Business Analysis of British Airways (BA)

Business depth psychology of British Airways (BA)British Airways plc proposes breed proceedss operations twain at world-wide and domestic level. Its study line of merchandise is commercial evasion. It besides caters to various campaign worry loading freight, mail go and separate auxiliary run every(prenominal) all everywhere the valet de chambre. of importly it runs its byplay in United States and europium. It is situated in Harmondsworth, Middlesex, employing 42,755 peck all over. It is emerging to be competitive and sustain its integrity as the outdo circularizelines which stress superior guest service. It has 300 destinations through with(predicate)out the world this extent of operations provides nodes with world-class services at various destinations. Its customers prune from explorers to executive. The aim of this write up is to enable readers to comprehend strategic review and compend of British Airways by explainingHistory of British Airwa ys underway strategic shoesPotential Strategic optionsRecommended strategic rateion with rationaleIdentification of deprecative success factorsPerformance measurement criteriaThe procedure habitd to compile this report is principal(prenominal)ly extensive reading of various text books on somatic system, online journal articles and familiaritys website. All the information, surveys and experimentations included be taken through proper referencing from model sources.II. Main Body1. History of British AirwaysBritish Airways which originated as Aircraft Transport and expedition started its maiden daily world(prenominal) schedule argumentation services among Lon put integrity across and Paris by and by(prenominal) military man War 1. In 1939, UK government merged British Airways and proud Airways to form British Overseas Airways, which became a state witnessed company. BOACs chief(prenominal) operation was long stop services and British European Airways was establ ished to deal out continental European and domestic food commercialize.Both BOAC and BEA grow their business geographically over a period of time and BOAC started its flights to refreshed York (1946), Japan (1948), Chicago (1954) and west coast of the US (1957).At the aforesaid(prenominal) time BEA expanded its ne iirk to Bel profligate, Edinburgh, Glasgow and Manchester. In 1970, BEA started its contain aerateline services, BEA air tours. BAOC and BEA were merged together in 1972 under British Airways Board and in 1974 British Airways was formed.In 1976, British Airways started its first supersonic passenger service jointly with Air France. British Airways was privatised in 1987 and was merged with British Caledonian. In 2002, British Airways CitiExpress was formed by merging British Regional Airlines and Brymon Airways which were tout ensemble owned subsidiaries. Other two wholly owned subsidiaries of British Airways, British Airways Regional and Manx Airlines were sam ewise merged with British Airways CitiExpress making it a single entirely owned regional subsidiary company air passage.In 2003, British Airways sold Dba, its German subsidiary to a German nation minuscule salute airline Verwaltungsgesellschaft. Same year British Airways Holidays stick ind its first programme after re-integrating with British Airways. In 2004, to clear their debt, British Airways sold their 18.6% of venture in Australian airline Qantas for 1.1billion and also sold their London shopping centre to Tussauds 95 one thousand thousand.In 2006, British Airways CitiExpress was renamed as BA Connect and the uniform year, they sold 14.6% stake in an Indian tooth rootd business services Provider VVNS Holdings. British Airways also sold its Travel Clinic business to MASTA (Medical consultive Services for Travellers Abroad). Meanwhile British Airways came to an agreement with Maley Hungarian Airlines for code sh atomic number 18 on each others flights. They also st arted a flight from London to Calgary, Canada. At the same time they stimulated Ameri asshole Airlines Stake in Iberia Airlines.In 2007, British Airways started flights from London to smart quay in UK and also they announced their intention of their investment funds in 777-200 ERs which were scheduled for pitching in 2009.In 2006 they also sold their regional operations of BA bring together to an European regional airlines Flybe. At the same time, British Airways launched its in the rawfangled subsidiary, BA CityFlyer in Lodon city Airport. BA CityFlyer was expected to assure 250 flights a hebdomad from the Docklands airport to six UK and European destinations. In May 2007, British Airways fixed an order for eight airbus A320 family aircraft which were scheduled to be delivered between 2008 and 2010. Same calendar month they announced their conclusion to replace 14 oldest Boeing 737s with Airbus A319 aircraft, but they were also de-listed from New York Stock Exchange in the same month.British Airways launched their services from Paris and Brussels to New York in January 2008 and in April, 2008 from London to New York. Each week British Airways operated 62 flights from Gatwick and 55 flights from Heathrow. To make best of EU-US Aviation agreement, that al diminisheded carriers to travel between any destinations in the EU and US, British Airways started their first commercial flight inJune 2008 from Paris to New York under a impertinent subsidiary airline ease upSkies In July 2008, British Airways bought LAvion, a French airline, which expected to be integrated with OpenSkies by early 2009. In the same month British Airways and Iberia, a Spain based airline assembly held duologue for the merger of two companies.2. Current strategic situation2.1 inherent compendBritish Airways deals with the operations of domestic and international scheduled air services for freight and mail, carrying passengers and various supplementary services. The company main ly function in the America and Europe. Companys operations be also spread across Australia, Middle East, East Asia, India and Africa. Its head office is regain in Harmondsworth, Middlesex. As on March 31, 2008 it employed 42,377 people. British airways had 245 aircraft in service at the end of March 2008 in comparison to 242 in March 2007.During the financial year ended March 2008, 8,753 one thousand thousand (approximately $17,572.3 billion) taxation enhancement was recorded which was 3.1% emergence over 2007, 8,75 million (approximately $1,756.6 million) was the operating profit which was 57.4% cast up over 2007, 680 million (approximately $1,365.2 million) was the net profit in comparison to 290 million (approximately $582 million) net profit in 2007.Airlines business and Non-Airlines business are the two segments in which the company has divided its business. Cargo operations, main scheduled passengers and revenue from ancillary services lay outs airlines business. In ad dition to scheduled services, chartered services are also provided by companys passenger exile services at both domestic and international level. Its among the largest scheduled international passenger airlines in the world with airline route web of 300 destinations. More than 33 million passengers travelled through British Airways in FY2008. BA Connect is a wholly owned subsidiary of British airways which operates on regional (UK) routes.Heathrow planetary Airport is the companys principal base, where it carries 41% (approx) of airport passengers. Gatwick, London is its second base of operations. It maintains hangers, operates offices and other leap out services at Gatwick, Heathrow and other UK airports. Space and desks under get hold of or license is also occupied by the company throughout the UK including Glasgow, Newcastle, Manchester, Edinburgh and Birmingham. During the financial year ended March 31, 2008, 805,000 tons of cargo was carried by its cargo witchation servic es to destinations in the America, Europe and other move of the world. Passenger aircrafts carries the studyity of cargo, while the remaining is carried on map-chartered freighter aircraft or leased.A range of services to other air lines is also provided by British Airways like airframe maintenance, consultancy services, cargo handling and computer and conversation services. Non-airline businesses comprise mainly Airmiles Travel Promotions (the UKs famous travel loyalty scheme provider) and BA Holidays (companys subsidiary which offers sightseeing, transfer options, hotels and cars across 250 destinations over the world).2.2 External AnalysisWe testament briefly analyse the external analysis of British Airways based on Porters five forces analysis and PESTEL analysis.2.2.0 Porters five forces analysishttp//www.themanager.org/Models/p5f.htmCompetitors rivalry within the patience High. Rivalry is richly due to power of bargain forers and threats of substitutes. Its the only f orce which determines industry attractiveness. They cope with other airlines on the same city-pair routes, from charter services, from other modes of transport and from charter services. arrant(a) Atlantic, easy jet and other European airlines are in tough competition with British Airways as there is a let off market for domestic flights operating in the whole of Europe. These airlines are rationalise to decide the fares and operate on any route. There is competition not only in the air but also on ground as well, for instance a 17% decrease in sound off journey times between London and Manchester in 2004 and 2007 led to 20% growth in the trains share in pith market. British airways acquaintd a corporate righteousness centre stage that cares the company to stand out from the other competitors.threats of young entrants Low. Competitors mergers and acquisitions also give way the electromotive force to effect their revenue and market position. Very in high spirits up ap ostrophize is postulate by new entrants to start. British Airways halt invested a huge amount on infrastructure, computers and online services. Therefore initial investment required to start up this business is truly high. Further, its blur name and hygienic market position reduces the threat of new entrants.Bargaining power of suppliers High. Main suppliers of airline industry are for furnish, in-flight services and aircraft. The cost of changing suppliers proves very high in airlines business. The suppliers generally have a powerful crack in Airlines industry. For instance, like British Airways have Boeing and Airbus aircrafts, therefore they indigence to advantage the services and maintenance of aircrafts from them.Bargaining power of buyers High. British Airways customers do dont have any take care over the prices or they drop bargaining power. However, they are very powerful as very high competition prevails in the airlines market. Their top competitors include Ryan air Holdings plc, Ryanair, Air France KLM, Virgin Atlantic Airways, Lufthansa etc and umpteen times these airlines provide competitive offers to the customers with very petty(a) prices.Threat of substitutes Medium. The airlines industry has suffered a high loss of customer confidence after September 11, 2001 disaster in New York. There is no direct reserve available for airlines for long/overseas journeys. Coaches, Trains or ship/ferries lot be used for short journeys. Rapid information of technology can be an indirect substitute of air transportation. According to International AirTransport Authority, corporate Air Travel Survey 2002, for last 12 months no frills/low cost airlines were used by 1/3 of all business travellers basically for cost benefit. Further, video conferencing was used by 37% to compose money and travel time.PESTELThe beginning of the new millennium has made the airlines industry witness the most difficult time it has ever faced. Political unstableness a nd unprecedented crisis have resulted from terrorist attacks in September 11, 2001 in New York and July 7, 2005 in London together with wars in Iraq. These incidents resulted in new security regulations from the US and EU and customer travelling confidence have also reduced. scotch factors are of resilient importance. Fourth quarter of 2008 showed a 2.0% lower gross domestic overlap than fourth quarter of 2007. This is mainly due to the upstart credit crises and thereby economic slowdown. Company showed an operating profit of 89 million as on 31st December2008, which is 88% down compared to 2007. Further, 70 million was the loss before tax for the same period and fuel cost went up by 48.4% to 2,244 million. It is mainly due to economic weakness and polish in the cherish of sterling.Impacts of social factors vary from country to country. Size of capableness market and customers call for are affected by them. Demographic changes have led to the growth of grey market which is in cur more expenses on travelling and leisure. Tastes, fashions and lifestyle are also changing. So as to maximize its capability to operate and object in a most effective scheduling and routes possible, British airways is using route preparation software. Use of standard technology leave alone asperse cost and provide flavor service to freight customers and passengers. (Gomm, 2005). technology also enables to reduce the person-to-person costs like automated check-in processes and e-ticketing and thereby enables the airlines to offer standard services with less human resource. BA is the first airline to introduce a unique technological system called Microwave Landing Technology, which increases the rate of safe arrive during low visibility by 20%.Power of Trade Union is an important legal factor alter British Airways. British Airways is aware of the consequences caused by Trade Unions (August 2004 and August 2005 drive actions). Factors which British Airways must consider ar e legal regulations on customer rights, employee rights and rise in ecological and milieual issues.2.3 SWOTBritish Airways which has healthful international operations net land with 300 destinations across the world has its own strengths and weaknesses. Here is the SWOT analysis which helps to understand their business scenario better.Positive ostraciseINTERNAlStrengthsWeaknessStrong geographical front line at international levelHigh employee productivityHigh Service Quality life-sized Airport PresenceStrong operating performancefirst-rate new fleet of aircraftsUse of High end technology agonistic and tone customer serviceBad performance at break markets in terms of revenue growthHigh Debt of the companyHighly parasitic on FuelLack of effective marketing strategyEXTERNAlOpportunityThreatsGrowing political programetary tourism industry and an increase in international travellersGrowing air cargo industryEU-US aviation agreementBuracratic systems and management poor decision makingDrastic change in technology and customer behaviourIntense competition from low cost airlinesIncrease in fuel costEconomic slowdown due to credit crunch2.4. Current strategy star Destination seeks to ensure our customers fly confident that, together, we are acting responsibly to take care of the world we live in. is the fantasy of British Airways. Their corporate state vision is to become the worlds most accountable airline and they have developed guiding principles describing what they are doing to achieve this goal. Leading the industry towards finding innovative solution is their determination. They plan to continually review how they fly, what they fly and what they buy to become the most responsible and efficient airlines in the world. The British Airways has developed a strategy where their main concern is to establish themselves in ending 5 and also acquire new aircrafts depending upon their financial performance by March 2010.They have adopt an approach to truly deliver this vision, uniting all areas of the organisation, divided into 4 study(ip) linchpins environmentThey aim to minimise their impact on the environment, including their contribution to air feeling, depopulate, climate change and noise. British Airways was the first airline to report its environmental performance in 1992 since they recognise the impact they have on our planet while delivering socially and economically vital service of air transport. So as to become the worlds most responsible airline, their environment strategy aims to minimise and manage the environmental impacts.Main heightenHow they fly Efficient operation to minimise their impact on environment.What they fly Adopting recent technology including alternative fuels, airframes andengines to minimise their impact.What they buy Using economic tools like emissions trading for fully reflecting the cost oftheir environmental impact.Goals across these areas areBy 2010 landfill by zero waste in the UK.By 2025 they aim to amend the century efficiency by 25% reducing the carbon dioxidefrom 111 to 83 grammes per passenger per kilometre.By 2015* average noise per flight to reduce by 15%By 2050 their net CO2 emissions to reduce by 50%*measured as the network average quota count (QC) for combined landing and take-off cycle.Comprehensive plan developed to achieve the GoalsClimate change British Airways overall strategy is to ensure maximum contributionto their share of global carbon dioxide emission reductions by 2050Waste Focus on recycling, reducing, reusing and responsible waste disposal.Noise Their impact on the local communities nearby airport to be reduced.Air quality Air quality for communities nearby airport to be improved.CommunityProviding support to local communities in the country where British Airways operate is the main belief of the company. Conservation projects, small individual programmes, 120 international communities and various charities were helped by BAs support. L ondon Benchmarking Group inform British Airways direct and in-kind donations of 5.7m last year.British Airways offer diverseness of support like cargo space, funding, fund raising events, merchandise, free flights and excess baggage. Their main concerns for support are Sustainable touristry and Heritage, Education and Youth Development, Environment and Supporting employees.MarketplaceBritish Airways suppliers and customers are involved in one destination in their marketplace pillar, to facilitate building up more sustainable business and to persuade dedication to corporate responsibility.Issue cover by their marketplace pillar comprisesHow they fly Reliable customerWhat they buy Responsible procurementWhat they fly Sustainable products and servicesGoals across these areas are10% of customers to be encouraged to counterbalance their carbon on ba.com by 2012.By 2012 100% of their strategic suppliers to be audited for ethical practices.Corporate responsibility to be used as a dec ision criteria by 75% of corporate customersby 2010.WorkplaceBritish Airways aim to provide a work environment that engages, develops, motivates and support their colleagues. Encouraging employees to be committed to Corporate state is the main aim of British Airways workplace As employees plays a vital role in making up the airline and they need them onboard One destination. This commitment is not only going to help them deliver a great place to work, rather it will also ensure quality customer service in the industry.Issues covered by their workplace pillar compriseHow they fly Responsible colleagueWhat they buy Tools to do the agate lineWhat they fly Invest in peopleOur goals across these areas are all year British Airways 50% employees donate money to charity through Pay Roll Giving.Every year British Airways 50% employees donate time to communities and charities.75% of employees committed to delivering our corporate responsibility goals by 2010British Airways have recogniz ed performance objectives to evaluate their development in each of these four sections. British Airways aim to deliver its corporate responsibility strategy by a programme plan developed including over 80 programme level activities and hundreds individual projects.Business Plan BP10Bring Terminal 5 aliveIn order to improve the operational performance and enhance customer experience British Airways main concern is successful delivery of remainder 5 at Heathrow base. Terminal 5 denote their sole biggest scrap and change. British Airways Fit for 5 programme was set to be perfect(a) in the 1st year, which involved essential agreement modification and carrying out on highly superior work performance all over the Heathrow terminals.BA Basics and adeptThe British Airways board aims to offer Brilliance in its activities and deliver the BA Basics evermore. Business Plan 10 (BP10) primarily focuses on baggage performance and punctuality with additional plans to witness BA Basics in va rious areas for the long term. British Airways aims to offer Brilliance to their customers in numerous vital areas such as their customer services, Terminal 5, ba.com, their premium customer experience and their network and schedule from London.Competitive cost baseMain priority of BP 10 is cost dominate they expect savings from various areas of business too. The need to decrease sizable deficit position and resolution of pensions problem is preponderantly acknowledged in BP10. Its quite difficult for them to achieve a competitive cost base if they are to accomplish their growth and investment plans.Invest in growthIn the first year of the plan they campaign to commence a competition for the new long haul aircraft, if the pensions deficit satisfactorily resolves. In order to tinge their explicit growth plans they intended to secure first of these aircrafts in 2009, whilst the replacement of fleet will be started by 2011 with the second batch. The strategic entailment of the oper ations in London and Gatwick airport is recognized in BP10. The key to British Airways network development programme from London airport is the operations maintenance of BA Connects London city, as part of British Airways regional business sale to Flybe.BP10 enablersThe vital aspect tin can implementation of BP10 is constant engagement and participation of British Airways people. A major segment of British Airways broader communication strategy was local face-to-face communication as it was accepted to be the most effectual engagement. The second major possibility for change in the business remained IT. British Airways investment plans in this sector comprised constant advancements in the functionality and usability of ba.com, Terminal 5, encouraging a variety of departmental change programmes and automating corporate processes plus simplifying services by use of employee self service.3. Potential Strategic optionsAfter going through BAs vision, goal and their real strategy, we ar e of the opinion that BAs trustworthy strategy is very competitive and will definitely help British Airways to achieve their goals. In addition to the above strategy, we also have identified few more potential difference strategic options which could be useful for BAs further growth. The accessibility to enormous products and services creates an chance to exploit them appropriately. Making the most of global variations and technological trends serves as a potential prospect to work with. The potential strategic options which British Airways could expend for further development of business could be Virtual reality, which may serve as an innovative simulation, share expertise and attaining network software. Some of the potential strategic options for British Airways are discussed belowGlobal tourismThere are many factors which have a very strong influence on the airline industry and one of them is trends in global tourism industry. As per the World Tourism Organization survey, approximately 898 million international tourists travelled globally in 2007 which is 6% higher than the previous year (846 million- 2006). As per the Tourism Satellite Account research which is done by World Travel and Tourism council, it is been predicted that world travel and tourism will grow at an average rate of 4.3% per annum for the period of 2008-2017 and will generate $13 cardinal for that period.Rising Air Cargo IndustryThere is a horrible growth in the Air Cargo market and the volume of the business is doubling in every 10 years time. As per the International Civil Aviation Organization, the cargo business is expected to grow at an average rate of 6.5% per annum in next 20 years. Approximately 22.17 million tons of freight was carried throughout the world and it is expected to grow up to 60million in 2017. In 2008, BA transported 805000 tons of goods and these numbers will increase tremendously in coming years due to its operations presence in most part of the world and will be benefited by the growing trend in cargo market.Open Skies AgreementOpen Skies aviation agreement between EU and US is an air transport agreement, which allows airlines of both EU and US to fly between any points among EU, US and non EU countries like Switzerland. This is the replacement for the previous agreement made between US and each European country. To take advantage of this agreement, British Airways started new subsidiary airlines OpenSkies and for the first time it started to fly direct flights from continental Europe to the US. The first flight of open skies was on June 2008, from Paris to New York. The new agreement has enabled British Airways to increase its operations in the key regions. some(prenominal) Strategic options can also be identified with the help of the Ansoff matrix analysis discussed below.Ansoff MatrixMarket PenetrationMarket penetration strategy involves consolidating and protecting/building the real product/services in the animate market. I t occurs when a company with its vivacious product penetrates a market. This strategy starts with the existing customers of the organization. This strategy can be used to increase sales without losing focus on their existing product/services. British Airways can penetrate in the market through their joint business agreement with Iberia and American airways thereby gaining competitors customers, by upgrading the quality of their services and also increasing the frequency of the flights in the existing market. It is comparatively cheaper to retain existing customers than finding new ones. increase DevelopmentProduct development strategy emphasises on building a new product with existing and new capabilities beyond menstruum expectations in the existing market. In the present scenario of economic downturn, it is quite difficult to introduce new product considering the cost involved in developing new product and it is run a risky to predict customer reaction too. British airways have already invested a huge amount in setting up its infrastructure especially in Terminal 5. They should rather emphasise on maintaining and upgrading the quality of present services.Market DevelopmentMarket development strategy focuses on finding new segments, territories, new uses of existing market with existing product/services. British Airways may go for new market development considering the current strategic situation of the market. However, as the company already operates in more than 300 destinations therefore we would recommend them to concentrate on maintaining the quality of services at the existing markets thereby further build up its position.DiversificationDiversification concentrates on developing a new product in new market with existing and new capabilities beyond current expectations. Since British Airways have numerous services operating almost all over the world, it would involve high degree of uncertainty and financial risk to go for diversification.Mergers and a cquisitions could be an important alternative for further growth. However the current financial situation of British Airways does not allow the same as they have already invested a huge amount on its current projects and it might prove to be difficult and risky too. Although British Airways may consider this decision once the companys position is reinforced and there is potential for growth and acquisition in the market. It may be a useful strategy in order to attain fast market growth.Thus the strategy which we would advise British Airways is to concentrate on existing market and existing services and accomplishing its ongoing investment project. So as to achieve further growth in the market British Airways should make the best possible use of its investment projects and strengthen its brand name by providing new offers to the current customers and appealing to new time out market.4. Recommended strategic direction with rationaleAfter discussing the current strategy and potential strategic options for British Airways, we would like to further recommend the following strategic directionsDevelop opportunitiesBritish Airways should try to continue their business tie-ups in the new market once they regain their financial stability. Though BAs talks on merger with Quantas Airways Limited failed, they need to strengthen their existing joint business with Quantas to have a good hold on the Australian market. They need to concentrate on Asian and Middle East market which has a high potential for growth.Distributing the riskBritish Airways should concentrate on their Cargo industry which has got a great potential. They should also try to apply more markets through code sharing with other airlines which is a cost effective option.Manipulating strengthsBritish Airways have got a very strong base in Heathrow Airport, UK. BAs Terminal 5 presence will help them to maintain high standard of service as it will enable them to handle increased volumes of customers and baggag e.Upgrading Customer experienceThey should focus on providing better facilities like T5 lounge, which provides premium customers better comfort and luxury like a private members club. They should strengthen their customer base by constantly upgrading their flight schedules, offering better competitive packages for customers and being competitive with the facilities provided on board so as to attract more customers and thereby creating an opportunity for increasing revenue.Controlling cost of expansion planBritish Airways has been clean successful by following its effective strategies. Currently, we would advise BA to control its expenditure on buying new fleets and expanding to new destinations. They also need to reduce the cost of high aircraft utilization so as to minimize environmental risks.ServicesBritish Airways needs to concentrate on providing value for money to the customers. There is an intense competition in the market from Virgin Airlines, Singapore Air, KLM, Quantas an d Emirates who also fly in the same route. They might stick out their customers if they do not provide something unique from their competitors. These days the number of low cost airlines is increasing through out the world in both domestic and international market. Hence, cost effective and better services should be provided.Passenger friendly airportsIt is of extreme importance for passengers to feel that their purchasing needs are met. British Airways should aim to establish an image of a major international hub with standard facilities.