BMAF004-20

INTRODUCTION TO BUSINESS AND MANAGEMENT

Introduction

British Airways is an airline company situated in England, United Kingdom and was founded through merger in the year 1974 (Pitchbook, 2023). The companies included in merger are British European Airways also known as BEA, British Overseas Airways Corporation also known as BOAC, Northeast Airlines, and Cambrian Airways. British Airways provide air transportation services which includes transporting passengers to numerous destinations throughout the world, cargo services which is responsible for mail and transporting freight on the aircraft, along with ancillary services which offers numerous additional services which includes travel insurance, hotel bookings, access to airport lounge, as well as rental cars (Pitchbook, 2023). This report analyses the Pestle framework, strengths and weaknesses, the structure of an organization, along with current issues and solution to those issues followed by a conclusion.

PESTLE Analysis

Political

Brexit: This has caused the exit of the UK from the European Union which had a significant impact on the British Airways. Brexit has caused the changes in the aviation regulations, freedom in operating through Europe, as well as in agreements. The labor movement was also impacted due to Brexit which further impacted the operations of British Airways.

Tax policy: The tax policy of the UK is another factor which affects the aviation industry. Air Passenger Duty also known as APD will reduce for those passengers flying economy to 6.50 euros from 13 euros per passenger (Travelplaces, 2023). The APD will split in two distinct bands for intercontinental flights. Passengers travelling below 5500 miles, there will be a rise in APD to 87 euros from 84 euros and for those passengers travelling a distance for more than 5500 miles, new band will be introduced with fees at 91 euros for economy cabin and for the rest 200 euros (Travelplaces, 2023).

Economic

Exchange rate: The airline industry earns revenue in numerous currencies thus fluctuations in any currency has an impact on the industry. In case, if the exchange rate of pound is strong, the international travel might become costly for the residents of the UK which might result in a decrease demand. While on the other hand, if the exchange rate of Euros is high, there will be an increase demand (Morrell, 2021).

Interest rate: The interest rate also has an influence on the cost of capital. The high rate of interest might result in an increase in the servicing cost, financing and might minimize the spending of consumer on non-essential items which includes air travel.

Social

Changes in the travel habit: The changes in the habit of the consumer also has an impact on the industry. When people prioritize experience above material possessions, it results in more travel however, if people prefer material possessions over experience, it results in less travel thereby affecting the profit and loss of the industry.

Cultural diversity: The airline industry serves the customers belonging from distinct culture, traditions, and languages hence, the airline industry must cater to their diverse needs through offering them multilingual services, international cuisine, as well as mutual respect for the culture.

Technological

Digital era: Through the enhancement in internet and technology, customers are now able to book the flight tickets easily through mobile based applications or online which require the airline industry to invest in digital platforms which are user friendly. The airline industry has made tremendous growth by providing mobile based applications, online services to book, select the seats, check-in, and many more.

Data analytics: With the help of big data, there are numerous opportunities for leveraging the data of the customer for enhancing the services and personalize offerings to offer them with positive customer experience. It also helps in identifying the growth opportunities and optimizing operations (Alsghaier et al., 2017).

Legal

Environmental regulations: The airline industry harms the environment hence, airlines have to follow numerous environmental regulations which includes noise pollution, regulating emissions, along with waste management.

Airline regulations: Airline industry has numerous regulations from employment laws to their safety standards which include Civil Aviation Authority which is also known as CAA. The UK airlines must comply with CAA for safety to employment laws (Gov.uk, 2023).

Environmental

Carbon emission:

The amount of carbon dioxide emitted by the commercial airlines reached approximately 900 million metric tons of carbon dioxide which resulted in enhanced regulations and criticism. Hence, the airline industry face challenge to minimize its carbon footprint simultaneously making efforts to grow.

Waste management: The airline generates numerous waste from disposable items which include cups, plastic cutlery along with food (Blanca-Alcubilla et al., 2018). Airlines need to manage and minimize the waste as it has a huge impact on the environment.

Strengths and Weaknesses

Strengths

Strong goodwill and image: British Airways has a recognized brand image and a long history throughout the world. It is the flag carrier of the UK and is well known for its reliability and quality service which helps in attracting both the leisure travelers and business travelers.

Advanced customer experience: British Airways offers premium services to its customers which includes personalized in-flight services, exclusive airport lounge, along with luxury amenities which helps the airline in attracting premium customers and differentiating itself from its competitors (Efthymiou et al., 2018).

Strong partnerships: The company has formed numerous joint venture and code-sharing agreements with numerous distinct airlines which helps British Airways in enhancing its market access, network, resources, and risks (Bilotkach, 2019).

Weaknesses

Dependent on the market of the UK: British Airways is over dependent on the market of the United Kingdom which makes it vulnerable to the changes in the demand of the consumers and towards economic fluctuations. Any shift in the economy of the UK will have a negative impact of the business of British Airways.

Negative labor relations: The company has faced numerous strikes and disputes from its labor which has hampered its goodwill and caused disruptions within the operations (Blain, 2017).

Environmental issues: The aviation industry is harming the environment a low and thus it is essential for the industry to reduce its carbon footprint and minimize the emissions for maintaining its license to operations and complying with the regulations (Daley, 2016).

Interrelation of strengths and weakness with external environment

The airline industry hampers the environment by causing carbon emission and it contributes about 2.5% of the global carbon dioxide emission (Greenbaggage, 2023). This is one of the weaknesses and an environmental factor. On the other hand, the airline industry is dependent on the market of the United Kingdom thereby any changes in the consumer demand and fluctuations will affect the business. This is also one of the weakness and an economic factor.

Organizational Structure

The organization structure determines the tasks and roles of employees along with their contribution towards achieving the organizational objectives. British Airways follows a flat organizational structure which signifies that the organization has a few management levels although a broad span of control (Christensen, Lægreid, and Røvik, 2020).

Figure 1: British Airways Organization Structure

(Source: Dudovskiy, 2016)

Current Issue

One of the biggest issue faced by British Airways is the environmental and climate change. British Airways is amongst the second largest polluter in Europe as it emits around 18.4 million tons of carbon dioxide which is same when compared to the emissions produced by the vans on roads.  Therefore, there is an urgent need to come up with solutions so that there is less damage to the environment.

Figure 2: European airlines’ total emissions in 2019

(Source: Transportandenvironment, 2021)

Solution

British Airways considered a roadmap for achieving the net zero carbon emission by the year 2050 (Britishairways, 2022). The short term plan includes enhancing the operational efficiency, funding the carbon offset projects for addressing the emission on the domestic flights in the UK, making investments in efficient aircrafts, as well as introduction of sustainable aviation fuels through waste feedstock. The medium and long term plan might include consistent investments to scale-up and develop sustainable aviation fuels and considering the measures on how to advance the development of latest technologies which includes carbon capture technology and zero emissions hydrogen powered aircraft (Britishairways, 2022).

Conclusion

To conclude, British Airways is running through numerous years and has created a strong goodwill and strong partnerships throughout its lifetime. However, it still has certain weaknesses which is further linked with its external environment. Despite operating through numerous years, one of the key issue faced by the company is environmental and climate issue. The airline industry produces millions of tons of carbon dioxide which impacts the environment in a negative manner therefore, to minimize its impact British Airways has considered a roadmap in terms of short term, medium term, and long term solutions.

References

Alsghaier, H., Akour, M., Shehabat, I. and Aldiabat, S., 2017. The importance of big data analytics in business: a case study. American Journal of Software Engineering and Applications, 6(4), pp.111-115.

Bilotkach, V., 2019. Airline partnerships, antitrust immunity, and joint ventures: What we know and what I think we would like to know. Review of Industrial Organization, 54, pp.37-60.

Blain, A.N.J., 2017. Pilots and management: Industrial relations in the UK Airlines. Routledge.

Blanca-Alcubilla, G., Bala, A., Hermira, J.I., De-Castro, N., Chavarri, R., Perales, R., Barredo, I. and Fullana-i-Palmer, P., 2018. Tackling international airline catering waste management: life zero cabin waste project. State of the art and first steps. Detritus, 3(1), pp.159-166.

British Airways., 2022. Sustainability at British Airways. Available at: https://mediacentre.britishairways.com/factsheets/details/86/Factsheets-3/217?category=1&pgck=L2ZhY3RzaGVldHM- (Accessed: 04-08-2023).

Christensen, T., Lægreid, P. and Røvik, K.A., 2020. Organization theory and the public sector: Instrument, culture and myth. Routledge.

Daley, B., 2016. Air transport and the environment. Routledge.

Dudovskiy. J., 2016. British Airways Organizational Structure. Available at: https://research-methodology.net/british-airways-organizational-structure/ (Accessed: 04-08-2023).

Efthymiou, M., Njoya, E.T., Lo, P.L., Papatheodorou, A. and Randall, D., 2018. The impact of delays on customers’ satisfaction: An empirical analysis of the British airways on-time performance at Heathrow airport. Journal of Aerospace Technology and Management, 11, p.e0219.

GOV.UK., 2023. Civil Aviation Authority. Available at: https://www.gov.uk/government/organisations/civil-aviation-authority#:~:text=The%20Civil%20Aviation%20Authority%20(CAA,the%20ATOL%20financial%20protection%20scheme (Accessed: 04-08-2023).

Green Baggage., 2023. Aviation Sustainability: Facts and Figures. Available at: https://www.greenbaggage.org/news-and-media/aviation-sustainability-facts-and-figures#:~:text=Aviation%20is%20responsible%20for%2012,to%2074%25%20from%20road%20transport.&text=Commercial%20aviation%20is%20responsible%20for,3%25%20of%20global%20carbon%20emissions. (Accessed: 04-08-2023).

Morrell, P.S., 2021. Airline finance. Routledge.

Pitchbook., 2023. British Airways Overview. Available at: https://pitchbook.com/profiles/company/61984-27#overview (Accessed: 04-08-2023).  

Transport & Environment., 2021. British Airways emitted as much CO2 as all the vans on the UK’s roads, new data shows. Available at: https://www.transportenvironment.org/discover/british-airways-emitted-much-co2-all-vans-uks-roads-new-data-shows/#:~:text=British%20Airways%20is%20the%20second,million%20tonnes%20of%20CO2%20respectively. (Accessed: 04-08-2023).

Travel Places., 2023. UK Flight Tax Changes Come Into Force On 1 April. Available at: https://travelplaces.co.uk/uk-flight-tax-changes-come-into-force-on-1-april/#:~:text=What%20are%20the%20new%20Air,%C2%A326%20to%20%C2%A313. (Accessed: 04-08-2023).