SWOT and PESTLE Analysis: British Airways
British Airways also known as BA is one of the largest airline carrier in the world. Founded in the year 1972 by the UK government as the major national carrier, it was privatized in the year 1987. The organization has been successful in its operations as it operates about 290 aircraft fleets and flies to all major inhabitable continents of the globe. According to latest sources, in year 2016 the organization has approximately generated £11.4 billion profits on operational costs. This significant paper would prolifically highlight the internal and external environment of the British Airways by emphasizing on the key areas that the organization needs to emphasize on for boosting the operational performances.
It is quite important for a reputable airline company like British Airways to significantly assess the internal environment for evaluating the market scenario and the significant changes that needs to be implemented for the company’s better performance. Assessing the business strategies of British Airways, the use of SWOT analysis can be quite helpful for understanding the strengths, weaknesses, opportunities and threats associated with the company.
- British Airways holds an experience of 90+ years in the airline industry. It is United Kingdom’s largest international airline and is considered as the world’s principal global premium airlines. The organization’s major business place is London in United Kingdom and they flies to more than 170 locations all around the world via its subsidiaries.
- The “IAGC international airlines” is the parent company of British airways. This have a significant influence on British Airways being the largest UK based airline in terms of stability and financial size. The “IAGC international airlines” is world’s third largest in terms of finance and revenue (Hunter, 2006).
- British airways have its own engineering branch for maintaining the aircraft fleets. This mainly includes line preservation for more than seventy airports all around the globe. Hangar facilities are provided at Gatwick and Heathrow airport and another two key maintenance centres are at Cardiff and Glasgow airports.
- It has been critically observed that about 50% of revenues of British airlines come from the market of United Kingdom. Despite this aspect is quite good but evaluating the significant risks in the globalized economy it is not good in taking risk of having a myopia market.
- The British airways have immense unionised employees. It has been reviewed that collective bargaining takes place in a regular basis and the sometimes breakdown within the process of bargaining may disrupt the operations and negatively impact the performance of the business. The continuous effort for managing the employment costs tend to increase the risk mainly in this area (Balmer et al. 2009)
- Despite having operations all around the world via distinctive subsidiaries, British airlines lacks in penetrating developing markets like China and India where the potentiality of the market is high due to significant increase in disposable income, stable economic conditions and changing lifestyle.
- The biggest opportunity for British airways lies with the emergence of varied developing economies and the increasing demand of investment in infrastructure of travel, interconnectivity, increase of middle classes, increase in international business and foreign tourism. These aspects are quite helpful in developing the airlines route.
- There has an advent and rise in new travelling groups and budget travelling segments which have significantly led in increase the service demand of this specific sector (Harvey & Turnbull, 2006).
- Due to the prolific increase in government interventions, many large companies operating in the airline industry are forced to exit the market because of the huge cost of operations, competing and struggle in the global economy. This aspect is considered to be highly beneficial for airline organizations like British Airways.
- Fare discounting by various other airline companies have a negative impact on British airways. This has therefore resulted British airways in responding to the fares of the competitors for maintaining the passenger traffic. Significant competitors have distinctive cost structures that are quite low compared to to British airways targeting budget segment of travelling.
- The airline industry is quite highly regulated. Starting from the flying routes to the fares and infrastructure costs, security and safety. The influence by the government and tight regulations impacts the business performance of British airways. Moreover continuous regulatory developments have major impacts on the industry as well as the long term business strategies (Tiernan et al. 2008)
- The improvement in infrastructure and developing alternatives forms of transportation liken Bullet trains and underground metros have eventually posed threats to the airline companies.
Along with the internal environmental analysis it is also important for British airways to consider analyzing the external environment. For assessing the eternal environment the Pestle analysis tool can be used for effective results.
- Political: Airline companies have to prolifically follow significant regulations and needs to work under various operating restrictions. In case of British airways, it isn’t different. British airways operate in a very challenging political environment which is pigeonholed by terrorist attacks. This led to political stir and stoppage of flights to certain destinations. Moreover last year’s vote of Brexit sparkled political turmoil impacted the economy of the country. This significant aspect impacted the business operations of British airways (Hunter, 2006). The customer confidence for all these issues was down which has led to implementation of strict and safety laws. These aspects also impacted British airways as they lost huge amounts of money in the due course. Due to all these issues the price and product are in strict control of the government and the influence prolifically highlights about the importance British airways needs to give on political factors and legal regulations.
- Economical: Due to the uncertainty following the Brexit situation, British airways had to face various economical impacts. Due to the political stir and government interventions the rate of pound depreciates and the revenues of British airways were negatively impacted. Despite being benefitted from interest rates and low fuel prices, the challenges tend to persist for co-occurrence of adverse natural factors. The sharp downturn of global economy experience in the past few years have affected British airways air travel demand.
- Social: British airways had to significantly formulate and implement new strategies for their target groups. Thus it can be assessed that higher number if commuters and the low cost demand provide an attitude change in regards to the airlines which potentially causes brand image issues for companies with high cost of air service. As in case of British airways, the company had to face huge issues due to social factors for the ATC strikes in France (Wensveen et al. 2009) Due to the social unrest of ATC union strikes the social government had to cancel various flights over France. Considering all these scenarios it can be ascertained that such social and cultural factors must be taken into consideration as it affects the needs of the customers and the potential market size. It is essential for British airways to emphasize on lifestyle, tastes and continuous changing fashion of the customers as these aspects can be significant opportunities to overcome the drawbacks.
- Technological: After the terrorist attacks of 9/11 the airline industry is undergoing a digital disruption of relative stability. The entire digital revolution has been prolifically ushered by the important role the internet plays. The digital revolution is also changing the cost structure of the airline industry. Considering British airways it can be reviewed that the company is also exploiting for various technological developments for reducing the impact of digital disruption. The organization is investing in varied technological developments for securing and providing quality support and safety to its passengers (Ho, 2014).
- Legal: One of the most important legal factors affecting the business operations of British airways is the influence of trade unions. This has negatively impacted British airways due to various strike actions. In a recent incident a walkout happened which lasted for three days resulting in cancellation of many flights. The shortage of employees and crew members affected the operations where the union demanded in protest for pay freeze and change in working conditions. The legal aspect often creates huge issues for British airways where a firm resolution is needed for resolving these sorts of issue.
- Environmental: British airways faced operation disruption in June, 2016 due to bad weather conditions that led to cancellation of more than fifty flights. These sort of external environment aspects cause travel issues for British airways which negatively affects the satisfaction level of the customers and future revenues and additional costs (Balmer et al. 2014). The organization must make sure of having least impacts due to environment and implement quality operations to overcome environmental aspects as United Kingdom government emphasizes on ecological factors strictly.
Assessing both the internal and external environment analysis of British airways via SWOT and Pestle analysis it can be strategically evaluated that it is important for the management of British airways to emphasize on key factors and strategies for overcoming the distinctive drawbacks. It is essential for British airways to constantly perform a market research by use of varied tools for the benefit of the organization’s business performance.