Marketing Assignment – British Airways
The purpose of this assignment is to examine British Airways (BA) marketing environment, both internal and external. Furthermore I will carry out a SWOT analysis on the company, which will consequently lead me to making strategic recommendations.
British Airways is the UK’s largest international scheduled airline, offering year-round low fares with an extensive global route network flying to and from centrally-located airports (www.britishairways.com1).
British Airways are now on the steady recovery from their 2008/9 cabin crew strikes. In the April – June quarter in 2009 the company reported a pre-tax loss of £164m, larger than the £148m loss it made in the same period last year, with revenues at the airline down 2.3% (www.bbc.co.uk1).
British Airways have only recently recorded their first profit in two years; their half-year profit was recorded at £158, with revenues up 8.4% to £4.4 billion (www.bbc.co.uk2).
British Airways – Macro Environment
Socio – Cultural Factors
It is crucial for organizations that ultimately want success to focus on their socio-cultural environment, it is here that they develop an understanding of their customers and what drives them. As technology develops people are becoming increasingly dependent on the internet. As the Office of National Statistics reports 60% (30.1 million) of UK adults in 2010 are using the internet every day, or almost every day. This figure shadows the 16.5% of adults using the internet in 2006 (www.statistics.gov.uk1).
The Research paper on Baggage Blunders (british Airways)
In the development of this case study the authors specifically acknowledges with pleasure the various helps, suggestions, and useful criticisms they received from Kristina Ginn A. Estoy. A big contribution and hard worked from her during the making of this case study is very great indeed. Special thanks to Mr. Stephen Alexeus G. Baltazar , who took the time to point out the correct format and ...
Internet use is linked to socio-cultural and demographic indicators. 60% of over 65’s had never used the internet, in comparison to the 1% of 16-24 (www.statistics.gov.uk2).
British Airways therefore have an instant booking section on their homepage, named ‘Create a Trip’ (www.britishairways.com3).
This entices any of the 30.1 million adults that are trying to book a holiday to book swiftly and is a clear example of BA utilizing the fast growing internet community. In September 2010 BA won two awards at the annual ‘Travolution’ awards for ‘Best airline website’ and ‘Best use of Search Engine Optimization’, this evidence that the customers are benefiting from the effort put into the website (www.britishairways.com12).
Technological Factors
The process of flight involves great quantities of technology, which is why British Airways state that they bring ‘technology and infrastructure together’. British Airways now claim to be utilising ‘environmentally considerate airframes, engines and fuels’ (www.britishairways.com2).
As British Airways reports, they are in a research and development programme with Rolls Royce to identify alternate fuels for their aircraft. Jonathon Counsell, Head of Environment at British Airways announced a further 25% improvement target on fuel efficiency by 2025 compared with 2005. If it is successful it will take British Airways closer to a greener fuel alternative that will help the aviation industry reduce its carbon footprint enormously (www.rolls-royce.com1).
In 2009 45% of adults believed that air travel should be limited for the sake of the environment (www.dvt.gov.uk1).
This statistic proves that almost half of the population is concerned about the amount of air travel. British Airways creating an innovative ‘greener’ fuel surely differentiates them from competition and could lead to an increase in flight bookings.
Economical Factors
The recession has had a direct impact on British Airways, by the end of March 2009 British Airways had recorded a loss of £401 million. This is the company’s biggest loss since it was privatized in 1987 (www.bbc.co.uk3).
The recession has forced the populations spending habits to change; customers are far more likely to now go on holiday internally within their own country, as opposed to travelling abroad. A report from the Office of National Statistics has found that 15% more of the UK populations are opting for so-called ‘staycations’ (www.news.sky.com1).
The Essay on British Customs Summer Winter Time
SUMMER Summer (June, July and August) is a relaxing time when the British make the most of the warm sunshine. Nothing can be more pleasant that a leisurely picnic in the heard of the countryside, a peaceful cruise down the river or for the more active a hike along our dramatic coastline. Pub gardens and pavement cafes are hives of activity and long summer evenings are perfect for barbecues or ...
Consequently this has resulted in British Airways having to adapt. In 2009 BA announced that they would be cutting 1,700 jobs to reduce costs (www.bbc.co.uk4).
Political/Legal Factors
In November 2010 it was announced that passenger airline duty will increase by up to 55%. The Government believe that this will generate an estimated £2.3bn for the Treasury (www.bbc.co.uk9).
This is worrying for BA as it is likely to turn more people away from flying. If BA wanted to counter-act this it would result in the company lowering costs and cutting revenue.
British Airways became the first airline to win Government approval for its carbon offset scheme in March 2009 (www.britishairways.com12).
Passengers are becoming increasingly aware about their carbon foot-print, therefore by BA including this voluntary carbon offset scheme people are able to have a positive effect on communities as we as balancing the emissions from their flight.
British Airways -Micro Environment
Customers
Like any business, British Airways solely relies on their customers. They are of high importance to any company that ultimately wants success. The airline industry unfortunately was an area that was directly affected by the recession. BA saw passengers fall from 34.6 million in 2008, to 33.1 million in 2009; this would consequently have a significant impact on their revenues (www.britishairways.com4).
Similarly, Mintel reports that total spending abroad by UK residents fell by 18% in 2009, from £36.8 billion in 2008 to £30.1 billion in 2009 (Mintel A).
This figure correlates strongly with the reduced passengers on BA. The accumulation of these two factors is worrying for BA and is something that they should address.
The Essay on American Airlines and US Airway’s Merger
Abstract American Airlines has suffered tremendous profit losses over the last few years. The losses have been so great that the company filed Chapter 11 bankruptcy. The news for the Chapter 11 bankruptcy protection was a shock to many, considering the fact that they had enough money to operate and cover their losses through the following year. The merger indeed was great decision on behalf of ...
British Airways clearly need to maintain the customers they currently have as well as attracting new customers. On a whole, two in five people believe that airlines need to speed up check-in times (Mintel B).
Evidence proves that this is clearly a problem, which is why BA is now innovating to differentiate themselves from other airlines. In July 2010 BA launched their very own ‘App’ for iPhone and Android phones. This enabled passengers display mobile boarding passes for short-haul flights and ultimately speed up the time of check-in (www.britishairways.com5).
It proved to be a great success and by mid October BA had recorded 250,000 uses of the app in airports (www.nma.co.uk1).
The use of technology here has ultimately increased passenger satisfaction which is essential to the company’s success in these economically challenging times.
Suppliers
BA pride themselves on being a luxury airline with high standards, which is why their suppliers are so important to them maintaining this image. Each year British Airways spends £5.2 billion purchasing goods and services from their suppliers (www.britishairways.com9).
BA’s fuel cost the company £3 billion in 2008, a 35% increase from the year 2000 (www.cpoagenda.com1).
Unfortunately this is a combination of high oil prices, financial turmoil and weak consumer confidence that meant BA had to contend with “the worst trading position for an airline that they had ever seen” (www.cpoagenda.com2).
BA has acknowledged that they have 25 suppliers that if they ceased trading it would have a severe impact on BA’s ability to operate (www.britishairways.com6).
As a result of the reliance BA has on its suppliers they are highly vulnerable to their power. However BA admitted that their supplier costs (excluding fuel) held flat over the year, despite significant inflationary pressures on suppliers’ own costs (www.britishairways.com7).
The dependence on their suppliers has forced BA into operating ruthless risk measurements on each individual supplier to evaluate how safe they are. This is measured across five dimensions, updated each month and they take mitigating action when any supplier is deemed to be at risk (www.britishairways.com8).
Furthermore, BA continues to maintain their supplier payment performance in accordance with mutually agreed terms. The number of days’ purchases in creditors at 31 March 2010 is calculated in accordance with the provisions of the Companies Act 2006 and was 33 days (www.britishairways.com10).
The Business plan on British Airways Valuation Company Airline Airlines
... million pounds.Thus, the interest ratio of European Airline is volatile. However, the situation in interest of the European Airlines is better than British Airways ... Bargaining power of suppliers of buyers Substitutes Threat of substitutes Source: Porter (1985) British Airways PLC (BAY ... (failed to cover the opportunity costs of shareholders). Therefore, British Airways in this sense is destroying value ...
It’s attention like this that keeps BA’s relationships with their suppliers healthy and will allow the company’s security and well-being to remain strong.
Competitors
BA operates in an oligopolistic market, because of this oligopoly there is a certain amount of interdependence between the key airlines, each airline is large enough for its actions to have a big impact on the market and on the behavior of its competitors (Brassington & Pettitt 2006).
The level of competition within the UK airline industry has increased dramatically over the last decade. It is believed that the UK airline industry has been worth over £18.25 billion since 2008, increasing year-on-year (www.keynote.co.uk1).
In 2009, BA generated revenue of £8.99 billion that was followed second by Easy Jet with £2.69 billion (www.keynote.com5).
BA clearly has the more dominant market share, however the ‘no frills’ airlines were generating more profit with their revenue.
Employees
BA has encountered various difficulties with their employees since 2008. In 2009, 44,987 employees operated under British Airways; by 2010 this figure had dropped significantly to 41,494 employees. This was heavily down to BA’s cabin crew strikes over salaries and staffing levels. The strike itself was estimated to cost BA £142 million (www.bbc.co.uk7), however, the revenue that will be lost in the future due to customers broken trust is impossible to record. Surprisingly BA’s cabin crew on average are paid £29,900 a year including bonuses and allowances, this is significantly greater than direct rivals Virgin Atlantic and Easy Jet at a respectable £14,400 and £20,200 (www.timesonline.co.uk1).
Strikes were initiated in response to BA announcing that there were going to be significant cuts. The company spoke to Unions about implementing a range of 32 cost-saving measures, such as cutting holidays by two days. It was inevitable that BA would have to be making these strategic decisions after the loss of £401 million in 2008 (www.timesonline.co.uk2).
The Essay on The Purpose of British Airways
It is this that has paved the way that British Airways do business and will carry on perfecting and tweaking its service so passengers across the globe can see that British Airways is the world’s favourite airline. www. britishairways. com British Airways Mission statement: "At British Airways, we want our customers to be at the heart of everything we do. " "Over the next five years, we will be ...
British Airways – SWOT Analysis
Strengths
• British Airways are currently the UK airline market leaders, with revenue at the end of 2009 reaching £8,992 million. BA is substantially separated from their closest competitor Easy Jet, who in the same year generated revenue of £2,687 million (www.keynote.co.uk2).
• In 2009, BA suffered heavily from the recession, however on 29th October 2010 BA announced their first profit in two years, with their half-year profit recorded at £158 million. This figure is certainly a direct consequence of the costs that were cut and sacrifices that were made by BA staff (www.bbc.co.uk6).
• I believe that British Airways as a brand name is certainly one of their greatest strengths. Of course the recent strikes and trouble that BA has encountered has certainly swayed a proportion of passenger’s opinions. However British Airways have already proved that they can overcome this with their recently published profits. The company celebrates its 91st anniversary this year, British Airways was the first airline in the UK, and therefore its name is trusted (www.britishairways.com11).
I do not believe that this will change due to the recession. It will have a temporary impact on the company, but one British Airways will most certainly pull through.
Weaknesses
• Although BA generated £8.99 billion in 2009, it recorded a pre-tax loss of £401 million, compared with the pre-tax profit of £922 million in 2007/2008 (www.keynote.co.uk3).
It was due to this considerable loss that BA re-evaluated and made the decision to cut costs.
• The recession had a significant impact on BA; arguably it was the factor that contributed most towards the £401 million pre-tax loss. A consequence to this was Willie Walsh (CEO British Airways) cutting 1,700 jobs in an attempt to reduce costs (www.bbc.co.uk5).
• The cuts in jobs and travel perks will obviously have a negative effect on the staff that is still working for British Airways. It could lead to a lack of motivation and British Airways could lose the excellence and quality of its service that it was renowned for. Ultimately this may have a knock-on effect and reduce the amount of passengers that currently fly with BA.
The Term Paper on British Airways 8
Some blamed Mr Walsh’s intransigence for prolonging the dispute but analysts praised him for preparing well. The airline had enough cash to fight a long battle and used a volunteer workforce, as well as aircraft hired from other airlines, to keep flights going. There was relief among Unite’s cabin crew members on Thursday that a formula had been found to end the dispute without more humiliation. ...
Opportunities
• A recession filters the strong companies from the weak. British Airways now have the opportunity to utilize their market strength. BA can take advantage of companies such as Jet2.Com Ltd that only generated revenue of £317 million in 2009 compared to BA’s £8.99 billion (www.keynote.co.uk3).
• The 2012 Olympics in London poses as a tremendous opportunity for BA. The Guardian newspaper estimates that the Olympics will bring in excess of 500,000 tourists from overseas to watch the games (www.guardian.co.uk1).
BA would gain significantly with this if they could secure sponsorship with London 2012, this would ultimately increase passengers and utilize more of their capacity.
• The internet is arguably the opportunity BA will focus mainly on, purely because of the numbers of people that you are able to access. 30.1 million adults are now using the internet on a daily basis, an increase of 16.5% from 2006 (www.statisticsgov.uk3).
It is inevitable now that BA will invest greatly into their website to ensure that they are appealing to as many customers as possible
Threats
• A threat that poses a worry in the immediate future is that of another strike. The strikes already have been estimated to cost BA £142 million (www.bbc.co.uk8), and 200,000 grounded passengers in March 2010 (www.guardian.co.uk2).
Further strikes would deter more passengers from using the airline and results in far more serious financial loss.
• BA lost £108 million to the ash cloud formed from the eruption if the Eyjafjallajokull in Iceland. As BA operates in the transport industry the uncontrollable environment will always pose a threat. The ash cloud in April 2010 is a severe example, however on an annual basis airlines such as BA will suffer and loose revenue from weather such a snow. A threat that cannot be avoided, and yet is most relentless.
• As BA operates in an oligopolistic market, they could be susceptible to the threat of government aiming to provide more equal competition for smaller airlines.
British Airways – Strategic Recommendations
With my strategic recommendations I predominately aim to increase BA’s profit, as I highlighted in the assignment in 2009 the company made a loss of £401 million. However, I am to keep the views of both BA’s staff and employers foremost when looking at my strategic recommendations.
Profit is equal to revenue minus costs, BA has already attempted to reduce costs, however this only resulted in strikes. BA has a reputation as being a higher priced, luxurious airline. Which is why I believe it needs to change these connotations, because in this global recession passengers are going to be far less likely to use them. If we were to look at the Ansoff’s Matrix I would suggest a ‘product development approach’, by introducing discounted, ‘no frills’ flights into a market that arguable Easy Jet are dominating. Their costs would consequently stay low, with ultimately increased passengers.
It is essential for me in my recommendations to turn BA’s current weaknesses into their strengths. A proportion of the current staff at BA is part of the work-for-no-pay scheme, as they are not receiving pay for one month I believe that they need a form of non-financial motivation to maintain the service and quality that makes BA famous. If BA were to offer extended holidays or more chance for promotion for when the company exits this economic downturn then it would certainly keep the employees dedicated and committed to the company.
BA already has an established website that has won two prestigious awards. With the amount of adults using each day growing to 30.1 million in 2010 BA need to take advantage. BA is searching for success, therefore the company needs to be innovative and differentiate itself from any competition. 55% of internet users book holidays online, compared to the 7% that book their holidays online (www.harvestdigital.com1).
Therefore, by placing increasing importance on their website, BA will have a low-cost, high reward answer to increasing their sales.
Most importantly, BA’s fleet is worth £5.74bn. BA needs an injection of cash to help them deal with the circumstances that they are under. By downsizing and selling, or perhaps leasing their planes to alternative airlines they will cut costs whilst increasing cash. Businesses need cash to survive; therefore this is arguably the simplest and most efficient recommendation to sealing their survival and success.
Conclusion
British Airways Plc currently is in a pivotal part of its 91st year, the next few months and years will play an influential role in how strong British Airways comes out of this global recession. As we speak, British Airways dominates the UK airline market share with revenues of £8.99bn in 2009. However, these revenues in 2009 translated to a loss of £401 million. Since then there have been strikes and jobs cut, BA seemed to be on the decline. Nevertheless, after a very rigorous cost-cutting process BA made its first profit, if this can be maintained BA will come out of this recession like the governing force they were before.
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