British Airways Business Environment Unit 1 Sample Report - Essay Prowess

British Airways Business Environment Unit 1 Sample Report

British Airways Business Environment Unit 1 Sample Report

  

British Airways also known as BA is arguably the world leading international airline. Based in Heathrow airport, London the airline boasts of more than 1000 planes that operate in 441 airports worldwide[1]. The headquarters are at are at Heathrow and Gatwick airport, London. The company has 42755 employees and operates in 86 countries. Their main business is domestic and international carriage of passengers, mail and freight and ancillary services. According to a report by IAG (International Consolidated Airlines Group), on 28th Feb. 2013, BA is currently the market airline leader in UK international scheduled airline and also the leading premium airline globally.

The airline operates in one of the busiest international scheduled airline route. The airline has signed many trade agreements; franchise and code shares in order to ensure that it remain profitable. The aircrafts currently flies to over 400 destinations worldwide[2]. During the year 2012 the airline revenues increased by 8.4% to stand at £10,827 million. The group also announced an operating profit of £274 million this was a decline from the previous year’s £518million (before taxation). Loss before tax deduction from the continuing operations was £139 million. To collect this the management to measure to increase its presence in Heathrow by acquisition of British Midland Limited. The bmi was formerly owned by Deutsche Lufthansa AG. This enabled BA to start operations in 20 new routes all from Heathrow[3]. The plans are underway to convert some short haul operations into long haul operations in the future to increase revenue incomes. The group is also committed to innovations in technology to continue providing quality services and introduce new products in the market.

BA have for a long time acknowledged the power of mission statement in influencing corporate growth. The airlines vision statement is to be “The World’s Favorite Airline” and its mission is to provide a full service experience and realize the target both in flight and on the ground. British airways have taken various strategic steps to ensure that it achieves this mission. Pursuing the business mission will go a long way in maintaining a strong brand name. Despite a lot of controversy surrounding the airline, the British Airways has always remained a strategic player in the airline industry due to effective strategic plans.[4] To pursue its vision and mission BA has invested 5 billion Euro pounds in the purchase of new aircrafts, cabins training and hiring, elegant lounges and in acquiring the right technology. All these are aimed at creating comfort during air transit and create customer royalty.

The vision of BA is to become “undisputed leader in world travel.[5]To keep moving towards the achievement of this vision BA has continued to develop their staff through in-service training and incorporating new technology in providing services to the customers. For example, the airline cabin crew has been provided with I pads to facilitate communication with the customers and easily to locate them in the plane. The corporate will always remain sensitive to the customer’s needs and endeavor to meet their expectations. A vision statement is a key driver of the company success. It enables all the employees of the company to direct their energy towards the attainment of these goals.

The airline (BA) has six well distinguished stakeholders. These entails;, business managers, customers, shareholders ,the society and the staff. All these stakeholders are very important in the success of BA. They form part of its business environment.[6]

British Airways (BA) has faced a number of challenges that with no doubt have had diverse effects on the various stakeholders. Due to economic challenges and consecutively making huge losses, BA under the leadership of Eddington requested 5000 workers to voluntarily resign from their jobs so that the company could hire new more efficient and flexible workforce. The move resulted into a clash between the management and the workers. Strikes and go slows were conducted to oppose the move. Later on the BA agreed to meet their demands and Staff development was done through training to make workers more efficient. The management also increased the salaries and made efforts to improve the working environment.[7]

As British Airways continued to perform poorly and incurring losses, the shareholders were worst affected. The company did not pay dividends for two consecutive years. However, the management came up with the strategies of returning the company back to profitability. They invested in employees to make them more productive and in structure such planes and Terminal 5.[8]

BA was over years rated poorly in terms of luggage handling and customer service. Due to poor working conditions the cabin was not efficient in the provision of services to the clients. BA has made an effort to correct the situation by creating an enabling environment for their workers, offering them with I pads so that they can be able to trace customers and construction of Terminal 5 and to equip it with the right technology to make luggage handling more efficient (2002). The company also has the best aircraft in the world right now which offer great comfort to the customers.[9]

British Airways has faced several setbacks in its endeavor to ensure customer satisfaction while at the same time operate profitably for the best interests of their shareholders. (Hanlon, J.2007) The 2009/2010 economic situations are the most severe in the History of the airlines operations. This industry has undergone several permanent structural changes. This has resulted to increased expenses, and reduced revenue incomes as the airline adapted to the new economics of managing premium airlines. These challenges included: The company needed to raise finance at period in time when there was a continued crisis in the debt market, their historical operational cost was very high and there was need to reduce it, sealing of the merger deal with Iberia airline, means of meeting their 3.7 pounds arrears in pension deficit, how to win the trust of Iberia and American airlines to cooperate in north Atlantic routes and finally sought ways to change their working practices. The airline also needed to set strategies of facing stiff competition from virgin Atlantic and other international airlines such as Air France.

Changes in the corporate leadership have also brought a number of challenges to BA. After Sir John King left the office of chairman, he was succeeded immediately by Robert Ayling, who became the CEO of this airline[10]. This resulted into a decrease in revenue incomes. Ayling was later replaced by Rod Eddington in an attempt to save British Airways. This called for the need to reduce the operational cost and to lay off some workers was seen as the best solution. In 2003, Rod Eddington declared that he was going to ask 5000 of the airline workers to resign voluntarily from their jobs within the following 11/2years period. At the same time, he stated that strategies were underway to replace the volunteers with newly hired employees who would be more efficient and flexible. The move was faced with fuming reactions by the workers. The idea was outsourcing services with the view of reducing the operational costs.

To calm the conflicts, the management agreed to meet and negotiate with the trade union halfway. The conflicts led to three-days go slow by the cabin crew. The strike and go slows affected the company operations heavily and resulted to huge losses. The plans to lay off workers and handling of the strikes reduced the moral of the employees. They were bitter because Eddington did not consult them in making this decision. As a result, their job performance became poor as a sign of their sentiments. The staff was offering poor services to the airline customers. This made these customers move to other airline companies like the Virgins Atlantic Airways, who were offering better services[11]. A good leader should always consult his subjects, understand them and convince them why things should be done in a given way. Employees should be involved while planning of strategies so that they can support them during implementation. Eddington failed to manage the changing business environment of British Airways effectively which resulted to huge losses. Every corporate should embrace change for survival. Success in the implementation process depends largely on the leaders capabilities.[12]

Over the last one decade British Airways has been faced by a number of Political and legal challenges. The current century (21st) has proved to be the hardest time of the airline industry[13]. The terrorists attack on 11th. Sept. 2001 and July, 7, 2005 in New York and London consecutively and the Iraq attack by the US have caused exceptional crisis and political instability. This caused various such as EU and US to introduce various security regulations. The effect of these regulations affected airline industry in 2006. It resulted into a sharp decrease in customer’s royalty and confidence in the British Airways. This resulted into a decrease in the number of passengers that resulted into huge losses. Security plays a vital role in the stability of all business sectors.

Economic challenges; British Airways products face a high elasticity of demand. As a result, the volume of passengers is will keep increasing[14]. In the last one decade, the price of fuel increased enormously. The increase in prices was aggravated by Iraq attack by the US during the reign of George W Bush which resulted to oils shortages in the world market. It is estimated that the rise in oil prices could lead to an increased cost of operations by over 100 million euro pounds. This may result into losses especially if you factor in the competition. The major customers of BA are tourists and the business people. During the times of economic challenges and slow down the number of business transactions decreased and, as a result, very few business travelers boarded the jet. Also, the tourism industry was greatly affected reducing the number of passengers.

The United States and E U have put into place rules and regulations on where the plane can fly as well as the pricing and product planning. The regulation changes were aimed at creating career opportunities and creating a fair market competition. Fierce competition and in particular price competition could lead to losses. The British Airways as a deregulated corporate needed to put into place systems that would facilitate quick decision making on key aspects of the business environment.

The Airline continues to face stiff competition in its market both locally and internationally[15]. The company trades in two types of market segments which includes; short- haul and long- haul flights. The long-haul competition is between BA and other international airlines like Air France. The competition is mainly based on comfort, services, overall quality and in routes. Under short- haul, BA faces competition from various airlines like Easy Jet and virgin Atlantic. Competition reduces the profit margins as the companies adopt price competition methods. This partly explains the cause of huge losses made by major airlines in the European market over that decade.

In conclusion, British airways must keep up with the pace of changes in the aviation industry. The contribution of employees in the pursuit of the airline mission and vision should not be underestimated. The management must commit enough resources to the personnel development, remuneration and the same will be reflected through quality services to the customers. Technology and innovation should always be incorporated in BA business strategies for the airline to remain the global premium carrier leader.

                      

Works Cited

Hanlon, J. P. (2007). Global airlines: competition in a transnational industry (3rd ed.). Amsterdam: Butterworth-Heinemann.

of Management.
He, H., & Balmer, J. M. (2004). The Oneworld alliance brand: a preliminary inquiry. Bradford: University of Bradford, School
International Airlines British Airways & Iberia Merge.. (2012). S.l.: MarketLine, a Datamonitor business.

Shibata, K. (1994). Privatization of British Airways: its management and politics 1982-1987. Florence: European University Institute.

Woodley, C. (2006). The history of British European Airways. Barnsley: Pen & Sword Aviation.

Task 2

The last decade, saw the many transformations of the airline industry in the United Kingdom. However, according to ITATA, the airline industry is currently experiencing the worst crisis of its history[16]. The report continues to argue that BA operates within the most competitive and busiest airline market. BA home market grew from 1.2% (2003) to attain a net value of 8.7 billion Euro pounds in year 2004. The growth was experienced in terms of increased number of passengers. The number of passengers increased to 86 million in 2004. This is from 70 million in 2000. The increase in volume of passengers and luggage’s handled called for the development of terminal 5 at London Heathrow to reduce air traffic.

Despite the developments in terms of the market size, the British Airlines continued to struggle and made losses throughout the period. This may have resulted from terror threats, increased competition both locally and internationally and increased cost of fuel[17]. Employees’ strikes and poor management also played their part in occasioning airline losses. The airline industry is made of long haul and short haul market segments. British Airways operates in both of these markets. The aviation market is expected to continue growing and expanding in future due to increased bilateral and multilateral trade agreements between various countries[18]. The speed and time of the means of transport is crucial in business. Air travel will always remain the favorite mode of transport for business because it is the fastest and it saves on time.

The fare charges for airline seats in both the short and long haul are projected to continue decreasing. This is because of the stiff price completion between the major carriers like British Airways, Air France and other low-cost airlines. Some of these low-cost airlines are already dominating the local market and therefore leaving British Airways without a choice. It must reduce prices to avoid losing customers.

However, the increase in the cost of fuel is expected to continue triggering an upward pressure to the charges of airline seats. British Airways raised its seat price in May 2004 by 2.50 Euro pounds for the long haul and short haul seat charges. The charges continued increasing as British airways and other airlines struggled to maintain their profit margins. During year 2004, BA raised its charges twice and then in year 2005, thrice. There has been conflict between BA and virgin Atlantic over the percentage increase of seat charges as the price of fuel increases. However, the low-cost airline do not corporate in implementing the proposed increase in fare charges. Passengers travelling in First class, club world traveler plus are often required to pay 24 pounds more than those travelling in the economy class. [19]

The organization culture affects relationship between all stakeholders in a company. The culture of the company is the pillar of the company as it determines not only the operations of the company, but also how well the company can achieve its goals and objectives[20]. Culture has great influence on how the company remains responsive to change. It entails sharing common habits, approaches, basic assumptions and values. The corporate culture of BA is a bred of the culture of companies they have acquired, merged with and the environment of operation. Being a global airline BA is exposed to varied culture and operational practices.

Every state of where BA operates has its own culture and way of doing things. This called for the need to develop BA staff and empower their ability to tolerate all cultures and create a sense of mutual understanding. The company had to invest time and other resources to cultivate BA culture. This started with the training programme that was dubbed “ putting people first” which was pioneered by Collin Marshal. Originally the programme targeted the employees who had direct contact with the customers. However, it was found to be fruitful and by 1986, all the 40,000 employees of BA had attended and completed this training. The goals of the training programme were to bring behavioral change in the employee’s attitude towards their work. This course was a direct challenge to hierarchical and military-like culture which existed in BA since it was founded. The course instructed workers not to wear uniforms while attending and then they were put in cross-grade groups and cross-functional groups. The course was well designed to encourage behavior change that would help to position the airline in the global market as a multicultural corporation. Enough time was dedicated the programme to make it a success. British Airways also changed the employment policies and practices to make sure they were in line with the new culture and continued to emphasize on these programs and practices. However most of the successful culture in BA may to have developed accidentally, or through circumstances that are impossible to recreate[21]. This proves that origin or history of the company and the environment it interacts with are strong determinants of the corporate culture. On the other hand corporate culture plays a big role in determining business responsiveness to its environment and may lead to success or failure.

The traditional image of European airline industry is that of institutionalized collusion and cartelization[22]. Even though the common transport policy was established under the 1957 treaty of Rome that first created the European community, air transport was not considered in the pact. As a result, each state regulated its own aviation sector. The international system of aviation was controlled through bilateral agreements between countries. The EU has also never formed a common regulatory authority with the mandate of controlling international fleets. This resulted to a regime of state based regulations that favored anti-competitive agreements that were aimed at protecting the national flag carriers which were mainly owned by the state. British airways being a state carrier enjoyed this protection that caused it to be insensitive to customer needs. The airline was operating as a monopoly. This hindered the growth of the airline. There was also an instance of government interference in BA governance.[23]

In 1986, the EU started negotiations with the aim of establishing a competitive internal transport system which could spearhead economic reforms in all other related sectors and promote tourism in the region. It is during this period that BA was privatized (1987) and became the first story of success in privatization. The airline underwent through a number of changes in management structure and leadership. Employees were also retrained and well motivated.

The EU aviation packages developed in 1987, 1990 and 1993 removed most of the regulations that acted as constraints to intra-European aviation sector . Rules regarding the fares charged frequency of services and capacity constraints were relaxed. By the late 1990s, the aviation rules in EU were more liberal than in the US. Cabotage was now legal in EU that enabled British Airways to be able to operate inside France. However, the EU has not yet settled the conflicting goals of ensuring there is competitive industry within relative to international [24]competitiveness of their carrier fully. The EU should negotiate aviation bilateral with non-member states through the European Commission and not individual countries to do it by themselves. In 2002, the EU courts advocate General stated that signing bilateral agreement with non-EU country is against the community law and will compromise deregulation in European Union single market. This ruling has inhibited expansion of BA to non-EU member countries.

Concorde; this is the only supersonic passenger aircraft in the world. It cruises at a speed double the speed of sound (1350mph) . Concorde is currently the record holder of crossing Atlantic within 2hours and 52 min and 59 seconds[25]. To meet the regulation requirement BA had to invest 30 million Euro pound for Concorde can resume flying. Of these, 17 million pounds were spent on fitting safety related gadgets. The installation exercise kicked-off on January. 14 million euro pound was committed to the installation of cabin interiors, new seats and other relevant customer service improvements. The security and safety modifications included installation of Kevlar-rubber, a fuel tank liner. These would reduce the likelihood of fuel leakage in case the wing of the craft punctures (Endres, G.2001). All these modifications were subjected to thorough proving and ground testing before Concorde certificate that is a proof of airworthiness was returned on 5th. Sept. 2001. B A had to over spend to meet these regulations.

The One world Alliance Conundrum; the alliance was founded around 1990s (He, H. & Balmer, 2004). However, the attempt by the two partners, British Airways and American Airlines to strengthen the alliance has been inhibited various regulations. The US has declined from approving the anti-trust immunity for her airlines with BA alliance without the inclusion of the revised US-UK open skies bilateral agreement in order to replace the restrictive Bermuda ii bilateral agreement. Bermuda agreement allows only two airlines from UK and from US to fly between Heathrow and US. The US government wants more of its airlines to be included. To crown it, all the European courts Advocate General ruled out the open skies agreement (2002) terming it to be against the communal laws. The effect is that though this was an opportunity of expanding the market fruits of the agreement can be enjoyed fully due to legal obstacles. It, therefore, follows that one of its largest market across the Atlantic is always one of the most regulated.

Tourism bodies have been of great influence on customer treatment by the crew. Most of the core values are borrowed from tourism and Hospitality Industry such as ensuring seat comfort, effective communication and accessibility of the crew. The adoption of these practices by the airlines has led to a fierce competition in the aviation industry. However, the cost of maintaining this level of services is turning out to be costly and unsustainable. As a result, British Airways has decided to outsource some of these services to cut on cost.

In conclusion, British Airways must take various strategies to ensure that it maintains its lead in its home market London. The airline should start low-cost airline subsidiaries to compete with airlines in this market segment[26]. This will lead to increased revenues to the company. BA should continue research to come up with innovative ways on how cut down the operational cost without compromising on quality of services.BA should also take advantage of deregulation and liberalization of the airline industry taking place in various regions especially in Asia and developing countries. Formation of alliances and planning on acquisition should be part of the strategies of penetrating these new markets. British Airways should also franchise their services in viable markets that they cannot be able to serve economically. Finally BA should also avoid industrial actions that will interrupt its operations. This can be done through all inclusive approach in decision making and good remuneration.

                                      works sited

Endres, G. G. (2001). Concorde. St. Paul, MN: MBI Pub. Co..

Hanlon, J. P. (2007). Global airlines: competition in a transnational industry (3rd ed.). Amsterdam: Butterworth-Heinemann.

He, H., & Balmer, J. M. (2004). The Oneworld alliance brand: a preliminary inquiry. Bradford: University of Bradford, School of Management.

International Airlines British Airways & Iberia Merge.. (2012). S.l.: MarketLine, a Datamonitor business.

Shibata, K. (1994). Privatisation of British Airways: its management and politics 1982-1987. Florence: European University Institute.

Woodley, C. (2006). The history of British European Airways. B


[1] Woodley, C. (2006). The history of British European Airways. Barnsley: Pen & Sword Aviation.

[2] Ibid

[3] Ibid

[4] Hanlon, J. P. (2007). Global airlines: competition in a transnational industry (3rd ed.). Amsterdam: Butterworth-Heinemann.

[5] Woodley, C. (2006). The history of British European Airways. Barnsley: Pen & Sword Aviation.

[6] Woodley, C. (2006). The history of British European Airways. Barnsley: Pen & Sword Aviation.

[7] Ibid

[8] Ibid

[9] He, H., & Balmer, J. M. (2004). The Oneworld alliance brand: a preliminary inquiry. Bradford: University of Bradford, School

[10] Woodley, C. (2006). The history of British European Airways. Barnsley: Pen & Sword Aviation.

[10] Ibid

[11] Hanlon, J. P. (2007). Global airlines: competition in a transnational industry (3rd ed.). Amsterdam: Butterworth-Heinemann

[12] Ibid

[13] Woodley, C. (2006). The history of British European Airways. Barnsley: Pen & Sword Aviation.

[14] Hanlon, J. P. (2007). Global airlines: competition in a transnational industry (3rd ed.). Amsterdam: Butterworth-Heinemann

[15] Hanlon, J. P. (2007). Global airlines: competition in a transnational industry (3rd ed.). Amsterdam: Butterworth-Heinemann

[16] He, H., & Balmer, J. M. (2004). The Oneworld alliance brand: a preliminary inquiry. Bradford: University of Bradford, School

[17] Woodley, C. (2006). The history of British European Airways. Barnsley: Pen & Sword Aviation.

[18] Hanlon, J. P. (2007). Global airlines: competition in a transnational industry (3rd ed.). Amsterdam: Butterworth-Heinemann

[19] Hanlon, J. P. (2007). Global airlines: competition in a transnational industry (3rd ed.). Amsterdam: Butterworth-Heinemann

[20] Ibid

[21] Woodley, C. (2006). The history of British European Airways. Barnsley: Pen & Sword Aviation

[22] Hanlon, J. P. (2007). Global airlines: competition in a transnational industry (3rd ed.). Amsterdam: Butterworth-Heinemann

[23] Woodley, C. (2006). The history of British European Airways. Barnsley: Pen & Sword Aviation

[24] He, H., & Balmer, J. M. (2004). The Oneworld alliance brand: a preliminary inquiry. Bradford: University of Bradford, School

[25] Endres, G. G. (2001). Concorde. St. Paul, MN: MBI Pub. Co..


[26] Hanlon, J. P. (2007). Global airlines: competition in a transnational industry (3rd ed.). Amsterdam: Butterworth-Heinemann