Business Environment of British Airways - Case Study Example

Business Environment (Easy Jet) British Airways The Historical Beginning British Airways is a world-renowned leading airline with a range of of-the art high technologized fleet. The organization consists of highly trained and skilled workers, organized procedures of travel and a respectable reputation gained over the years. Currently, it has millions of satisfied customers and clientele. British Airways had first started up with the name ‘Imperial Airways’ in 1919 by setting off a commercial flight from Le Bourget to Honslow in August the same year. At that point, Imperial Airways consisted of only 18 aircrafts and 250 employees. High costs could not be incurred due to the stress of world wars at the time, change of empires globally and evolution of new technology. British Airways has evolved almost a century within the airline industry of the world and is currently a premier airline. British Airways was a ‘pushed merger’ between Imperial Airways and the British Overseas Airways Corporation in UK. Shortly after World War II, a sister airline was created, known as the British European Airways, to handle transatlantic flights and expand further in the airline industry. British Airways at Present Amongst all worldwide airlines, British Airways is considered one of the leading international airlines of United Kingdom. The flying route to over 550 connective destinations, British Airways is recognized worldwide for its high end services, and has received a number of global awards. The remarkable success of British Airways could be mainly credited to its incessant addition of long-haul and latest technologized international flights, the world class services currently offered and the continuously rapid extension and improvement of its fleet. Exceptionally, the entire airline expresses its commitment that provide its passengers with due comfort and luxury through value added and innovative services such as extended leg room for economy class passengers, beautifully unique lounges and onboard continental catering services round the clock. If a passenger travels through Economy class of British Airways, they are able to enjoy maximum comforts and additional services. However, if a Business Class passenger travels with British Airways, they are open to endless pleasure from the stylish presentation with imperial touch, highly sophisticated and personal classic service of the highest level available at current era of technology. Additionally, other conveniences are provided for passengers for more ease of check-in process. These include telephone check-ins for travelers, innovative valet services and an online portal available 24 hours; the official British Airways website offers a series of information, easily enabling travelers to check Airways Schedule round the clock, book flights and offer travel advice along with other information on different destinations. British Airways has also introduced and successfully implemented Online Booking Services through an e-ticketing system which provides passengers with the maximum flexibility of checking in without requiring a ticket’s physical availability. Only the travelers’ details, such as proof of identification are required and are obligatory to be produced during check-ins. On the other hand, alternatively you may visit a travel agency for your desired destination. Furthermore, the British Airways travel agency also provides numerous other air travel services such as hotel bookings at any destination and between destinations, instant travel insurance purchase, car or cab rentals, holiday purchases, etc. But it is just a supporting to the core business. Summing up, all of above said value-added services work together with numerous customer support services, generating a chain of success for the leading airline. British Airways Fleet and Staff British Airways is the largest airline based in the UK in terms of its fleet size, international flights, and international destinations and was the largest airline by passenger numbers until year 2008. The airline carried 34.6 million passengers in 2008. British Airways holds Type ‘A’ Operating License from United Kingdom Civil Aviation Authority , permitted to carry passengers locally and internationally, business cargo, and mail on aircraft with minimum 20 or more seats. British Airways is centered at London Heathrow Airport in West London, including a major fleet present at Gatwick Airport, along with a base at London Airport. Fleet facts Current aircrafts available of British Airways: 1. Boeing 777-300 2. Boeing 747-400 3. Boeing 777-200 4. Boeing 767-300 5. Boeing 757-200 (Open Skies) 6. Airbus 321-200 7. Airbus 320-200 8. Boeing 737-400 9. Embraer 190 (BA City Flyer) 10. Airbus 319-100 11. Airbus 318-100 12. Embraer 170 (BA City Flyer) Technical Information on British Airways Aircrafts Boeing 777-300 2. Boeing 747-400 3. Boeing 777-200 4. Boeing 767-300 5. Boeing 757-200 (Open Skies) 6. Airbus 321-200 7. Airbus 320-200 8. Boeing 737-400 9. Embraer 190 (BA City Flyer) 10. Airbus 319-100 11. Airbus 318-100 12. Embraer 170 (BA City Flyer) The British Airways Mission Statement “In an incredibly tough trading environment we have to focus hard on pulling ourselves through the immediate crises, while preparing the business for better economic times. This year we have mapped out a long-term vision for our business. It is to be the world’s leading global premium airline.” Continued Objectives: British Airways presents its’ complete 2012 program which aims to drive the entity as a team performing together by placing customers as the center of their culture. With British Airways staff, it is all about the customers’ demands. Their firm belief is that they can set a new standard of customer services by keeping promises, offering unique services, properly implementing fully for customer care and finding solutions full of flexibility. All this leads to further progress and success. British Airways believes in treating each customer as an individual by adding a personal touch which delivers that everyone should feel valued. Using comprehensive communication, training and development programs helps gain progressive reputation and success. British Airways puts emphasis on staff on high standard services and claim to be proud of expecting great things of every employee or worker of British Airways. They believe their colleagues to be central to British Airways’ ambition to be the world’s leading global premium airline. British Airways Business Plan British Airways BP11 The continued three-year business plan, BP11, set out the British Airways’ agenda for 2008-09. Their main aims involved building on Terminal 5’s strengths and effectiveness in order to upgrade the customers’ experience throughout destinations, continue to produce cost-effective solutions without compromising expected high standards, expand operations and make professional corporate responsibilities a prominent part of their airline. Fluctuating fuel prices and the global downturn led to British Airways needing to revise their plans and resetting priorities respectively. Nevertheless, British Airways has gained significant progress against their original goals, laying the foundations for future success. Terminal 5 -An Upgraded Customer Experience Terminal 5 has transformed British Airways’ overall performance and high standard customer service. British Airways has maintained punctuality and baggage targets across the worldwide network, achieving tremendous customer satisfaction rates. British Airways’ services for premium customers has already been upgraded with the new Club World product, recently fitted to all Boeing 747 aircraft and over half of their Boeing 777 aircrafts. Additionally, in the near future, British Airways will launch its new First cabin. The Galleries lounges at Terminal 5 and Terminal 3 have had a superb reception which led to British Airways using the same concept at other core airports such as Johannesburg, Milan, Vancouver etc. Competitive cost base In a competitive market cost always remains decisive for a leading airline in the world. Day by day, fuel prices are instinctively increasing by increasing demand and curtailing the cost. Terminal 5 permitted British Airways to cut the cost of its Heathrow operations by more than expected. By the end of March 2009, the overall Heathrow manpower levels had been reduced by 1,074 MPE, 14 per cent lower than the high resource level during the first 30 days of Terminal 5 operations. A constructive and significant management voluntary severance program also reduced the number of managers. Capacity was increased by fuel efficient aircrafts. British Airways Total Group operations (note -1) Traffic and capacity   2010 2009 2008* 2007 2006** Revenue passenger km (RPK) m 110,851 114,346 118,395 112,851 109,713 Available seat km (ASK) m 141,178 148,504 149,576 148,321 144,194 Passenger load factor % 78.5 77.0 79.1 76.1 76.1 Cargo tonne km (CTK) m 4,537 4,638 4,892 4,695 4,929 Total revenue tonne km (RTK) m 15,588 16,054 16,797 16,112 15,909 Total available tonne km (ATK) m 21,278 22,293 22,872 22,882 22,719 Overall load factor % 73.3 72.0 73.4 70.4 70.0 Passengers carried ’000 31,825 33,117 34,613 33,068 32,432 Tonnes of cargo carried ’000 760 777 805 762 795 Revenue aircraft km m 618 644 644 637 614 Revenue flights ’000 257 279 281 276 280 Operations   2010 2009 2008* 2007 2006** Average manpower equivalent (MPE)   37,595 41,473 41,745 42,683 43,814 RTKs per MPE   414.6 387.1 402.4 377.5 363.1 ATKs per MPE   566.0 537.5 547.9 536.1 518.5 Aircraft in service at year end   238 245 245 242 284 Aircraft utilization (average hours per aircraft per day)   10.43 10.68 10.91 10.82 10.29 Unduplicated route km ’000 628 621 629 589 574 Punctuality – within 15 minutes % 81 77 63 67 75 Regularity % 98.0 98.6 98.2 98.5 98.8 Financial   2010 2009 2008* 2007 2006** Passenger revenue per RPK p 6.30 6.85 6.42 6.44 6.31 Passenger revenue per ASK p 4.94 5.28 5.08 4.90 4.80 Cargo revenue per CTK p 12.12 14.51 12.57 12.74 12.94 Average fuel price (US cents/US gallon)   189.24 284.06 245.26 209.60 188.22 Interest cover (note 2) times (2.9) (3.6) 15.4 16.7 6.0 Dividend cover times n/a (5.2) n/a n/a n/a Operating margin (note 3) % (2.9) (2.4) 10.0 7.1 8.5 Earnings before interest, tax, depreciation, amortization and rentals (EBITDAR) m 642 645 1,780 1,549 1,666 Net debt/total capital ratio (note 4) % 52.0 56.3 28.7 29.1 44.2 Net debt/total capital ratio including operating leases % 63.1 62.8 38.2 39.6 53.0 Total traffic revenue per RTK p 48.31 53.00 48.91 48.79 47.53 Total traffic revenue per ATK p 35.39 38.17 35.92 34.35 33.28 Total operating expenditure per RTK (note 5) p 52.76 57.38 46.91 49.26 47.26 Total operating expenditure per ATK (note 5) p 38.65 41.32 34.45 34.68 33.10 *Restated for the adoption of IFRIC 13 and 14 and to include frequent flyer passenger numbers. **Restated for the disposal of the regional business of BA Connect. n/a = not applicable. How Global Economic and Geopolitical Scenarios affect British Airways In the changing world, peace and security concerns have particularly changed the priorities and preferences of every field of life. Firstly, gulf war pinches the already stressed business world by preventing clientele from free moving and raveling to their designations. This created an immense inflation in prices of items linked specifically with airlines concerns. British Airways was badly affected by the Gulf crisis during the nineties. Fuel prices fluctuations also harmed inversely by increasing the flying cost which created a negative completion by lowering the prices to the customers. Additionally, after the 9/11 incident, the airline business industry was also transformed. Strict security measures prevented freedom of movement to various destinations. The counter combat by the British Airways was tremendous. Expanding and spreading, finding new locations, new destinations, keeping high standards as a trademark leading others, British Airways provided its customers with a transformed outcome. What Line of action has British Airways adopted in accordance with the UK policies and Regulations? In addition to the peace and security parameters for the safety of citizens and other nationals, the United Kingdom has prime concern for their domestic interest at priority. Regardless of their travelling levels, British Airways remained intact with the UK reforms in accordance with the peace and security concern. Moreover, changing needs laid new reforms to be implemented successful. This led to further training and development of staff launched by British Airways to help them combat in new and unfamiliar scenarios. British Airways and its Stakeholders The stakeholders are the connecting groups who are linked and interested in the British Airways business. British Airways Workers, its shareholders, its suppliers, and ultimately its customer are hoping better outcomes in the coming years. Keeping in the view the British Airways continued growth, their dedication and business spirit, optimistically is landmark for new and struggling airline companies. British Airways’ Engagement with its stakeholders comparing with BMI British Airways believes in a direct and active approach to its stakeholders. Keeping this in mind, they have developed forums for employee direct communication, proper and professional consultation, including the famous BATUC (British Airways Trade Union Council) and the British Airways General Forum. It consists of active programs of result oriented communication with investors, including its regular Investor Days at which the British Airways plans are fully discussed with analysts personally in accordance with the market competition. Within a broad society, they maintain an active and valuable dialogue with national and local government, regulators and lawmakers, local communities, social representatives and non-governmental organizations. Over the last year, British Airways has been very keen to discuss and debate with others about its views on the governments consultation and concerns on the forthcoming future of aviation and runways’ options, which included a series of local and foreign stakeholder meetings with different community groups around Heathrow, forming new concepts for growth and development in the world as far as airline business is concerned. British Airways was expected to takeover BMI in 2007 due to ownership of 11 percent of take-off and landing slots at Heathrow Airport by BMI. Currently, BA holds about 40% of slots at Heathrow. However, after the merger it would have owned more than half of the said percentage. British Airways has also been facing losses approximately up to £1 million per day, so it would have helped to takeover BMI’s ownership. Stakeholder Analysis Shareholders aim for British Airways to expand as they own the company and want their investments to increase in value. British Airways Employees are interested in British Airways Careers as it provides them with complete job security with good working conditions, training and development of career opportunities and a competitive handsome salary. Customers would be interested in flying with British Airways due to their reputation as offering high standard premium flights and customer service, as well as a freedom of choice for more world class services. REFERENCES 1. Alamdari, F. & Morrell, P. 1997. ‘Airline Labour cost reduction: post-liberalization experience in the U.S. and Europe, Journal of Air Transport Management, Vol.3, No.2 pp 23-55 2. 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