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TRAdE-Offs – ARE THEy inEviTAblE? 79

example Flat beds trade off utilisation for comfort

At one time most airlines operated a ‘twin class’ system – First Class and Economy Class. Then
came Business Class, with service standards placed between First and Economy classes. Ideally
designed for the burgeoning business travel market, it attracted customers from both the First
and Economy Classes. British Airways’ strategy was typical: on most non-European sectors, BA
offered all three levels of cabin service to their customers, with First and Business Classes par-
ticularly popular on long-haul flights – the transatlantic route being the single biggest market.
By the mid-1990s the First Class market seemed to be in terminal decline, with many airlines
pulling out of the First Class product entirely and, instead, concentrating on offering superior
service in Business Class.
British Airways took a different view. They believed that the whole concept of First Class travel
needed to be redefined, and in early 1994 they decided to refurbish their First Class cabins. Exist-
ing First Class cabins had 18 passenger seats, each with a 62-inch seat pitch, serviced by four
cabin crew. BA’s research, using passenger focus groups, showed that the most important factors
associated with First Class travel were, in fact, space related. The main challenge was to create
maximum passenger space within the existing area and simultaneously boost revenues from
this segment. Their answer was a new design for their First Class cabins – the ‘Bed in the Sky’: a
private, first-class seat encased in a shell that could transform itself into a completely horizontal
bed. With the help of in-cabin technology, all control facilities were accessible within an arm’s
length of the passenger seat – audio/video, light switches, call buttons etc. However, the more
spacious seats meant that cabin size, in terms of seating, was reduced to 14 passenger seats. BA
was also able to complement the new cabin designs with improved standards of cabin service
and cuisine.
Refitting all their long-haul aircraft in this way succeeded in repositioning BA’s First Class
product so it had a unique First Class offering with no comparable competition. But it also had
spent money to have fewer seats. Service quality was improved, but its costs per passenger were
higher. This meant that BA had to increase its seat utilisation (the proportion of seats actually
filled with paying passengers) in order to generate higher revenues from its improved service.
In fact, BA were able to arrest the decline in First Class travel, and increase its market share and
revenues in the segment (revenues exceeded the business plan proposals by over 10 per cent).
BA had traded off cost efficiency (it went down) for service quality (it went up). This paid off
because of the extra revenue it brought. So successful was this exercise that BA repeated the
strategy in its Business Class products. But now many other airlines have implemented a similar
strategy, so the concept of ‘erosion of delights’ applies. Flat beds have become an ‘order-winner’,
even in Business Class.

Trade-offs, operations strategy and CsR

The idea of trade-offs and the ‘efficient frontier’ can also help with an understanding of
how corporate social responsibility (CSR) fits into operations strategy. Many advocates
of ‘green’ operations talk about how being environmentally sustainable is also economi-
cally efficient. If Marks and Spencer (the UK-based retailer) makes its trucks more aerody-
namic then they save fuel and save costs; if a firm reduces its travel budgets and increases
the use of teleconferencing, they save money and reduce carbon footprint and so on. Yet
within these dimensions of sustainability, it seems clear that there can also be trade-offs.
For example, in choosing between local suppliers and those in developing countries whose
activities promote economic self-sufficiency, there may well be a higher total carbon

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