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A Business Report To The Board of Directors Of British Airways Free essay! Download now

Home > A Level > Economics > A Business Report To The Board of Directors Of British Airways

A Business Report To The Board of Directors Of British Airways

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PESTLE and Porter's analysis


Company Background:

British Airways can trace its origins back to the birth of civil aviation, the pioneering days following World War I. World’s first daily international scheduled air service was started by Aircraft Transport and Travel Limited (AT&T) on 25 August 1919. This service was between London and Paris. In 1924, Britain's four main fledgling airlines, which had by then evolved into Instone, Handley Page, Daimler Airways (a successor to AT&T), and British Air Marine Navigation Company Limited, merged to form Imperial Airways Limited. In 1935, Qantas Empire Airways Limited merged with some other smaller British airlines and formed the original privately owned British Airways Limited, which became Imperial Airways' principal UK competitor on European routes. Following a Government review, Imperial Airways and British Airways were nationalised in 1939 to form British Overseas Airways Corporation (BOAC). The businesses of BOAC and British European Airways (BEA) were combined under the newly formed British Airways Board, with the separate airlines coming together as British Airways in 1974. Although this merger was to lead initially to substantial financial losses and industrial strife, the new airline inherited its predecessors' pioneering path, launching the world's first supersonic passenger service, simultaneously with Air France, with Concorde in January 1976.

Market structure:

British Airways has become the world’s second largest airline carrying more than 28 million passengers from one country to another. Main aim of British Airways is to provide outstanding service to its customers at an affordable price. Despite tough competition from other airlines such as Virgin Atlantic Airways, United Airlines and other European airlines, British Airways still holds the major market share. British Airways market can be divided into two major categories for a deeper analysis.

Long Haul (E.g. London-New York):

In case of long haul flights such as London-New York, British Airways can be seen to operate in an “Oligopolistic Market” . The main features of British Airways’ “Long Haul” are:

Less competition as there are few airlines operating on such routes

Prices are similar, and there are no price wars since the airlines would be the only losers as pointed out by Bertrand

Since demand is price elastic, cutting prices will cut revenues not gain larger market shares

The service provided by airlines on such destinations is very similar and differentiation is attempted only by brand loyalties and non-price competition.

Short Haul (E.g. London-Paris):

However, in case of short haul flights such as London-Paris, British Airways can be observed operating in a “Monopolistic Market” . The main features are:

There are numerous airlines operating in this market

Quality of service is not the same

Prices are not similar

Consumer Thinking:

British Airways have recently tried to change its general image. Till the mid 90s, British Airways was seen as a “Businessman’s Airline”. Its fares were high and the main clientele was the business class people. Soon after 9/11, it had to change its image. Now British Airways is also addressing the general public as the competition has grown tougher and consumers have numerous other options. British Airways has been very quick in changing gears and adapting to new situations according to the changing business trends and customer tastes.

Macroeconomic Factors:

Effect of War and Terrorism:

Gulf War II and terrorism throughout the world affected British Airways’ results. However, British Airways dealt with these problems by cost improvements.

Lower Fuel Prices:

Lower fuel prices helped British Airways in reducing the running costs.

Exchange Rates:

During the last quarter of 2003, the price of US Dollar($) against the GB Pound Sterling(£) fell. British Airways gained a lot due to this factor as it enhanced their buying power.

Environmental Analysis:

The business environment that surrounds British Airways can be influenced by a number of different factors. To identify these factors, a PEST (Political, Economic, Social and Technological) analysis can be used.


The political environment has always heavily influenced airline industry. In recent times, it has become even more evident. After the terrorist attacks on America, many airlines suffered because of some strict governmental restrictions. Due to these political reasons, British Airways had to face some huge losses. British Airways had to suspend air links with many countries due to security and political reasons.

After the War on Terror began, many governments throughout the world severed their visa policies. Tourism industry almost collapsed and British Airways lost many customers.

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