FLYING HIGH, GOING GLOBAL BRITISH AIRWAYS IS REPAINTING PLANES AND TRYING TO JAZZ UP ITS IMAGE TO BECOME A TRUE GLOBAL COMPETITOR. BUT SUCH BIG CHANGE WON'T BE EASY.
By RONALD B. LIEBER

(FORTUNE Magazine) – Airline officials are accustomed to complaints about the hideous food they serve aloft. So it came as something of a surprise recently when Japanese passengers told British Airways executives that their cuisine wasn't really the problem. ("Not bad for Westerners," they allowed.) No, at issue were the plates. It seems that the Japanese prefer patterned tableware, and the plain white china used on BA flights was similar to that used in Japanese hospitals and prisons.

That's the sort of gaffe any company with a global reach is likely to make from time to time, and it's hardly the most crucial one. Increasingly, companies are coming to realize that going global is an intricate process with dozens of potential pitfalls. Pleasing disparate, far-flung hordes of customers with a multitude of different habits and preferences is, quite simply, a lot harder than it might seem.

No one understands that better than British Airways, which carries more international passengers than any other airline. Last year the company earned a fairly respectable $900 million on revenues of $13.6 billion. But if it is to improve on this performance, the carrier must find new ways to please customers around the globe. Bob Ayling, BA's witty, low-key CEO, is taking a four-pronged approach:

--Develop a marketing plan with universal appeal.

--Help employees understand the company's global vision.

--Benchmark off mistakes that others have made in the past.

--Select the right partners for joint ventures overseas.

The whole process has to begin with heavy market research. British Airways' internal surveys show that passengers view the airline as stuffy, reserved, and, well, perhaps just a bit too British. Richard Branson, the irreverent chairman of rival Virgin Atlantic Airways, has helped feed the notion that BA is a trifle staid--especially when compared with his own freewheeling operation. He once dressed up as a pirate to drape the Virgin logo over a BA model in its terminal at Heathrow, and he puts masseuses and clowns on his flights to entertain passengers. Even with strict capacity restrictions, Virgin's share of U.K. to U.S. traffic has risen from 11% to 15% since 1992, while BA's has remained steady in the high 30s.

To regain momentum, BA has set about transforming itself from a British airline with a global reach to an airline of the world that just happens to be based in Britain. "We don't want to ram our Britishness down people's throats," says Ayling. "There's no more empire. We're just a small nation on an offshore island trying to make our way in the world."

This is all rather hard to do when the word "British" is plastered on everything the company owns, so the airline is totally changing the way it presents itself to passengers. While its name won't change, the planes will soon look completely different--with new logos and paint jobs. It's retraining its crews to make them more culturally sensitive. And it has announced an alliance with American Airlines, which will establish a globe-straddling juggernaut of routes--if regulators allow it to proceed. The eventual fate of the proposed alliance was thrown further into doubt when a host of critics showed up at U.S. congressional hearings in early June.

Even without a link with American, British Airways has some powerful tools to use in its transformation. It's one of the few airlines in the world that has been profitable every year for the past decade. It hasn't had a major crash in over 20 years, and it already understands how to please passengers better than most airlines. Says Ayling: "I don't like to think of our business offering as a commodity. We can differentiate on service."

To prove it, the airline has led its competitors both on the ground, where it set the standard for arrival lounges with showers and valets, and in the air. Its first-class seat is a marvel of engineering, complete with inflatable lumbar support and a mechanism that allows it to recline into a fully horizontal bed. There's enough demand that people actually pay to sit there; flashing your platinum pass for an upgrade won't guarantee you a seat, no matter how many millions of miles you have.

Still, various cultural issues continue to beguile the airline. "The further away from our Western culture we go, the less satisfied our customers are," says Michele Heyworth, BA's manager of market research. "I would hesitate to call it racism, but people from other cultures have felt looked down upon. Customers from Singapore said that our alliance with Qantas in Australia looked like the whites of the world uniting." There have also been a series of incidents in the air that highlight the difficulties of trying to serve an international clientele. Reservations agents placed Indian wives in rows next to strangers, which made their husbands uncomfortable. The cabin crew would close galley cart drawers with their feet, which is a big no-no for Thais and others who believe feet should be far away from food.

As the evidence accumulated, the airline knew it needed to fix things fast if it wanted its customers to see it as a true global player. It started with its corporate identity and tapped Newell & Sorrell, a hip London branding specialist, for assistance. "Corporations create identities the way dogs mark their territory," says John Sorrell. To avoid that sort of blanket approach, a first step was to fine-tune its image. "In the summer, the airline has 15 nationalities flying in its 747s all at once, but the branding strategy was monolithic," notes Piers Schmidt, a Newell & Sorrell director.

As the consultants saw it, BA's identity overhaul presented a golden opportunity to prove how global it really is. So the gang from Newell & Sorrell set off for the four corners of the globe to commission dozens of designs from regional artists--African murals, Japanese calligraphy, Scottish tartan plaids. Then the airline transposed these multicultural images onto ticket jackets, cabin crew scarves, business cards, and the tails of planes. "The idea behind any good identity is to make the company's promises visible," says Schmidt of the new designs.

This is all window dressing, of course, and it will take years to rebrand every plane. Besides, once passengers are onboard, the service needs to improve too if the image making is to be effective. But mastering cabin service isn't simply remembering cultural quirks and laying on plenty of attention. "There can be too much of a good thing," explains market research chief Heyworth, noting how the benchmark for crew service always seems to be the "Singapore girls," who hover in cabins of Singapore Airlines' flights. "They're always next to you, and some people think it goes too far," she says. "Sometimes you want to be left alone." That means BA must train its frontline employees to know just when to serve and when to stand back.

In the quest to go global, a little enthusiasm about the overall management vision helps too, and BA does seem to be stirring up some genuine excitement among the troops. At a recent employee gathering in New York, none of the 75 people in the audience could remember the company's sentence-long mission statement. But there were audible oohs and ahs when images of the new planes and ticket jackets flashed up on a big screen in the front of the auditorium. The point was clear: If you give somebody a product they can be proud of and tell them why it's changing, you stand a good chance of helping them sell it better.

Along with pitching itself as a company that spans the globe, BA has also been tackling some nettlesome issues in its own neighborhood in Western Europe. There are two trends sweeping the European airline industry right now. One, which BA is driving, is the growth of alliances like the one the airline is attempting to forge with American. The other trend, the formation of low-cost carriers, poses something of a threat. As restrictions on air travel within the European Union have been lifted in the past few years, a number of startup airlines have emerged, much like the People Express clones that sprang up in the U.S. in the 1980s after deregulation. Having learned the painful lessons that flabby U.S. carriers were taught by the vicious price wars that then ensued, BA simply went out and bought large stakes in low-cost carriers itself. It owns Air Liberte in France, which is Europe's largest domestic air-travel market. It also took 49% of what is now known as Deutsche BA in Germany, Europe's second-largest market.

The proposed alliance with American still overshadows many of BA's current efforts, since any airline that wants to be truly global has to have a route network that literally spans the planet. While American has many flights to Europe, various regulations keep it from carrying passengers farther in the same country once it lands. BA faces the same restrictions in America. By essentially merging their route structures, the carriers can feed traffic to one another and put more people on their planes than they do now.

On the surface, these agreements look like a good deal for passengers. By operating under a system called code sharing, where passengers get just one ticket on a trip that includes flights on both American and BA, travelers can avoid having to check and recheck luggage. Plus, with proper coordination of gates and schedules, there's less chance of missing a connection or having to walk a mile and a half to find the departure gate for the second part of a trip. Already, the two carriers are bragging about the potential for a shuttle service between New York and London, with convenient hourly flights.

Because the two airlines already control 65% of the seats between the U.S. and Heathrow, however, a howl of protest has erupted over the proposed alliance. Competing airlines figure they'll be rendered irrelevant by the convenience of flying on the new BA and AA. Regulatory agencies have also raised alarms, for if competition decreases, prices may well skyrocket. But both airlines insist that this will not happen, and American CEO Bob Crandall has gone so far as to offer Richard Branson a [English pound]100,000 wager that prices will actually fall. Maybe so, but make no mistake: The two airlines may talk a good game about convenience to the consumer, but by combining operations they hope to micromanage prices and stabilize profits on their most lucrative routes.

There's nothing sinister about any of this, of course. American paid $445 million for the right to fly into Heathrow when it bought TWA's London routes in 1991. BA has earned its position as a dominant airline across the Atlantic over years of stellar service. The pair even offered to sell the slots for 12 daily round-trip Heathrow flights to get their deal done. So far, however, no one has budged. "None of these regulatory authorities will be able to hold their heads up high unless they extort more slots than the airlines originally volunteered," says Henry Schlee, who heads the aviation consulting practice in Europe for Mercer Management Consulting. "It is a game of bluff, lobbying, influence, and no doubt some political tradeoffs. Everyone is looking for their pound of flesh." Indeed, in early June the General Accounting Office in the U.S. suggested that competing airlines receive at least twice the slots the carriers first offered up.

So how much should the two airlines be punished for the sin of building a strong position in the marketplace? It's hard to say, though it appears that the deal won't get done unless they give up so many slots that it dilutes the value of the partnership. Both airlines desperately want to make it work, as competitors on both sides of the Atlantic, including major rivals like United and Lufthansa, are already benefiting from such alliances.

Rebranding BA for the new millennium is a nice idea that may well solve the problem the company has with its stuffy British image. But if BA is to live up to its new identity as a truly global airline, it will need help from a strong American carrier. And there's no telling what it may have to pay to make that happen.