British Airways Operational Environment

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British Airways – Operational Environmental
Introduction
British Airways (BA) is the UK’s largest international scheduled airline, currently flying to over 550 destinations. The British Airways group consists of British Airways Plc and a number of subsidiary companies including, among others, International Aeradio, British Airways Helicopters serving mainly the North Sea oil rigs and British Airways Holidays Limited (BA 2008)and (Encyclopaedia Britannica-a).

Historically, British Airways was created as a state-owned company in April 1974 by a merger between British Overseas Airways Corporation (BOAC formed in 1939) and British European Airways (BEA formed in 1946) and their associated companies (Encyclopaedia Britannica-a). Despite a pooling of resources and expertise of the merged airlines, BA experienced growth pains which culminated in a pre-tax loss of £141 million in the year ending 31 March 1981. Lord King of Wartnaby was appointed as Chairman in February 1981 to return the company to profitability and prepare it for privatisation. As a result of his sweeping changes (staff reductions, fleet modernisation, improvement of control systems and terminal facilities and a new responsiveness to customer needs) , the company earned profits in the year ended 31 March 1983 (BA 1987). With the major technical and operational changes paying dividends, BA management was the next to be overhauled between 1983 and 1986; with an emphasis on the commercial and marketing divisions (BA 1987). The company was returned to profitability and subsequently privatised in 1987 (Encyclopaedia Britannica-a).

Political Environment
-The 9/11 attacks in New York, the SARS epidemic, Bird Flu and the wars in Afghanistan and Iraq have caused governments and airlines to re-think their strategies and responses to the slump in air travel which resulted from these events. Increased medical and security screening and frequent responses to terrorist warnings and events continue to place a burden on airline industry resources. -BA remains particularly vigilant due to the UK Government’s support of the US Government’s activities and policies in the Middle East, Asia and the Far East (BBC World News and Business News–TV Broadcast Excerpts). The fallout from these foreign policies has created home grown terror threats such as the threat at London’s Heathrow Airport on 12 February 2003 (CNN.com/World 2003) and the London Bombings on 07 July 2005 (BBC NEWS 2005). -Passenger traffic recovered from 9/11 and the SAARS scare in August 2004, and the granting of operating licences to low cost airlines has driven passenger growth in recent years. British Airways was quoted by Reuters on 10 August 2005 as stating that the short term impacts of the London attacks were not materially significant; although Ryanair reported a drop in passenger traffic numbers as a result of the same events (Airwise News 2005). Economic Environment

-Recession and high oil prices (and terrorism) are the most quoted reasons for the problems facing the airline industry. British Airways announced that it would increase fuel surcharges on all tickets issued on or after 03 June 2008 (Airwise News 2008 a). -The Association of European Airlines (AEA) stated on 03 June 2008 that struggling European airlines might ground unused aircraft next winter (Airwise News 2008 b). -On 02 June 2008 at an annual general meeting in Istanbul, the Director General of the International Air Transport Association (IATA) stated that “a significant decline in global airline profitability , or even losses, look inevitable in 2008 as the industry struggles with sky-high fuel prices.” The price per barrel of oil roughly doubled in the past year, reaching an all time high of US$135.09 per barrel on 22 May 2008, seriously threatening the outlook for the industry. A combination of high fuel prices, the US economic downturn and accelerated deliveries of new aircraft ordered at the peak of the economic cycle but...
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