British Airways Timeline.

1998: British Airways orders 59 aircraft in the Airbus A320 family and 16 Boeing 777s.

1999: British Airways opens its new World Cargo Centre.

2000: British Airways completes a 9 per cent acquisition of Iberia.

2001: Heathrow Terminal 5 is given the go-ahead by the UK Government.

2002: British Airways becomes the world’s first airline to take part in a scheme to reduce

greenhouse gas emissions.

2003: Concorde makes its last commercial flight.

2004: British Airways becomes the first airline in the UK to enable passengers departing from

Heathrow to print their own boarding passes online for selected flights.

2005: A new voluntary scheme is launched to enable customers to offset the carbon dioxide

emissions from their flights by making a contribution to an environmental trust.

2006: British Airways unveils its next generation business class cabin, offering greater comfort,

more space and storage.

2007: British Airways places an order for 12 Airbus A380 aircraft and 24 Boeing 787 aircraft.

2008: British Airways’ first flight from Terminal 5 departs to Paris on March 27, 2008.

Introduction.

British Airways is the UK's largest international scheduled airline, flying to over 300 destinations at convenient times, to the best located airports. Their principal place of business is Heathrow, one of the world's premier airport locations. They fly to 300 destinations worldwide. Who we are: British Airways Annual Report 2007/2008. In 2008/09, they carried more than 33 million passengers earning them nearly £9 billion in revenue, up 2.7 per cent on the previous year. Passenger traffic accounted for 87.1 per cent of this revenue, while 7.5 per cent came from cargo and 5.4 per cent from other activities. British Airways carried 777,000 tonnes of cargo to destinations in Europe, the Americas and throughout the world. At the end of March 2009 they had 245 aircraft in service Who we are: British Airways Annual Report 2008/2009

SWOT

|STRENGTHS |WEAKNESSES |
|Expansion on EU-US markets |Recession has weakened company |
|Moved to terminal 5 |Debt funding |
|Proud sponsors of London 2012 |Heathrow operational constraints |
|Restructuring management | |
|A plan for growth | |
|. | |
|THREATS |OPPORTUNTIES |
|Recession may finish business |Merge with Iberia |
|Other airlines with competitive prices |Heathrow’s third runway plans |
|Brand reputation |Merge with American Airlines |
|Key supplier risk |Opportunity to expand in key international cities e.g Dubai, |
| |Johannesburg and Saudi Arabia |

Swot analysis

Strengths:

• Expansion on EU-US markets

British Airways now flies to more cities in the US from EU airports such as Paris and Amsterdam. This increases revenue for the business as well as awareness of the airline in key international cities. Heathrow have introduced ‘open skies’ which allows any EU or US airline that wishes to fly from the airport to the US. This changes the competitive environment at the airport.

• Moved to terminal 5

This will benefit British Airways by achieving levels of excellence, focusing more time on their customers and improving their business operations. It is stated in the annual report that the move to terminal 5 has had a good impact on operational performance. For example, a significant decrease in cases of baggage loss.

• Proud sponsors of London 2012

Last year they were asked to be the customer service champion of the London 2012 Olympic and Paralympics Games. They were very proud – as one of the eight UK sponsors and the official airline for the Games – to have this key role. It matches their own efforts to focus on world-beating customer service and is proving to be very inspirational for everyone at British Airways

• Plans for growth

British Airways launched new routes from London to Hyderabad and St Kitts; we launched OpenSkies, our subsidiary flying from continental Europe to North America in June 2008, and subsequently purchased L’Avion in July 2008

Weaknesses:

• Recession has weakened company

This means that British Airways is not performing at its full potential due to the economic crisis. Less people are travelling due to the credit crunch which impacts the business because of reduced customers spending in British Airways. Fuel prices are also at its peak prices which mean the expenditure of the airline has increased significantly. This has also left British Airways to job-cuts and freezing pay to employees.

• Debt funding

British Airways carry substantial debt which will need to be repaid or refinanced. Their ability to finance ongoing operations, committed aircraft orders and future fleet growth plans may be affected by various factors including financial market conditions. Although most of their future capital Requirements are currently asset related and already financed, there can be no assurance that aircraft will continue to provide attractive security for lenders in the future.

• Heathrow operational constraints

Heathrow has no spare runway capacity and operates on the same two runways it had when it opened 60 years ago. As a result, they are vulnerable to short-term operational disruption and there is little British Airways can do to ease this.

Threats:

• Recession may finish business

British Airways is at its worst times in history due to the economic crisis. They have lost £220 million in the year 2008-09. This can lead to the business going into administration due to the mass debts and high expenditure.

• Other airlines with competitive prices British Airways face direct competition from other airlines on their routes, as well as from indirect flights, charter services and from other modes of transport. Fare discounting by competitors has historically had a negative effect on their results because they are generally required to respond to competitors’ fares to maintain passenger traffic. A particular threat in the current economic environment is cash rich competitors growing market share and acting irrationally to force other airlines out of the market. • Brand reputation

Our brand is of significant commercial value. Erosion of the brand, through either a single event, or series of events, could adversely impact our leadership position with customers and ultimately affect our future revenue and profitability britishairways.com

• Key supplier risk

Overall supplier costs, excluding fuel, were up nearly 7 per cent year on year, reflecting significant inflationary pressures on suppliers’ own costs.

• Restructuring management

While Compete 2012 is a long-term change programme, current market conditions have made it imperative to move fast to create a leaner, more fragile structure starting at the very top of their business

Opportunities:

• Merge with Iberia

The merge with Iberia means that it offers important cost savings, in terms of bulk-buying, maintenance services and eradicates non profitable routes. It is a step towards a needed combination of the European airlines industry.

• Heathrow’s third runway plans

This means that BA will have increased flights to its destinations which will increase profits and therefore create opportunities for them.

• Merge with American Airlines

The BA-AA partnership will not be a corporate merger but an operational one, potentially allowing cost savings and joint pricing and booking. BA and AA are applying for antitrust immunity this week in a move that would give them control of 63 per cent of capacity between Heathrow in London and JFK in New York - the main airports linking Europe and North America. BA-AA would also control 66 per cent of capacity between London and Chicago and 79 per cent between London and Boston.

• Opportunity to expand in key international cities e.g Dubai, Johannesburg and Saudi Arabia

To provide the best global connectivity for our customers. In addition to our new longhaul service from London City to New York JFK, our network depth will be strengthened with more flights to Dubai and Johannesburg and a return to Saudi Arabia.

Pest

|POLITICAL |ECONOMICAL |
|Government intervention - airline industry becoming more regulated. |Fuel prices go up |
|UK government plan to double APD from 2010 |Currency risk on revenue |
|BAA playing ‘monopoly’ |Global economic slowdown |
|Aircraft construction rules. |Lower interest rates |
| | |
|SOCIAL |TECHNOLOGICAL |
|Demographics suggest population is increasing |Self/ online check in |
|People want to travel more |Chipped passports |
|People are living and working longer | |
| |ENVIRONMENTAL |
| |Pressure to be ‘green’ |
| |Aircrafts are biggest polluters. |
| |Have to meet the EU ETS requirements for CO2 emissions |
| |Carbon off-setting |

Pest Analysis.

Political

• Government intervention - airline industry becoming more regulated.

The airline industry is becoming increasingly regulated. The scope of such regulation ranges from infrastructure issues relating to slot capacity and route flying rights, through to new environmental and security requirements.
Their ability to both comply with, and influence any changes in, these regulations is key to maintaining their operational and financial performance.

• UK government plan to double APD from 2010 In a survey it was found that more than half of UK holidaymakers will cut the number of overseas holidays they take due to the rise in Air Passenger Duty. And 13% said they would stop overseas holidaying all together due to the APD increase, which will see the tax increase by a minimum 10% this year before a further increase next November. Online: travelmole.com [October2009}

• BAA playing ‘monopoly’

Richard Branson stated that “A proposed alliance between AMR Corp's American Airlines and British Airways would create a "monster monopoly. an alliance between BA and American would strangle airline competition on routes between London's Heathrow Airport and the United States.

• Aircraft construction rules. There are increasingly tight rules about the materials that need to go into aircraft construction in order to make them safer and more resistant to fire hazards. This has had the impact of raising costs. thetimes100.co.uk

Economical • Fuel prices go up

We use approximately six million tonnes of jet fuel a year. Volatility in the price of oil and petroleum products can have a material impact on our operating results. This price risk is partially hedged through the purchase of oil and petroleum derivatives in forward markets which can generate a profit or a loss.

• Currency risk on revenue

British Airways is exposed to currency risk on revenue, purchases and borrowings in foreign currencies. The Group seeks to reduce foreign exchange exposures arising from transactions in various currencies through a policy of matching, as far as possible, receipts and payments in each individual currency and selling the surplus or buying the shortfall of its currency obligations.

• Global economic slowdown

British Airways, like its counterparts in the United States, is having a difficult time thriving during the current global economic slowdown. In an attempt to adjust to the current financial climate, the airline is making a number of different business alterations. The changes British Airways is making include cutting down the number of seats available on each flight, postponing the 12 new Airbus planes it had planned to add to its fleet and grounding planes to compensate for the lack of capacity. bizzia.com

• Lower interest rates

Means that people have more disposable income to spend on luxuries like long distance air travel

Social

• Demographics suggest population is increasing

• People want to travel more

Increased popularity of foreign travel leading to a boom in demand for air travel. However, this has been negatively affected by international terrorism

• People are living and working longer

Technological

• Self/ online check in

• Chipped passports

Environmental

• Pressure to be ‘green’

• Aircrafts are biggest polluters.

The government believes there is a strong case for seeking to secure large economic benefits through the addition of a third runway at Heathrow. At the same time, however, it recognises that these strong economic arguments must be weighed against the serious environmental impacts. The main issue is considered to be air quality. ealing.gov.uk

• The government acknowledged that nitrogen dioxide objectives in the airport vicinity were already being breached. In terms of justifying the third runway, it was clear therefore, that the most difficult issue is compliance with mandatory EU limits for nitrogen dioxide from 2010 • Have to meet the EU ETS requirements for CO2 emissions

• Carbon off-setting

Current Business Goals

• Be the airline of choice for long haul premium customers. • Deliver outstanding service for customers at every touch point. • Grow presence in key global cities. • Build on leading position in London. • Meet customer needs and improve margins through new revenue streams.

Evaluation of Current Goals and Objectives

Record fuel prices and the global downturn meant they needed to revise their plans and reset priorities. Nevertheless, British Airways have still made significant progress against their original goals, laying the foundations for future success

Achieved • Delivered outstanding customer service by moving to T5. • Growth of presence in US markets. Partnerships with Iberia and American Airlines. More flights to Dubai, Johannesburg and Saudi Arabia. • Built on leading position in London by working with BAA. • Improved operational performance. • Have met customer needs and improved margins through new revenue streams, e.g. In-flight sales, ba.com car hire/hotels

Not achieved • Financial aspects of the business is in loss due to economic state. Loss of £220 million. This impacted on long haul premium customers. • Partnership with Qantas failed.

Recommendations

Are British Airways Goals realistic?
Goals that are realistic ▪ Need to be customer service orientated ▪ Boosting sales revenue ▪ Thinking of other ways to increase profit, without spending as much ▪ Grow presence in key global cities.
Goals that are not realistic ▪ Be the airline of choice for long haul premium customers.
Comparison to other Airlines
Virgin Atlantic Airlines announced that one of their long term objective was to fly passengers to the moon.

Bibliography

• Our Strategys and Objectives [Online] Availabe at: http://www.britishairways.com/cms/global/microsites/ba_reports0809/pdfs/Strategy.pdf [Accessed: 10 Nov 2009]

• British Airways and American Airlines: a monopoly about to take wing? [Online] Available at: http://business.timesonline.co.uk/tol/business/industry_sectors/transport/article4518393.ece [Accessed: 10 Nov 2009] • The way we run our business: The workplace [Online] Available at: http://www.britishairways.com/cms/global/microsites/ba_reports0809/pdfs/BA_AR_2008_09.pdf [Accessed 10 Nov 2009]

• Principal Risks and Uncertainties [Online] Available at: http://www.britishairways.com/cms/global/microsites/ba_reports0809/pdfs/Risks.pdf [Accessed : 10 Nov 2009]

• British Airways Adjusts Business Plan [Online] Available at: http://www.bizzia.com/tag/global-economic-slowdown/ [Accessed: 10 Nov 2009]

• Aircraft pollution [Online] Available at: http://www.ealing.gov.uk/services/environment/pollution/air_pollution/aircraft_pollution/ [Accessed: 10 Nov2009}

British Airways merger with Iberia could smooth a bumpy ride [Online] Available at: http://business.timesonline.co.uk/tol/business/columnists/article4425636.ece [Accessed: 10 Nov 2009]

British Airways unions say strike looks inevitable [Online] Available at:

http://business.timesonline.co.uk/tol/business/industry_sectors/transport/article6877131.ece# [Accessed: 21 Oct 09]

• British Airway [Online] Available at: http://www.ft.com/cms/s/149ea75e-b31d-11de-ac13-00144feab49a,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F3%2F149ea75e-b31d-11de-ac13-00144feab49a.html&_i_referer=http%3A%2F%2Fsearch.ft.com%2Fsearch%3FqueryText%3Dbritish%2Bairways%26aje%3Dtrue%26dse%3D%26dsz%3D [Accessed 21 Oct 2009]

• British Airways[Online] Available at: http://www.ft.com/cms/s/78dabbe8-5f32-11de-93d1-00144feabdc0,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F3%2F78dabbe8-5f32-11de-93d1- 00144feabdc0.html&_i_referer=http%3A%2F%2Fsearch.ft.com%2Fsearch%3FqueryText%3Dbritish%2Bairways%26aje%3Dtrue%26dse%3D%26dsz%3D [Accessed 21 Oct 2009]

• BA’s cash call [Online] Available at: http://www.ft.com/cms/s/ff14108a-72a9-11de-ad98-00144feabdc0,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F3%2Fff14108a-72a9-11de-ad98-00144feabdc0.html&_i_referer=http%3A%2F%2Fsearch.ft.com%2Fsearch%3FqueryText%3Dbritish%2Bairways%26aje%3Dtrue%26dse%3D%26dsz%3D [Accessed 21 Oct 2009]

• British Airways [Online] Available at: http://cachef.ft.com/cms/s/89d07416-46a9-11de-923e-00144feabdc0,Authorised=false.html?_i_location=http%3A%2F%2Fcachef.ft.com%2Fcms%2Fs%2F3%2F89d07416-46a9-11de-923e-00144feabdc0.html&_i_referer=http%3A%2F%2Fsearch.ft.com%2Fsearch%3FqueryText%3Dbritish%2Bairways%26aje%3Dtrue%26dse%3D%26dsz%3D [Accessed 21 Oct 2009]

• [Online] Available at: http://cachef.ft.com/cms/s/fd80f156-5054-11de-9530-00144feabdc0,Authorised=false.html?_i_location=http%3A%2F%2Fcachef.ft.com%2Fcms%2Fs%2F0%2Ffd80f156-5054-11de-9530-00144feabdc0.html&_i_referer=http%3A%2F%2Fsearch.ft.com%2Fsearch%3FqueryText%3Dbritish%2Bairways%26aje%3Dtrue%26dse%3D%26dsz%3D [Accessed 21 Oct 2009]

• British Airways business traffic falls sharply[Online] Available at: http://www.ft.com/cms/s/f0473b56-cce4-11dd-9905-000077b07658,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F3%2Ff0473b56-cce4-11dd-9905-000077b07658.html&_i_referer=http%3A%2F%2Fsearch.ft.com%2Fsearch%3FqueryText%3Dbritish%2Bairways%26aje%3Dtrue%26dse%3D%26dsz%3D [Accessed 21 Oct 2009]

• British Airways [Online] Available at: http://www.ft.com/cms/s/2213dd52-ebe3-11dd-8838- 000779fd2ac,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F3%2F2213dd52-ebe3-11dd-8838-0000779fd2ac.html&_i_referer=http%3A%2F%2Fsearch.ft.com%2Fsearch%3FqueryText%3Dbritish%2Bairways%26aje%3Dtrue%26dse%3D%26dsz%3D [Accessed 21 Oct 2009]