You are on page 1of 9

British Airways

British Airways (BA) is the UK's largest international scheduled airline. It


operates international and domestic scheduled and charter air services for
carriage of passengers, freight and mail. It has over 550 destinations globally
which makes it the leader in the industry.
BA has it's main hubs at London Heathrow Airport and London Gatwick
Airport. It's headquarters is located at Waterside. British Airways is said to be
the largest airline in the UK based on fleet size, international flights and
international destinations.
On 31 March 2009, BA celebrated its 35th anniversary. On 12 November
2009, British Airways confirmed that it had an agreement to merge with
Iberia. The merger promises to create the world's third-largest airline in
terms of annual revenue. The merger is expected to be completed by the
end of this year.

The Market Environment


Geographical Market
British Airways serves nearly 150 destinations including the following:
In Europe, there are Austria, Bosnia and Herzegovina, Bulgaria, Belgium,
Albania, Croatia, Czech Republic, Denmark, France, Finland, Germany,
Greece, Ireland, Italy, Netherlands, Norway, Poland, Russia, Spain,
Switzerland and Turkey.
Within UK, Manchester, Newcastle, New quay, Aberdeen, Edinburgh,
Glasgow.
In Africa, Tanzania, Mauritius, Uganda, Egypt, Libya, Tunisia, South Africa,
Zambia, Nigeria, Ghana are included.
In Asia, there is China, Japan, India, Thailand, Bahrain, Israel and UAE.
South America which includes Brazil and Argentina.
Lastly, there is North America which includes Canada, US, Mexico, Caribbean
and Australia.

Pest-G analysis

The main PEST factors that have influenced alliances are:Political - Political factors include government regulations and legal issues
and define both formal and informal rules under which BA must operate. The
benefits, is that it makes unreachable routes, possible.
Economic - Economic factors affect the purchasing power of potential
customers and BA's cost of capital. Economically, this lead to a greater
control on capacity, which results in reducing competition and increasing
yields. By code sharing airlines are able to not only split costs but to offer
services and enter markets, they might ill afford to do on their own.
Social. - Social factors which include the demographic and cultural aspects
of the external macro environment of BA. These factors are the ones that
affect customer needs and the size of potential markets.
Technological - Technology in this industry is fast moving and can be a little
expensive. It gives the opportunity for joint investment ventures, such as
shared check-in systems.

The competition
Who are the main competitors?
British Airways faces competition from many like bmi, Air Berlin, Air France,
KLM Royal Dutch Airlines, Ryanair, easyJet. However, it's major competitor is
Virgin Atlantic.
Virgin Atlantic is Britain's second biggest long haul airline and was
established by Sir Richard Branson. It works hard to retain customer loyalty
and to remain long-term profitable and successful.

Sales and profit trend


Last year, VA announced that it had almost doubled annual profits just when
British Airways announced a huge loss. The airline claimed pre-tax profits
that went from 34.8m to 68.4m in the year to February.
They recently reported revenue for the quarter was up 10% to 513m, with a
steady growth in their business.

Market Share

On 30th July 2010, Virgin Atlantic claimed a 5% increase in their market


share during its March to May quarter as it flew 15 percent more "Upper
Class" passengers this year. Quarterly revenue grew by 10 % year over year.

Target Markets
VA operates long haul services to thirty destinations worldwide that range
from Shanghai to Las Vegas.

The company
Sales and profit trend
British Airways finally managed to end its period of losses and bounced back
in the first six months of the year. It has posted their pre-tax profits of 158m
for the six months to the end of September. In the summer quarter, BA got
an operating profit of 370m with an operating margin of 14.7pc.
Nearly one-third of its sales have been made through ba.com, which
accounts for 20 percent of its revenue.
By 31 March 2010, the company's selling costs were 290 million, coming
down from 369 million by 21.4 percent over the previous year.

Market Share
Last year, Market shares of British Airways were 47%. Recently, it serves up
to 43.6 percent flights from Heathrow to the United
States.http://kona.kontera.com/javascript/lib/imgs/grey_loader.gif
It's market capitalization is 1505.48 million and it has 45% of the total
market shares.

SWOT Analysis

Strengths
Size
Strong brand recognition
High level customer experience
Customer loyalty

Environment friendly
Weakness
Lower fares due to high competition
Poor communication within the company
Poor employee relations history
Opportunities
Increasing demand for transatlantic flights
Emergence of new markets
Decreasing costs as industry expectations decline
Competitors failing on delivering reliability
Threats
Fuel costs
Terror Attacks
Economical instability
Global economic crisis

The company's marketing strategy


Segmentation
British Airways is segmented into four classes of travel. They are:
First Class - It offers exceptional comfort and refined surroundings. It
delivers travel essentials in a flawless, excellent and typically British manner.
Business Class - It is better Economy Class seating and gives the option of
a Biz bed or Biz seat which cuts costs, not comfort.
Premier Economy - It provides privacy and expert service, ensuring
relaxation throughout the journey.
Economy - It gives a comfortable surroundings, friendly service and
complimentary food.

Targeting
British Airways mainly aims at the banking and finance passengers which
account for 40 per cent of its revenues.

Differentiation
What makes BA different from others?

A 28% improvement in carbon efficiency across their fleet since 1990 has
provides environment friendly services.
They are the only airline to proudly win the Pfm Award for their work on the
reuse and recycling of office and lounge furniture.
They aim at becoming world's most responsible airline to ensure they lead
the industry in managing and minimising environmental impact.

Growth Strategy
British Airways and Spanish carrier Iberia announced a merger plan on 30
July 2008. In 2009, it was confirmed by BA. This will create the world's thirdlargest airline in terms of annual revenue and the second largest airline
group in Europe. The agreement is expected to be completed by the end of
2010. British Airways and Iberia have already drawn up a list of 12 potential
airline targets as takeover candidates, once their merger is finalized.

The marketing mix


Product
British Airways operates one of the largest and the most modern fleets of
any airline in the world. In 2007, the carrier placed its next major order of 12
Airbus A380s and 24 Boeing 787s. In September 2010, the average age of
the BA fleet was 11.7 years.

Price

The types of British Airways ticket are:


Lowest ( changes and refunds may not be permitted)
Flexible ( changes and refunds possible)
British Airway Fare vary for adults (12+years), children (2-11 years)
and infants (0-2 years).

Place

Modes of ticket purchase:


Online Booking
Telephonic and Direct Booking from any of the worldwide counters

Promotion

It gives a lot of offers to promote the company and attract customers.


Some are mentioned below.
Exclusive Flight Offers: Great fare deals for registered members
Companion Offer: A round-trip flight, using the BA Visa and get an
extra ticket.
BA Visa Card: A bonus of 20,000 BA Miles following the first purchase.
Frequent Flyers get points on selected fares.
Business Rewards Program

People
BA offers highly attractive rewards packages to its crew. They closely monitor
wages across the different industries and take reviews to make sure their
salaries remain sufficiently competitive to attract and retain the people
needed.
The employees are provided with the special benefits like bonus, employee
share scheme, profit scheme, etc.

Processes
Once the booking is done, the rest of the process is made quite easy. There is
an option of checking-in online, where the customer does not have to wait in
queue for any checking and can directly proceed to passport control. BA also
provides special lounge service to their business and first class passengers.
They are making efforts to provide maximum customer satisfaction to make
travel a pleasure.

Physical Evidence
This includes the environment in which the service is delivered and where
British Airways interacts with their customers. They provide excellent quality
and service to the customers. The aircraft's seating configuration which is
meant to be spacious and comfortable, and it's in-flight food provide count
for the physical evidence. The domestic lounges are enhanced with good
interiors and basic amenities.

BCG matrix
British Airways has had a great market share and low growth rate over the
past few years. They did not make any major investments like increasing

their fleet size or expanding their destinations which made them a cash cow.
But recently, BA placed more focus on their growth strategies by placing
orders for new aircrafts, expanding geographical market. Another major
decision was the merger with Iberia which will be finalized by the end of
2010. This will make the company's revenue one of the highest in the
Aviation Industry. By doing so, BA will not only generate large amounts of
cash because of their strong relative market share, but also consume large
amounts of cash because of their high growth rate; therefore the cash in
each direction approximately nets out. It shows that the company is slowly in
the process of becoming a star.

Product life cycle


Introduction Stage
By the 1920's Britain had a lot of airline companies but due to strong
competition many private British air carriers were forced out of business. In
1923 all these companies merged to form a single british international air
carrier called the Imperial Air transport.
Meanwhile, the british airways, had begun to impose a big threat and
competition to imperial air transport which resulted in the formation of the
British Overseas Airways Cooperation was formed (BOAC) that later
combined with the BEA and 2 smaller companies formed the British Airways
(BA)
Growth Stage
The growth can be easily marked by the introduction of the concorde into the
BA.
In 1985 British Airways was made a public limited company. In February 1987
the privatization was finally consummated when 720.2 million shares of
British Airways stock were sold to the public for one billion pounds.
Expansion of fleet and routes were even more noticeable after mergers with
other carriers like Bcal (British Caledonian). Due to the expansion of BA,
another carrier Laker Airways were also forced out of business. This marked
how dominant BA was turning out to be in the air carrier sector.
Maturity Stage
The BA mergers assured the dominance of the carrier in the home market
secure for the time being.

During this stage alliances and mergers made/attempted by BA with other


carriers in different markets were numerous:
Aliiance with Aeroflot in Russia to create Air Russia.
Attempted merger with KLM royal dutch airways. Broke down due to
valuation of the two firms.
Purchased 25% of Qantas airlines in Australia.
Gained 49.9% of the French, TAT European Airlines.
Started a german carrier called Deutsche BA with 49% ownership.
Purchased 25% of USair.

Evaluation of the company's strategies and


tactics
Evaluation of the company's current position

BA presented its interim report for the six months ended September
30, 2010.
Period highlights:
Profit before tax of 158 million (2009: loss of 292 million)
Costs down by1.5 per cent
Operating profit of 298 million (2009: loss of 111 million)
Quarter 2 operating profit of 370 million (2009: loss of 17 million)
Total revenue for the period was up to 8.4 per cent.
Operating costs were down by 1.5 per cent. Fuel costs were up by 2.4
per cent, and other non fuel costs reduced by 3.1 per cent, 4.0 per
cent.
Profit before tax for the period was 158 million.
The effective tax rate for the period was 27 per cent.
Cash position remains strong, at 1,857 million as at the end of
September, up 143 million from the end of March 2010.
The Directors declare that no dividend be paid for the period ended
September 30, 2010.

Evidence of the company's success


Evidence.png

Sourcehttp://phx.corporate-ir.net/External.File?
item=UGFyZW50SUQ9Njc0MTh8Q2hpbGRJRD0tMXxUeXBlPTM=&t=1

Prospects for future growth/success


British Airways is planning for a future where it can provide its customers a
better service than before despite the potential threat of walkouts hanging
over it.
British Airways recently opened up its Gatwick gateway with a growing route
network that has established it as the airport's leading long haul carrier. It
continues giving an excellent punctuality performance at Gatwick Airport
with achieving the best monthly punctuality figures British Airways has ever
recorded in March.
They have also placed an order for 12 A380 airbuses which will be given by
2012. They are quieter and cleaner which will lead to environmental
improvements and at the same time they are fuel efficient which lead to an
increase in profit by reducing the operating cost.

Conclusion
After going through a bad phase for two years, British Airways appears to
have finally drawn a line in the sand and turned those losses around. Now
not only does BA offer excellent punctuality and customer service, they also
have an excellent route network, with plenty of choice and a flexible
schedule allowing passengers to connect from many parts of the UK. The real
challenge now is how it aims to plug the money-spilling into revenue
generation