Corporate Strategy for British Airways

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British Airways PLC

Flying an extensive route network of more than 300 different destinations in more than 70 countries, with nearly 250 aircrafts in service, British Airways is today the largest airline in the UK and the leader in terms of transatlantic flights globally. They are a group mainly based in Heathrow Airport, London Gatwick and Manchester, where they operate international & domestic scheduled air services for carriage of passengers, freight & mail.

In addition, British Airways is part of the oneworld alliance that together comprises 700 destinations. Founded in 1999, American Airlines, Cathay Pacific, Finnair, Iberia, Japan Airlines, Lan Airlines, Malév, Qantas and Royal Jordanian are also members of this association. The establishment of this kind of business partnership benefits customers expanding their access to a much wider network of destinations.

In terms of shareholding, for instance, the group has participation of 13.5% in the Spanish airline Iberia and 15% in Flybe. According to Key Note (2009), ‘other British Airways ventures include a 10% stake in Eurostar (UK) Ltd as part of the InterCapital and Regional Rail alliance. BA also operates a number of subsidiaries and franchises organisations, for example, British Airways World Cargo, BA Cityflyer and OpenSkies.’

BA’s financial overview defined by Key Note (2009) says that in the year ending in 31st March 2008, ‘British Airways PLC increased its turnover to £8.76bn from £8.49bn in 2007. Pre-tax profit increased to £922m in 2008 from £611m in 2007. In the year ending 31st March 2009, turnover was up to £8.99bn and there was pre-tax loss of £401m.’ The company’s annual report of 2009 describes in more details that 87.1% of this revenue is from passenger traffic, 7.5 % from cargo and 5.4 remains from other activities. The great financial results in the year that anticipated the credit crisis, a record of profitability in BA’s history, left the company in a good position to a much harder period that should arrive in 2008/09.

The airline industry

Key Note (2009) considers Aviation an important sector of the economy, enabling people to visit countries it contributes to the development of other sectors and to warm the economy in general. It is a competitive field which has been recently affected by the low-cost companies, specially the scheduled flights market, where price pressure has being on emphasis influenced by short-term issues as, for instance, the economic recession, oil price fluctuation, government taxation and international environmental and health concerns.

In accordance to Key Note, the number of companies on the air travel market significantly increased since 2004, the main reason to explain the expansion was the increasing operation of non-scheduled flights, which represented 48.7% of the overall total on that year and 63.9% in 2008. Even though the rising demand stopped in 2008, this period was a continuous growth for airline enterprises, companies were still able to operate revenues of £18.25bn that year, which means an increase of 6% on 2007 figures.

In summary, all the positive results are certainly a consequence of globalisation, the airline industry has an important role in this process as it stimulates tourism, global trade, foreign investments and therefore despite the recent economic recession it remains a large and growing industry. Environmental Influences

Political and Legal

There have been some major political issues since the start of the millennium, which have affected the airline industry and British Airways in particular. One specific event was the September 11th 2001 terrorist attack to the world trade centre in New York and the London attack on July 7th 2005, which have resulted in introducing new regulation and security procedures in European countries and the United States. The new regulations have come into effect in 2006 to try to combat the threat of terrorism and illegal...
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