the target audience is composed of both sexes. Audience is generally influenced by press reports – both positive and negative than by advertisements. The influence of FFPs and special lounges remains strong but has not been found to be an effective strategic marketing tool.  Gender is a major demographic influence in interpreting marketing communications. Increase in female traveller suggests that BA should be kept in mind while devising the marketing communications. They must reorient their marketing communications. The sales promotional activities are not meant just to bring back repeat customers but to generate new sales. To sustain a relationship service providers must have benefits that are important for customers and difficult for competitors to duplicate (Long & Schiffman, 2000). FFPs are no big deal in the industry today.

Their Global Performance Monitor (GPM) survey, an on-board customer survey followed by a telephone survey is carried out on approximately 50,000 customers per month. Merely collecting data is not enough; data has to be interpreted and analysed. For this, BA has appointed an independent Market Research Company to collect and interpret data. This would give an unbiased judgment. This is also based on the premise that word-of-mouth (WOD) publicity would arise through personal recommendations of friends. This is expected to be an important linkage between customer experience and enhancement of business.

WOD is an uncontrolled form of communication which has a stronger influence on brand attitudes. WOM communications are important source of information for service consumers before they start patronizing the brand. Here negative WOM and publicity can also adversely affect the brand (Grace & O’Cass, 2005).  What is important to note is that BA gives importance to customer feedback and takes suitable action to rectify this. This is again based on the fact that if the customers’ interactions with products and services and other elements in the contacts between buyers and sellers are bad and create a negative communication effect, effective integrated marketing communications as a purely communications program does not develop lasting relationships. There has to be a two-way communication but all communication efforts should enhance relationships (Gronroos, 2004).  BA has been cautious to ensure that customers develop a positive attitude without which even the WOD would fetch negative publicity which is more powerful and spreads faster than positive publicity.

Service both poor and outstanding has a strong emotional impact upon customers creating intense feelings about the organization, its staff and services (Wirtz & Johnston, 2003). It influences customer loyalty. Having an international reputation for service excellence makes delivering outstanding service a continuous challenge. Feedback mechanisms of BA are in place so that the staff not just listen to the customers but also understand them. Feedback is regularly analysed and followed up. Compliments and complaints both are taken seriously. These are taken as learning lessons.

The purpose of direct selling by BA is not cost reduction but also to get customer personal details. This helps them to talk directly to the customers and motivate them. Their selling efforts are reduced towards the travel agents as they have started targeting the direct customers. Most of their direct business is through internet and greatly reduced through telephones or call centres.

Marketing communications perform three functions: to inform, to remind, and to persuade. The first two forms of marketing communications may be performed by the traditional model but the persuasion function for differentiating the brand is difficult through the traditional model. Marketing through the internet offers a departure from the traditional marketing environments (Hoffman, Novak & Chatterjee, 2000). Their marketing communications efforts are effective as they are now having 40% of direct business. This has been possible through the use of internet as an interactive medium for personal selling. Passengers can obtain up to the minute information of flight arrival and departures, make bookings, check-in, allocate seats, print boarding pass, order special meals, books hotels and car hire. Not only this, they can even get information on the destination. These are all value-added services, which is essential in the competitive market. They also accept payments through multiple channels. Their communication tools are able to guide the customer through the purchase process, because these are consistent with their promotion decisions. The design is consistent with the positioning of the product. Marketing communication efforts should be integrated and this requires that the communication activities fit with the business functions, says Holm (2006a). Companies use internet technology to shift the basis of competition away from quality, features and service toward price, making it harder for anyone in their industry to reach profitability.

BA’s web presence is an effective means of promoting brand personality and is consistent with other forms of corporate communication. Earlier it was used as a selling tool to compete with the no-frills carriers but now it reflects the investment in brand development. The website offers a one to one relationship to the visitor and has positive features and is easy to navigate. Communication is only relevant if it leads eventually to some expression of consumer behaviour in brand selection or in terms of purchase and BA’s web presence has made this possible.  It has appointed a dedicated e-mail marketing provider which reflects the increasing importance of direct electronic customer communication as part of the airline's marketing communications strategy.

Consumers retain images of their experience with an airline or any service and this personal experience becomes the key driver for future purchases (FitzGerald & Arnott, 1999). BA ensures that visitors to the website have a smooth experience because they know that the first experience counts in not only a repeat customer but also referred customers. It helps to build a strong personal relationship with the direct customers without the intermediaries. The personal data collected through direct selling helps the airline to email or contact the passengers over mobile in case of flight cancellations or rescheduling. Personal data collected helps them in all future sales promotions or direct selling campaigns. Thus their business strategy to reduce or eliminate intermediaries has benefited by enhancing the marketing communications.

BA has a powerful brand as it also has the largest UK based network. Corporate communications in an airline must have certain differential features to influence travellers and establish brand image (Driver, 1999). To this extent, BA’s brand distinguishes it from the other airlines, demonstrates its customer-focused approach and confirms its commitment to the market. The national carriers should reflect the distinctive character in use of language, cuisine, and nationality of employees, says Driver and British Airways reflects the best of established British values. It demonstrates a friendly, youthful and diverse outlook, and truly gives the feel of a global airline. It reflects a distinctive competence in comparison with other brands. Consumers are known to retain that brand in memory and if satisfied, it becomes their preferred choice. The attributes related to the image of the airline are only partially related to direct operational and flight factors. This makes it important that not just the purchasing process but even the in-flight experience is pleasurable. BA is using technology to enhance in-flight services and entertainment which is in alignment with its marketing communications objectives. Consumers’ direct experience speaks volumes and one satisfied customer can translate into several referred customers.

In its sales promotions efforts, it reaches the customers through focus customer groups. They distribute product information, fares and schedules to these groups through intermediaries like the travel agents. They have a Closed User Group (CUG) for which they create offers, price and availability and target particular subsets of their target market. They offer huge discounts to such groups but frequent and heavy discounts can go against the corporate image of the airline. If the target is the price-conscious group, such target segment would have no loyalty and could switch to another airline with even a marginal difference. The brand has to reflect the promise of performance, the value of reassurance, transformation of experience, social connotation and personality (Driver, 1999). By constant discounting, it would be a compromise on the brand image of the airline. Relationship marketing emphasizes the need for firms to establish lasting relationships with customers, suppliers, employees and stakeholders through trust, relationship commitment and co-operation (Chenet, Tynan & Money, 2000).

BA claims to have a loyalty vehicle to directly attract and retain the SME sector that normally uses travel agents. Through a combination of inventory, price and service benefits they expect to have competitive edge. Marketing communication can be an effective and strategic competitive tool if the basic values and beliefs are shared by all concerned (Holm 2006a). The tools should be such competitors are unable to duplicate them. It has become extremely important to protect an existing customer base and it is also recognized that is less expensive to maintain an existing relationship than to create new customer base in the service industry. Hence, trying to attract new segment is not the ideal approach. They should first try to consolidate the existing customer base in the turbulent market. Enhanced customer satisfaction can lead to positive behavioural intentions. Technological advances, capital investments and physical facility issues (i.e. tangibles dimension) and robust recovery policies must be emphasized company wide in order to increase competitiveness. This gives the airline competitive distinction (Olorunniwo, Hsu & Udo, 2006).

BA aims at intelligent sensitive relations with the customers. They use marketing communications across brand marketing, investor relations, issue management and public affairs. They have a separate team responsible for communications with consumers, employees, policy makers and shareholders. The paintings and emblems on the aircraft demonstrate diversity for the airline. The idea is to be viewed as a global airline. It wanted to give an image of being friendly without being frivolous. The UK travel and tourism market is mature and will continue to segment itself. Overseas distribution channel is important (Riege & Perry, 2000). As of now BA uses travel agents overseas although they foresee getting the major business through their website. Mass marketing or extensive marketing approach is inappropriate. Single marketing approach after proper segmentation is preferable. Competitive pricing is essential for price sensitive UK segments although pricing is not a core factor. Distribution strategies should be with major wholesalers or specialized travel agents as they always have funds available.

BA’s major concentration is selling through ba.com and they offer more than their own services. Ancillary services can also be booked which is a great advantage as a customer wants to have a one-stop shop for all its needs. BA is attempting to target new and varied segment and mostly direct. Despite some indications that taking an integrated marketing communications approach can make communications spending more effective, translating the concept into reality can be problematic (Baker & Holt, 2004). BA’s corporate brand emanates warmth and friendliness and it should capitalize on that. By repetition and the use of art people are made to believe in warmth and friendliness associated with a particular brand (Balmer & Gray, 2003).

Thus, BA’s marketing communications mix concentrates on direct and personal selling through introduction of innovative products. Their advertising promotions match their objectives and corporate values while keeping in mind the values nurtured by the customers. Corporate brands are also seen as guarantee of quality and BA’s brand extends positive and global feeling. BA has an integrated marketing communications strategy in place.

Fundamental changes in technology and innovation, specialisation, internationalisation of service processes, and increasing integration of emerging economies are changing the global economic conditions. With emerging economies accounting for over half of the total world GDP and consumed over half of the world’s energy and four-fifth of the growth in oil demand pushing fuel prices. Rising oil prices fuel consumer price inflation that triggers interest rates and affect ways in which firms raise finance calls for greater flexibility in human resource management.

This paper critically assesses the impact that the changing global economic environment has had upon the human resource and financial management decision-making of British Airways Group (BA). In particular, the paper focuses on ways in which the global economic environment affected the financial performance, and suggests ways in which human resources can be managed to improve flexibility in enabling BA to respond to the ever changing global economic conditions.

In the financial year 2006, BA carried more than 35 million passengers on its services and currently operates one of the world’s most extensive international scheduled airline route networks, comprising 148 destinations in 75 countries. BA is one of the world’s leading scheduled international passenger airlines and its principal place of business is London, one of the world’s premier airport locations, which serves a large geographical area and a comparatively high proportion of point-to-point business.

The global economy is in the midst of a radical transformation and more countries are opening up their economies and seizing the opportunities that come from closer integration into the global economy. The rapid growth of large emerging economies, in particular China and India, are shifting the balance of global economic activity. Last year the combined output of emerging economies reached an important milestone: it accounted for more than half of the total world GDP measured at purchasing-power parity (Economist 2006). Far-reaching and fundamental changes in technology and innovation, specialisation and internationalisation of production and service processes, and increasing integration of emerging economies are changing the global economic environment.

Technological change is one of the principal catalysts of greater world integration and the distinctive feature of its current phase is the unprecedented speed and scale of change. Rooted from technological change, advances in communication technologies have been a principal driver in the integration of world markets (UNPD, INTELSAT.).

As technology impacts on service processes and increasingly also on the flow of information, it influences the structure of firms, and the location, ownership and management of service activity among regions and countries. The related inventions of the personal computer, the Internet and the World Wide Web, which draw on and combine the advances in communications technology, have changed the way in which companies operate their businesses and have led already to further integration of international markets - enabling greater competition and price convergence (see also competition in BA’s home market).

As a result of technological advance and policy liberalisation, many service processes have become increasingly specialised, international and dispersed. One important aspect of this internationalisation and subdivision of activities within and between firms is the increasing relocation of economic activity abroad (OECD, 2002), and is termed international outsourcing or off-shoring. There are several reasons why the specialisation and internationalisation of service processes has become more cost effective:

• Firstly, technological advances have lowered the costs. Karoly and Panis (2004) with reference to computing speed and storage capacity noted exponential rate of progress that between 1970 and 1999, the cost of 1 megahertz of processing power fell from $7,601 to 17 cents.
• Secondly, developments in emerging markets, greater stability and openness, improved infrastructure and rising education and skill levels enable firms to establish sales and/or service centres in foreign countries, an economically viable strategy.

BA could use these means for off-shoring with greater ability to manage the complex, geographically dispersed and highly specialised service processes at lower costs.

In addition to cost advantages from off-shoring, internationally located service centres have the potential to raise productivity and/or the quality of service. Offices across different time zones, could enable BA to further productivity gains through providing 24-hour, worldwide coverage. This way, service requests made during unsocial hours in one time zone could be serviced from an office in another time zone.

The ease with which services, capital and technical knowledge can be moved around the world has increasingly enabled firms to service its customers and generate revenue internationally. New opportunities presented by the ICT revolution alongside capital restrictions (Brooks and Guile, 1987) means, for instance, in setting up offices, BA has choices to locate its service centres in line with countries' comparative advantage.

“According to Ricardo’s theory of comparative advantage, it makes sense for a country to specialise in the production of those goods that it produces most efficiently and to buy the goods that it produces less efficiently from other countries, even if this means buying goods from other countries that it could produce more efficiently itself.” (Hill, 2003: pp. 145)

Sadly organisations do not adapt sufficiently enough to meet the changing global economic environment and Bill Gates of Microsoft (1995) said:

“When we look back at the last twenty years it is obvious that a number of large companies were so set in their ways that they did not adapt properly and lost out as a result. Twenty years from now we’ll look back and see the same pattern.”

Internet-related technologies are boosting efficiency and growth by increasing the availability of information and improving access to markets. In tandem with this, advances in ICT have also enabled and encouraged fundamental changes in the way that businesses are run (The Economist 2006). The advent of real-time information systems has enabled better coordination of services and administrative procedures, promoted transparency, improved response times and very importantly generated newer sales.

• For example, computers have allowed virtually costless means of communication via e-mail and the Internet, with national borders no longer providing boundaries to such transmission. Major advances in transport and information technology, enabling innovation in logistics, sourcing supplies internationally. This is something that BA has applied quite well resulting in low inventory turnover ratio to just 4 days in 2005/6 (see also quick ratio, covered separately).
• Technological advances have enabling airlines sale of tickets through what is called ‘e-commerce’. BA along with other airlines actively offer web only deals to customers not only to promoting direct interaction between the airline and its customer base, but is also enabling airlines save agent fees as profits.

Liberalisation, deregulation and the advances in technology has the potential to cause negative impacts. An example is the no frills carriers that continue to consolidate their presence in European markets, and now account for more than a third of all short haul flights from London’s airports. As a result, BA has seen its share of passengers in the United Kingdom short haul market fall from more than 30 per cent in 1998 to below 20 per cent in calendar year 2005. Even among business travellers, corporate cost consciousness has allowed no frills airlines to carry an increasing share of the market, and proportion of business travellers flying in the premium cabins of the network carriers, such as British Airways’ Club Europe, has continued to decline.

To BA, Europe as a region has only contributed negatively for 7 years in a row up to 2003/04 with an aggregate loss of £1196 million. Yet in 2005/06, BA earned over £8.5 billion in revenue, 9.6 per cent up on the previous year. 80 per cent of this revenue was generated from passenger traffic, 6 per cent from cargo and 14 per cent from other activities (including fuel surcharges). BA’s profitability, improved again in 2005/06 and the operating margin rose to 8.3 per cent, up from 7.2 per cent in 2004/05. Noteworthy is that as much as it is for the no frills, BA’s success is also connected with market liberalisation, deregulation and advances in technology that allowed it to venture into long-haul sectors internationally. Hence, market liberalisation and technological advances shape economic environments and also impact organisational financial performances.

The engagement of large emerging economies, in particular China and India, with the rest of the global economy over the past two decades has provided a significant impetus for growth (The Economist 2006).  Analysts suggest that this  was  supported  by  a  series  of  market-based  economic  reforms  -  following  a period of rigid controls in the product, capital and labour markets during the post war period. As a result of these economic reforms, the Chinese and Indian economies have grown by over 700 per cent and 250 per cent respectively since 1980, and have become increasingly integrated with world economic activities, with stocks of inward FDI increasing from less than 1 per cent of GDP in 1980 to currently over 35 per cent and over 5 per cent respectively (IMF, 2004). These emerging countries are looming larger, consume over half of the world’s energy and account for four-fifths of the growth in oil demand (The Economist, 2006) and this increase in demand for oil is pushing the fuel prices to its highest levels in 20 years.

So far airlines, through fuel surcharge, have been able to increase the ticket prices to compensate for more expensive fuel. In June 2005, British Airways increased its surcharge for the second time in six months. The addition on each long-haul return ticket went up from £32 to £48, and short haul flights went from £10 to £16. Yet, fuel cost is the second highest expenditure for BA and raises a number of issues:

• Firstly, BA is bound to maintain a good fuel risk management strategy to protect the airline from sudden changes in oil prices. BA does this through judicious use of a number of derivatives available Over The Counter (OTC) markets.
• Secondly, with capital expenditure, together with ongoing operating lease and fuel payments denominated in US Dollars, creates a deficit of US Dollar. In 2006 BA had more US Dollar payments than US Dollar revenues, principally as a result of its fuel requirements being purchased in US Dollars. Consequently BA is susceptible to experience adverse or beneficial effects arising from exchange rate movements. For example, BA is likely to experience an adverse effect from a strengthening in Sterling or the US Dollar and a beneficial effect from a strengthening of other foreign currencies.

Derivative financial instruments (derivatives) can be used to hedge anticipated exposures selectively for Treasury and fuel risk management. At BA forward foreign exchange contracts and collars are used to cover near term future net revenues in a variety of currencies. As derivatives are used for the purposes of risk management, fortunately they do not expose BA to market risk because gains and losses on the derivatives offset losses and gains on the matching asset, liability, revenues or costs being hedged. The only ineffectiveness related to fuel hedges where the unrealised profit being recognised in the income statement for ineffective hedges was £19 million compared with a recognised realised hedging profit for 2006 of £303 million, and therefore, derivatives were generally found to be effective in 2006.

Separately, rising oil prices drives up the cost of raw materials and just as in supermarkets, homes too are packed with oil-based products and thus the biggest fear about rising oil prices is that it fuels consumer price inflation. An increase in inflation rate is likely to trigger an increase in interest rates (TBA Lecture Notes, 2006) and in London (Reuters), inflation accelerated to 3.0 percent in December 2006, its highest since comparable records began a decade ago, and as a result the Central Bank of England raised interest rates to 5.25 percent in January 2007. Interest rates affect the way in which organisations source funds and determine finance/borrowing cost.

At March 31, 2006, 53 per cent of BA’s gross borrowings (after swaps) were at fixed rates of interest and 47 per cent were at floating rates. This proportion of fixed rate borrowings has increased from 51 per cent at March 31, 2005. BA’s borrowings are predominantly denominated in Sterling, US Dollars and Yen. Sterling represents BA’s natural “home” currency, whilst a substantial proportion of BA’s fixed assets are priced and transacted in US Dollars. Net debt, then, as at March 31, 2006 amounted to £1641 million, a reduction of £1282 million compared with March 31, 2005. This is net of cash, cash equivalents and other interest bearing deposits totalling £2,440 million. The net debt/total capital ratio at March 31, 2006 was 44.2 per cent, a 23.5 point reduction versus the last year mainly due to the deduction in net debt, the conversion of the Convertible Capital Bonds 2005 to equity on maturity and the recognition of the fair value of derivative financial instruments under IAS39 from April, 2005. Including operating leases, net debt/total capital ratio in 2005/06 was 53.0 per cent, a 19.3 point reduction from 2004/05.

For a highly geared company such as BA, ‘Interest Cover’ is a critical measure of its ability to meet the financial commitments in terms of interest repayments. Between the periods 1999 to 2002, BA has had its lowest interest covers averaging to 1.18. One explanation is that BA was highly geared during that period and that lenders may have charged higher interest rates causing a direct impact on the interest cover. From 2003: 1.6 to 2006: 5.8 BA had improved its interest cover with a whopping average rate of 150% per year; and reflects the improvement in the operating profitability of BA and a reduction in net interest payable. This reduction principally reflects the lower net debt in 2006.

Despite the improvement in Net Debt and also the ‘Interest Cover’ for the year 2005/06, BA’s credit rating (BB+) remain unchanged mainly due the high degree of uncertainty over its future funding needs in relation to substantial deficit in pension funds.
 
Return on capital employed (ROCE) is considered as a primary ratio and indicates the profit earned in relation to the capital employed. Careful analysis show that BA has had its adverse periods in the year 2000: 0.83%; 2002: -1.05%; and 2003: 2.95%. In 2005/06 BA’s return on capital reached a 10 year high to 8.06% yet it is 20.12% short compared to its position back in 1996: 10.09%.

Asset turnover indicates the sales earned per £ of capital invested. In the year 1996, BA generated £5.6 billion in sales and achieved an asset turnover ratio of 1.08. Ever since sales grew year on year and achieved a peak of £ 9.2 billion in the year 2001 with a compound average growth of 6.49% but weighed against capital invested, the asset turnover figures have generally decreased from 1.08 in 1996 to very low 0.77 in 2003. However, from 0.83 in 2004 asset turnover ratio has improved to 0.97 in 2006, thus a good recovery.

Operating margin is defined as Operating Profit/Loss divided by Revenue expressed as a percentage and is the key measure of financial performance. BA has improved its operating margin by 15.28 % to 8.3 per cent in financial year 2006, up from 7.2 per cent in 2005. Yet, it is still short of the rate of ten per cent that it has set itself as a target to deliver an adequate return to shareholders over the long term. One possible cause for underperforming is that operating cost increases are frequently outside BA’s control, and is causing a significant impact on the results of operations. In an effort to reach the prescribed target, in 2004, BA launched an incentive scheme for junior employees too.

At present BA offer arrangements for all its employees to benefit from its future success and managers and upper grades are offered performance related bonus scheme linked to the operating margin and individual performance targets and ratings; and in 2004 it introduced a new scheme called Employee Reward Plan (ERP) for non-management grades, linked to the operating margin the airline achieves.

In 2006, BA’s current ratio improved 26.89% over 2004/05 and for the very first time since 1996 its current assets surpassed current liabilities. BA has had its inventory managed very well and for the last four years including 2006, BA maintained a very low inventory turnover ratio of 4 days, resulting in a low inventory/stock value. Good inventory management has had a positive impact firstly on the quick ratio that also improved from 0.82 in 2005 to 1.04 in 2006 recording the highest ever positive change of 27.92% since 1996; and secondly together with very healthy debtor days and creditor days, in 2006 BA has made a dramatic recovery over its working capital. New achievements over the liquidity ratios in 2006 are in par with the airline industry and within its trading index, S&P 500. While recoveries in liquidity ratios are signs of better usage of available assets, they are healthier signs to the many creditors who translate these ratios as measurement of an organisations’ internal ability to meet its current liabilities.

External events beyond BA’s control include fluctuations in the price of fuel, the availability or otherwise of financing and fluctuations in currency and interest rates, or events that BA control, such as a strike or well-publicised disruption. The fact is the airline industry is very volatile and that businesses are having to under go, and will continue to under go, significant structural change to thier financial and human resource management.

Worldwide and within the UK, labour activities and the balance between workers’ rights and shareholders’ interests is in flux. Increased labour activity or adverse labour market regulation could damage BA’s operations and results. Also BA operates a highly technical business; if sufficient technically qualified staff from pilots to engineers and many others cease to be available, operations and results could be adversely affected.

Although it is a complex process, human resource can be managed to improve flexibility so as to respond to the ever changing global economic condition and BA utilises several concepts.

BA’s training department delivers in excess of 200,000 training days per annum worldwide and the majority of expenditure is on mandatory and job essential training. In November, 2005 BA announced a programme to reduce the number of senior managers at BA by 50 per cent and the number of middle managers by 30 per cent by March, 2008.
This course of action, to many industry analysts, is long expected as a result of training and preparation to flatten its organisational structure. By flattening the organisational structure BA aims to remove duplication and complexity, provide greater accountability and to reduce costs. Additionally Holbeche (1994) postulated that shedding tiers or flattening organisational structures helps faster decision making, responsiveness to environment and employee empowerment. BA’s initial phase of this programme saw a 23 per cent reduction in senior managers as at March 31, 2006.

Stemming from the desire to become more efficient and effective, firms in both the private and the public sectors have adopted downsizing strategies (Cameron, 1994a). Increasingly dynamic and competitive workplace and the trend toward globalisation or grater integration have prompted many firms to downsize (Appelbaum et al., 1987a; de Meuse et al., 1994; Mroczkowski and Hanaoka, 1997). At BA technological advances, and market liberalisation together with deregulation, have led the airline to expand, grow, reduce workforce and improve efficiency. Since 1997 BA’s engineering department alone has downsized labour force from 9’000 to 6’000, simplified base locations, and reduced inventory value from £ 630 million to £ 340 million through:

• Switching to smaller simplified fleet, newer and modern technology has reduced workload.
• Using industry standard processes, training employees to most modern standards, improved facilities resulted in improved processes, systems and skills.
• Modern aircrafts are much more reliable resulting in engineering department’s load reduction.
• Move to industry standards to minimise aircraft downtime led to inventory reduction benefits.
• Improved skills and working practices through multi-skilling; improved efficiency – e.g. ‘Fly by day, fix by night’ for shorthaul aircraft; and by setting up modern, efficient hangars and workshops.
• Investment in fully integrated system – SAP for managing and distributing all technical documents electronically, SAP replaced 150 old, unsupportable systems.

These significant improvements in BA’s efficiency and improved performances are based on simplification, technological advances and application of standard practices, multi-skilling, and cost reduction. Noteworthy is that there is no sign of cost reduction and/or sufficient flexibility in its approach just yet. First, an employee cost rose by five per cent to £2.3 billion in 2006 and is by far the highest expenditure. Second, there is room to review its present off-shoring mechanism and to apply comparative advantage in setting up service centres and/or offices so as to maintain quality and also to reduce cost. Again lower costs insinuate greater flexibility to the organisation as a whole to compete with other global airlines and grow.

Conclusion:
The speed and scale of technological advances and changes are causing greater world integration. The internet has changed the way firms operate and have led further integration of markets causing competition and price convergence. Policy liberalisation has allowed firms to disperse and internationalise services at lower cost. Aside from lower costs, the opportunity to off-shoring could also raise productivity and quality of service.

The ease with which services, capital and technical knowledge can be moved around the world provides newer ways to services customers and the advent of real-time information systems allows better coordination of services and administrative procedures, promoted transparency, improved response time and vary importantly created newer ways to sell.

Liberalisation, deregulation, technological changes and advances in communications provide greater opportunities and also creating gaps for tougher battles. Seven years up to 2003/04 BA recorded aggregate losses of £1196 million from its European routes while its long haul routes in other regions have contributed positively to the airline.

When BA is reliant on other markets, engagement of larger emerging economies like China and India with the world economy causes a number of issues. One major concern is that these looming economies give raise to oil price. Airlines can do away with a bit of increase through passing the increase in cost of fuel to customers and by using derivatives to hedge anticipated exposures for treasury and fuel risk management. However, rising oil price fuels consumer price inflation and increase in inflation rate triggers an increase in interest rates. The thing about interest rates is that it affects the way in which firms source their funds. To many airlines like BA that are highly geared, an increase in interest rate means a sudden increase in cost in over floating interest rate borrowings and an increase in cost for future funds.

Despite the many intricacies assessed herein, arising from global economic environment, in 2005/06, BA has managed its cash flow and at the same time increased its asset value. This is by no means a comfort as the airline industry is very volatile and that businesses are having to under go, and will continue to under go significant structural change to its financial and human resource management. BA has brought about significant improvements in efficiency and performances in their human resource management and is based on simplification, technological advances and application of standard practices, multi-skilling, and cost reductions. Sadly employee cost rose by five per cent to £ 2.3 billion in 2005/06. In order to survive in the ever changing global economic conditions, BA must embrace greater flexibility. May it be off-shoring or making best use of comparative advantage in setting up office, bold choices are to be made and require collective thought and rapid action.

The Maldives is doing its best to shrink and tighten expatriate quota so as to make space for the locals. This is while more locals are less willing to participate in the tourism labour market. While these two processes are gaining momentum, there is sufficient room to question the long term prospect for tourism resort investments and to the country as a whole.

Which every side you are in, in the interest of everybody, do participate and contribute to this study, and feel free to be yourself.

Yaaa

Living in a tiny resort island alongside 99% male workforce, miles away from ones family and friends, with a set quota of day-offs will no doubt bring about rewards/benefits and/or penalties/costs both to ones own self and to their families and/or loved ones. Irrespective of where on earth you are located, if you think you have any experiences to share, please express it here for research purposes, and be heard one day or another.

Yaaa

There is rigour and postulation that mega-trends will affect shareholder values over the next five years. Deloitte in-depth report into driving shareholder value in the hospitality sector, Hospitality 2010: a five year wake up call includes aspects on brand, emerging markets, human assets and technology. Whether or not such trends mean anything to tourism in the Maldives is however, a very subjective matter and may even call for extensive examinations.

Yaaa

America and China conflict each other politically, yet economically they both share a lot. My most recent work was to underpin evidences that demonstrate America's influence on China's economic performance and its implication to hospitality/tourism of China.

In particular, the study focuses on the intricacies of China's recent move loosen Yuan’s 11 year peg to the US Dollar.

Abdulla Yasir