Company Overview British Airways Plc (BA) is the UKs largest international scheduled airline.

Alongside scheduled services, BA is engaged in the operation of international and domestic carriage of freight and mail, and the ancillary services (Datamonitor, 2008). In association with codeshare and franchise partners, BA fly to more than 300 destinations, and carried more than 33 million passengers, earning over 8.7billion in revenue in 2007/08 (British Airways, 2008). Employee headcount in March 2008 stood at42377 people (Datamonitor, 2008). Since privatisation in 1987, BA has continued to grow as competition in the market has risen worldwide. In recent times, BA has successfully been labelled the worlds first airline to take part in a scheme to reduce greenhouse gas emissions (2002) and to allow passengers to print online boarding passes (2004) (British Airways, 2008). In 2005, the company saw Willie Walsh become Chief Executive of BA (Flight Global, 2008), who to date has driven the company through the completion of Terminal 5 at Heathrow, amongst other new initiatives. Despite reported and imminent industry hits due to the global economic downturn, BAs future looks promising. As BA announces its aim of becoming the worlds most responsible airline in the latest annual report (British Airways, 2008), great importance lies in developing guiding principles and careful strategic direction to allow the achievement of this goal. Current Strategies The report will be designed in consideration of BAs current strategies (British Airways, 2008): Upgrade customer experience via the introduction of text and mobile services for business class customers. Modernize aircraft fleet and offer new services. Manage cost base. Increase corporate responsibility through environmental performance and partnerships.

Political Heavy regulation (AEA, 2009): Compliance is essential if BA wants to continue operations.

Increased security due to past terrorist threats (DFT, 2008): Sufficient security measures should be in place to ensure consumer confidence and competitive advantage is maintained.

Economic Global economic crisis: World growth is projected to just over 2 percent in 2009(IMF, 2008). Pound weakens especially against the Euro: 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. Oil prices: declined by >50 % since their peak retreating to 2007 levels. Decline in fuel price = strengthening of the dollar (IMF, 2008) Fluctuations in oil prices and exchange rates will directly affect BAs cost base. UK consumer spending saw its sharpest decline for 13 years between July and September 2008 (Channel 4, 2008): More intense competition Social The UK has an aging population (National Statistics Online,2008): Potential opportunity for growth as older generations have more time to spend on leisure activities such as international travel. Increasing unemployment (Kollewe and Sager, 2008): Increased bargaining power as an employer.

Technological A recent survey revealed that 34% of online consumers plan to use price comparison sites more in 2009 (NMA,2009): Increased consumer awareness and therefore bargaining power. Online booking services and check-in is becoming increasingly used by the airline industry: 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.

Environmental/Ethical Noise pollution controls, and energy consumption controls (DFT, 2008): 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): Limited capacity => utilization of capacity.

Consumers are becoming increasingly green and more aware of the environmental impact of their actions: Failure to adopt an integrated environmental strategy could lead to a detrimental effect on the BAs reputation and income. Cancellations of flights and loss of baggage (Channel 4, 2008): Such ethical issues could have a detrimental effect on reputation if left unresolved. Legal Collusion and price fixing: Restriction on mergers will have an impact on BAs proposed alliance with American Airlines. Recognition of trade unions and industrial action e.g. Cabin Crew strikes: Good employee relations are essential if BA wants to avoid industrial action and interrupted operations.

EXTERNAL FACTORS: The managers cannot control these factors and for this they are called external factors. PESTLE ANALYSIS Economical As a global company with customers in virtually every business and industry, British Airways net revenue depends on the result of macroeconomic trends in the world. Aviation provides part of the economic infrastructure that oils the wheels of business, allowing it to take place efficiently and effectively. It is not therefore surprising that the rapidly growing sectors of the economy over the longer term, including the so-called knowledge industries that rely heavily on human capital and knowledge, are intensive users of air travel. And for this in the future the air travel business may rise quickly. GDP, GNP, Tax rate, Tariff rate of different countries are affecting the operating activities of BA. Political: International issues play a major rule in the aviation business. So, British Airways net revenue and services and routes are heavily dependent on the international situation. For example, after 9/11 the whole aviation business has changed so much that it has made the airlines to change their policies and business strategies. In the same way international conflicts, wars, business restrictions on different nations affect the whole aviation business. And a member of this aviation business British Airways has to depend on the international issues. Worldwide customers: As British Airways is a service providing company it is seriously dependent on its customers throughout the world. And customers always want to fulfill their need in the best way. And all these have made British Airways to go for different customer serving and relation activities. Competition in the Airline Industry: The markets in which British Airways operates are highly competitive BA faces competition from other airlines on its routes, as well as from indirect flights, charter services and from other forms of transport. The BAs pricing decisions are affected by many factors, including competition from other airlines, some of which have cost structures that are lower than BA or have other competitive advantages and therefore may

be able to operate at lower fare levels. And for this all of the company policies are fully depends of the market situation. Seasonality of Business: British Airways normally earns most of its operating profit between April and October each year, as demand is higher during this period, whilst the Accordingly, as a result of seasonality of demand, operating results have and are expected to vary significantly from period to period within the financial year. Various factors (like vacation periods, demands for seasonal products (cargo) etc) can also cause operating results to vary significantly from period to period and year to year. British Airways revenue may not meet expectations if it is unable to accurately predict the effect of seasonality on its business. Jet Fuel Prices: Jet fuel prices are a significant component of the BAs cost structure and have been and could be highly volatile. While the BA endeavors to hedge part of the jet fuel price volatility, due to the competitive nature of the airline industry and other factors, including the price-sensitivity of the demand for air travel, increases and fluctuations in the price of jet fuel may have an adverse effect on the Groups operations and financial performance. Suppliers: Though British Airways depends on most efficient suppliers of the company and suppliers portfolio, all of it services depend on the suppliers. So British Airways always try to maintain a comprehensive supply chain management with the help of its suppliers. But still if any of the supplier fails then the company has to incur loss. Foreign Currency Exchange Rate: British Airways net revenue may be affected if it does not effectively hedge its exposure to fluctuations in foreign currency exchange rates. And for this British Airways utilizes derivative instruments to hedge its exposure to fluctuations in foreign currency exchange rates and interest rates. Environmental: BAs operations are covered by a wide range of environmental regulations at local, national and international levels. These regulations cover, among other things, emissions to the atmosphere, disposal of solid waste and aqueous effluents, aircraft noise and other activities incidental to the Group's business. Future operations and financial results may vary as a result of such regulations. Compliance with these regulations is costly and new regulations could increase the Group's cost base and adversely affect its operating and financial results. In addition, failure to comply with these regulations could adversely affect the Group in a variety of ways, including adverse effects to the Groups reputation.

Legal: As British Airways operates its business globally, it depends on the rules and regulations of different countries. Mainly UK and USA are the two major counties whose rules and regulations affect the net revenue and other policies of British Airways. Besides the decisions related to direct investments and alliances with other airlines depend on the different countries governments, rules and regulations.

Role of Management: It is the responsibility of management, under the direction of the functional head to conduct the business and affairs in an effective, responsible and ethical manner, consistent with the principles and direction established by the Board. In carrying out that responsibility, management is charged with the following: Organizing management - Selecting qualified management and implementing an organizational structure that is efficient and appropriate for BAs operations and culture. Strategic and operational planning and implementation - Developing longterm strategic plans and annual operating plans, presenting those plans to the Board, implementing and executing approved plans and recommending and executing changes to those plans as necessary.

 Managing risk - Identifying and managing the risks that British Airways undertakes in the course of carrying out its business and managing Dell's overall risk profile. Financial reporting - Ensuring the integrity of the financial statements and reports by implementing, and supervising the operation of, systems, controls, processes and procedures that allow British Airways to record, process, summarize and report information timely and accurately and produce financial statements and other disclosures that fairly present financial condition and results of operations and permit stockholders to understand BA's business, financial soundness and risks. SWOT Analysis:

SWOT stands for Strengths, Weaknesses, Opportunities and Threats. A SWOT analysis is the internal analysis of organizational strengths and weaknesses as well as the external analysis of environmental opportunities and threats. The ultimate goal of SWOT analysis is to identify the critical factors affecting the firm and then build on vital strengths, correct glaring weaknesses, exploit significant opportunities, and avoid disaster-laden threats. (Kerin R A, Hartley S W, Rudellins W, Marketing-The Core, 1st ed.) British Airways is a huge company, which has its network all around the world and coming up with a SWOT analysis can be quite difficult. Still we have tried to present the whole picture in a condensed form. Opportunities: An opportunity is a favorable situation in the external environment which indicates the potential to meet a need consistent with the companys mission. It can be any external circumstance or trend that favors the demand for an organization's specific competence. British Airways is one of the largest airlines in the world and has a lot of opportunities. Some of the major opportunities of BA are discussed below: Expand cargo services: BA carries freight and ranks as one of the biggest cargo airlines in the world. The majority of its cargo is carried in the holds of passenger aircraft, with the rest on leased or part-chartered freighter aircrafts. BA has the opportunity to expand its cargo service. Cargo service in a good source of revenue and BA is in a position to exploit it. BA can easily introduce more Boeing 747s and Boeing 777s, which have more cargo space than other aircrafts.

Expand Alliances: British Airways is already a member of many alliances all around the world; which allows them to cover a large number of destinations. British Airways can easily form new alliances with other airliners to provide better and improved service in the current routes as well as expand its network. One-stop Holiday service: Every organization must have different sources of revenue. BA is currently offering holiday packages in limited number of countries. The number of holiday makers in Asian countries has risen significantly over the years. BA can offer holiday packages in Asian countries like Thailand, Malaysia, Hong Kong, Bangladesh etc. They can establish agreements with local travel agencies and provide BA customers with a one stop service for tours by taking care of accommodation, car hire and sightseeing arrangements.

Mail & parcel service: British Airways flies to a large number of destinations. They have the opportunity to start a mail & parcel service. BA has already got a huge number of planes and can easily set up the facilities for such a service. BA does not need to spend money in the heavy investment involved in acquiring airplanes it only has to set up offices, hire additional employees and buy ground vehicles.

Threats: A threat is a challenge posed by an unfavorable existing condition, trend or future development that may lead to deterioration in sales or profit. These are the elements that can damage the company and jeopardize the future success of the company. The threats of British Airways are discussed below: Competitors: The main threat of British Airways is its competitors. British Airways is, with out doubt an industry leader but it has deficits in some sectors. Customers always search for the best service at the minimum cost. British Airways has a massive network which covers 105 countries; as a result BA has to deal with a large number of competitors all around the globe. Ever fluctuating fuel prices:

The fuel price has risen significantly recently due to the war in Iraq. The cost of crude oil per barrel is now 52 dollars and it has every possibility to shoot up again. The rise in the price of jet fuel will affect the profit margin and therefore pose to be a great threat. War-prone international scenario: The current condition of the world is quite severe. War on terrorism has affected the airline industry as a whole. Saudi Arabia has been on heightened alert since a series of suicide bombings in May, which killed more than 30 people in the capital, Riyadh. British Airways had to suspend flights to Saudi Arabia and other Middle Eastern countries due to security threats. The present international scenario poses to be a great threat to BA. Bomb threats and hijacking: During the recent couple of years there has been an increased number of bomb threats, most of them were hoaxes but BA had to suffer financial loses as they had to cancel flights and have the threat investigated. The increased number of bomb threats and the incidents of hijacking have had a negative impact on the airline industry. This is in fact a great threat to BA which they have to deal with constantly. Increasing operating expenses: In recent years, airlines have had to cope with higher landing charges as well as additional taxes imposed upon the airlines. As a result their operating cost has gone up resulting in lower revenues and narrower profit margin. The excessive maintenance costs and taxes on the airlines industry are posing to be a great threat to BA.

Conclusion British Airways is one of the worlds longest established airlines and has always been regarded as an industry-leader. Last year, more than 38 million people chose to fly with British Airways. Over the years British Airways has become one of the giants in the airlines industry. They not only cover a wide number of destinations but also provide excellent service. British Airways forms a class of its own. British Airways is reputed for its innovative customer services and exceptional hospitality. Since its pioneering days, it has also taken the world into the jet age with British built Comets - the Auto land era, and into supersonic passenger flight. British Airways has some weaknesses which they hope to overcome and provide even better service to its customers and eventually become the undisputed leader in world travel.

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