3.

0 Customer Analysis
Over the past decade there has been increasing complexity in customer needs, as the customer has
become more educated and demanding. Particularly, the following changes have occurred:

A shift in demographics to older passengers (Keynote, 2008c).

Increased global connectivity allowing the usage of internet and search mediums (e.g.
comparison and review websites).

Increased requirement for convenience (e.g. new destinations, quick check-in).

Price has become more of a priority

Segments have become more defined within their needs.

Evidence that BA is failing to respond to the changing customer landscape includes:

The amount of BA customers recommending their services reduced from 61% in 2006/07 to 59%
in 2007/08 (British Airways, 2008).

BA have been criticised for slow innovation (Doganis, 2006, Pg 165).

Poor reliability and baggage handling (AQR)

Failed attempts to target the price conscious consumer through low cost airline operation (Eirma,
2008).

4.0 Competitor Analysis

4.1 Strategic Groups
Figure 3 Strategic Group Analysis (Source: Johnson et al., 2008, p73-77.)
Specialist e.g. PalmAir

LOW

Mass Service Providers e.g.

BA, Virgin, Lufthansa, AirFrance KLM

PRICE

Local e.g. BMI

Non-scheduled e.g. Thomson

HIGH
LOW

No-frills
e.g. Ryan Air, Easy Jet

BREADTH OF SERVICE

PRICE FOCUSED

MIDDLE MARKET

HIGH
FOCUS ON SERVICE OFFERINGS

Figure 3 illustrates that BAs direct competitors are those who operate similar services and
lie within the same strategic group. The competition is likely to be most intense within this
group as they are seeking similar strategies.
Lufthansa and KLM-Air France are the 2 leading European Airlines Member carriers in terms
of passenger numbers, with 15.1% and 14.1% respectively of the total number of
passengers carried. BA comes in third with 9.3% of the total (Keynote, 2008c).
BA face competition from a small number of serious contenders in the UK, with the main
contenders being Virgin Atlantic, and United Airlines in the Star Alliance soon controlling BMI
(Euromonitor, 2008). Although they do not lie within the same strategic group as BA the
advent of low-cost air travel has changed the face of the airline industry. Airlines such as
Ryanair and EasyJet have established themselves among the leading carriers in Europe,
whilst the more established long-haul carriers such as BA have struggled to keep up with
their counterparts growth rates.
Moreover the economic downturn and sharp fall in oil prices has caused a price war between
Emirates, BA and Virgin Atlantic on the London-Dubai route. Fares have dropped by 30%
across the airlines. Thus competition still remains fierce.
Based on the strategic group analysis it could be argued that there is a gap in the market
for a low cost airline operating a high breadth of service however it is likely the reason no

airlines have adopted this strategy is due to the fact that it would be destined to fail. This
assumption could be supported by BAs failed attempt to enter this market in recent years
(Telegraph, 2002).