An analysis of the macro-environment has been carried out using PESTEL (Figure 2).

PESTEL Factor
Political

Key Points
Heavy regulation (AEA, 2009).
Increased security due to past terrorist
threats (DFT, 2008).

Economic

Global economic crisis: World growth is

projected to just over 2 percent in 2009
(IMF, 2008). Pound weakens especially
against the Euro.
Oil prices: declined by >50 % since their
peak retreating to 2007 levels. Decline in
fuel price = strengthening of the dollar
(IMF, 2008)

Implications for BA
Compliance is essential if BA wants to continue
operations.
Sufficient security measures should be in place to
ensure consumer confidence and competitive
advantage is maintained.
Possible reduction in the amount of business
travel as companies are cutting costs and using
alternative means of communication such as
teleconferencing. BA is vulnerable as a UK
operating airline to a poor exchange rate.
Fluctuations in oil prices and exchange rates will
directly affect BAs cost base.

Figure 2 PESTEL Analysis

PESTEL Factor
Political

Key Points
Heavy regulation (AEA, 2009).
Increased security due to past terrorist
threats (DFT, 2008).

Economic

Social

Technological

Environmental/
Ethical

Legal

Global economic crisis: World growth is

projected to just over 2 percent in 2009
(IMF, 2008). Pound weakens especially
against the Euro.
Oil prices: declined by >50 % since their
peak retreating to 2007 levels. Decline in
fuel price = strengthening of the dollar
(IMF, 2008)
UK consumer spending saw its sharpest
decline for 13 years between July and
September 2008 (Channel 4, 2008).
The UK has an aging population (see
appendix 3) (National Statistics Online,
2008).
Increasing unemployment (Kollewe and
Sager, 2008).
A recent survey revealed that 34% of
online consumers plan to use pricecomparison sites more in 2009 (NMA,
2009).
Online booking services and check-in is
becoming increasingly used by the airline
industry.
Noise pollution controls, and energy
consumption controls (DFT, 2008).

Implications for BA
Compliance is essential if BA wants to continue
operations.
Sufficient security measures should be in place to
ensure consumer confidence and competitive
advantage is maintained.
Possible reduction in the amount of business
travel as companies are cutting costs and using
alternative means of communication such as
teleconferencing. BA is vulnerable as a UK
operating airline to a poor exchange rate.
Fluctuations in oil prices and exchange rates will
directly affect BAs cost base.
More intense competition
Potential opportunity for growth as older
generations have more time to spend on leisure
activities such as international travel.
Increased bargaining power as an employer.
Increased consumer awareness and therefore
bargaining power.
BA must ensure that they remain up to date with
these technological advances whilst avoiding
becoming overly reliant, as this may isolate
certain consumer markets (i.e the elderly) who
dont feel comfortable using such technology.
New legislation (e.g. Climate Change Bill)
enforcing tighter environmental regulation may
increase operational costs each year.

Limited land and for growing airports

Expansion is difficult at Heathrow as it
would result in a loss in the Londons
Green belt area. (BBC News 2006)
Consumers are becoming increasingly
green and more aware of the
environmental impact of their actions.

Limited capacity=> utilisation of capacity.

Cancellations of flights and loss of

baggage (Channel 4, 2008).
Collusion and price fixing.

Such ethical issues could have a detrimental

effect on reputation if left unresolved.
Restriction on mergers will have an impact on
BAs proposed alliance with American Airlines.
Good employee relations are essential if BA wants
to avoid industrial action and interrupted
operations.
Opportunity for BA and its competitors to freely
transport aircraft between the EU and US.

Recognition of trade unions and industrial

action e.g. Cabin Crew strikes.
Open Skies Agreement (AEA, 2009)

Failure to adopt an integrated environmental

strategy could lead to a detrimental effect on the
BAs reputation and income.

Key Points
Heavy regulation (AEA, 2009).
Increased security due to past terrorist threats (DFT, 2008).
Global economic crisis: World growth is projected to just over 2 percent in 2009 (IMF, 2008). Pound weakens
especially against the Euro.

Oil prices: declined by >50 % since their peak retreating to 2007 levels. Decline in fuel price = strengthening of
the dollar (IMF, 2008)
UK consumer spending saw its sharpest decline for 13 years between July and September 2008 (Channel 4, 2008).
The UK has an aging population (see appendix 3) (National Statistics Online, 2008).
Increasing unemployment (Kollewe and Sager, 2008).
A recent survey revealed that 34% of online consumers plan to use price-comparison sites more in 2009 (NMA,
2009).
Online booking services and check-in is becoming increasingly used by the airline industry.
Noise pollution controls, and energy consumption controls (DFT, 2008).

Limited land and for growing airports Expansion is difficult at Heathrow as it would result in a loss in the
Londons Green belt area. (BBC News 2006)
Consumers are becoming increasingly green and more aware of the environmental impact of their actions.
Cancellations of flights and loss of baggage (Channel 4, 2008).
Collusion and price fixing.
Recognition of trade unions and industrial action e.g. Cabin Crew strikes.
Open Skies Agreement (AEA, 2009)