Business Policy - British Airways - Case Study Example

According to the International Air Transport Association, the industry lost up to $8 billion in 2008 which is even greater than what was forecasted previously. The report uses a PESTEL analysis (See PESTEL Analysis: Appendix D) to scan the external environmental structure of the company. The business cycle of British Airways includes several parameters. This is due to the fact that airline industry is characterized by longer business cycle resulting from the lower profitability and for the lower shareholder returns.

(Liehr, Nd, page 1). The marketing environment is constantly changing and with every change in the last few years airlines industry is being affected. The demand for the airline industry is highly income elastic. (“An analysis of British Airways Marketing Environment”, 2008) Thus the rise in the fuel prices last year and recent economic turmoil has affected the airlines industry in huge way as the passengers are avoiding more expensive air travels. According to a report by Air Transport association of America, the revenue generated from passenger travels for all airlines fell by 19 % during the month of February, 2009 when compared to February 2008.

This is the forth consecutive month where loss is being recorded. The business sector, hit badly by the economic crisis are cutting back on their airline trips. British airways having ten flights operating daily between London and New York is among the worst hit. (“Lucrative Business class air travel hit by crisis”, 2009) The company saw a decline in 8.6 percent in premium traffic and 4.1 percent in non premium. (“Lucrative Business class air travel hit by crisis”, 2009)  Also there are other factors which are directly affecting the industry.

The events like terrorist attacks in the recent past closely linked with the airplanes may be considered as an external factor affecting air traveling. This assumption is based on the fact that these events lead to the introduction of strict security norms and regulation from the EU and US, affecting from summer 2006 resulting in a fall of customer traveling confidence.(“An analysis of British Airways Marketing Environment”, 2008). The intervention of Government rules and regulation were present in the areas of controlling the place of flight, the pricing policy etc.

Also there are restrictions in the number and types of baggage that they carry, which ultimately is becoming the restriction on the part of the customers.