One must remember that BA was part of the civil service until 1984, so as a commcercial organisation it is only really just over 16 years old.
Profound change takes many years to achieve and I have certainly seem sound progress in terms of both customers service and business improvement over the years.
Sure, they have their problems, but they also have a solid strategy which will work over the long run, once the present economic downturn stabilises and recovers.
People always talk about low staff morale, but IMHO having worked with the company as a an external consultant, they have a workforce that is remarkably committed to the airline, even if they do not always appreciate some of the management moves ... but then again what large organisation (65K employees) does not find it difficult to maintain perfect morale?
If BA is contrasted against other flag carriers, it looks pretty good; not the best business performance, but a strong performer moving in the right direction.
Also, remember that BA's main base is LHR, where the airline has 40% of the slots and Star Alliance 26%. Contrast that with FRA where LH has 70%. Everyone wants to service LHR and so BA is constantly under strong attack in it's own backyard.
I am not anti bmi, British European, Virgin et al (as a Brit I think that they are good companies and part of the reason that BA is constantly forced to improve), but ask yourself what real internal competition SA or Alitalia have.
All in all, BA is doing okay. The industry is suffering from a downturn at the moment and Merril Lynch's statement is pretty fair comment. But over the long term, BA will do well for the country as an ambassador and an earner of foreign "hidden" income.