Business Analysis of British Airways - Case Study Example

British Airways Case Study Analysis Question one: On 1st February, 2008 British Airways Chief Executive Willie Walsh, Said: "This is another good set of results despite soaring fuel costs and difficulties in the market. Revenue up some one per cent and a strong cost performance has led to an operating profit up 28.5 per cent. While fuel costs in the first six months were down £36 million, they have soared £72 million in the third quarter." Analyze the performance of British Airways, in 2006 and 2007, in view of the comments of the Chief Executive. Introduction: Anybody who has been following British Airways for the last two years, knows that it has had to go through a list of disasters of varying magnitudes. Presiding over all this was British Airways Chief Executive Willie Walsh. While the responsibilities of the various disaster may lay in varying degrees with him, it is the purpose of this case study to analyze the plans which he laid out for British Airways over the last two years have been successful or have been successfully implemented. We will be using two exhibits to guide us in that ( Exhibits 1 ( Income Statement) Exhibit 2 ( Balance Sheet) 1of the last few years. A Critical review of this statements will reveal if British Airways is where Mr. Walsh has wanted it to be in 2008 or not. The biggest report card in this context would have to the British Airways Business Plan Year 2006-2008 which was unveiled in 2006 which would indicate how successful British Airways was in meeting those goals, when compared to the above mentioned exhibits. A little about British Airways : It is one of the largest airlines in the world , in fact till recently , it called itself the World’s favorite airline , until Lufthansa supplanted it as the largest passenger carrier. The size of British Airways is big. British Airways is engaged in the operation of international and domestic scheduled air services for the carriage of passengers, freight and mail, and the provision of ancillary services. The company operates international route network comprising around 147 destinations in 75 countries across America, Europe, Far East Asia, Australia, Africa, Middle East, and the Indian sub-continent. The company maintains a fleet of 242 aircraft. During the fiscal year 2007, the company carried about 33 million passengers and 762,000 tons of cargo8 There is a mixed feeling as one review the financial statements. There is no question of a strong trend of increasing revenues. But this is accompanied by decrease in bottom line. An increase in the percentage of sales devoted to cost of goods sold from 83.80% to 84.81% was a key component in the falling bottom line in the face of rising revenues. There is definitely good news on the debt front. Debt as a percent of total capital decreased at British Airways Plc over the last fiscal year to 58.12%, it is still in-line with the Airlines industrys norm. Additionally, even though there are not enough liquid assets to satisfy current obligations, Operating Profits are more than adequate to service the debt. Cash Collection is a strong suit as the company is more effective than most in the industry. As of the end of 2007, its uncollected receivables totaled £654.0M. However British Airways Plc is among the least efficient in its industry at managing inventories, with 4.34 days of its Cost of Goods Sold tied up in Inventories. In 2007, British Airways Plc increased its cash reserves by 79.15%, or £315.0M. As a percent of revenues, this change was above the Airlines industry median. By looking at the Cash Flow Statement, One can easily see the sources and use of cash generated throughout the year. Cash Flow from Operations is the only sustainable source of cash and represents earnings from the day-to-day business of a company. In 2007, this company earned £756.0M from its operations for a Cash Flow Margin of 0.09%. Cash Flow from Investing is a measure of the cash used to maintain and grow the business, also called Capital Expenditures, in 2007 Cash Flow from Investing totaled £36.0M, indicating this company earned more from the sale of existing assets than it spent on the purchase of new assets. Cash Flow from Financing describes the inflows and outflows between a company and its owners or creditors. In 2007, Cash Flow from Financing was negative, which tells investors that this company did not need to attract significant financing from outside sources2. So there is a mixture of good news and bad news but how does this compare with the Business plan 2006-2008 unveiled by Mr. Walsh. The Key financial elements in there were:11 · Proposals to enable the achievement of a 10 per cent operating margin and prepare the airline for future profitable growth. Savings across the airline worth £225 million in 2006-07 and a further £225 million the following year; Investment of nearly £200 million to include a new Club World seat, on-demand films in all cabins and ba.com; The investment and the cost savings targets have clearly been met. There are obvious external pressures from fuel prices so how is the goal on operating margins going. An operating profit of GBP602 million for the 12 months ended 31-Mar-07 (2006: GBP694 million) was reached. The operating margin was 7.1%, down from 8.5% in 2006 and British Airways operating margin for the year ending March 31, 2009, will be about 7 percent, from a target this year of 10 percent. It does look very bad. But let us look at in a proper context. That compares favorably with 6% operating margins at Air France-KLM and just 4.2% for American Airlines parent AMR .Willie Walsh had said on the business Plan 2008 “This plan will make us fit for the future. By resolving our pension deficit, reducing cost and delivering world-class customer service, we can make a 10 per cent operating margin a sustainable reality. So what had gone wrong, well it was mainly the fuel price increases. So now what does the future hold . Analysts are predicting an operating margin of about 7.2 percent for the next fiscal year.5 Sales will advance 4 percent to 4.5 percent in the next fiscal year to more than 9.1 billion pounds ($18 billion), the airline said today. Fuel costs will increase by about 450 million pounds to 2.5 billion pounds and non-fuel costs will gain as much as 3.5 percent. British Airways is a business in transition according to Walsh. The airline needs to determine how it can grow in London, its biggest market, where flight growth is constrained by government regulations The carrier also must create opportunities outside the U.K. capital and various new markets like India and China Conclusion: The mark of 10% operating margin will not be reached this fiscal and most likely not be reachable in the near future , but does this mean that the British Airways has floundered under Walsh over the last two years. Not at all, in fact it has outperformed the Industry. While it’s financial results show a mixed bag, it has not compromised on service to reduce costs and it continues to invest in that area. The financial health of the airline is good from a debt stand point of view and if needed can raise substantial capital in Equity and debt markets. It is ideally positioned cash wise for any acquisitions in the local as well as new markets. Walsh said at the start of the business plan “Better management of our costs and having an absolute focus on customer needs will give us a lasting platform for success”4 and “Meeting the business plans objectives will put us in a position to take on our competitors in preparing for growth.” Both these goals have been met. British Airways is ahead of it’s industry norms and it’s competitors. So though there have been some trials and the internal goals have not been completely met , Mr. Walsh’s leadership over the last two years can be called a qualified success. Question two: Customer satisfaction and favorable opinions of all stakeholders is a key to the success in the service based businesses. Compare the performance of British Airways to that of any other major Airline in the past 3 years. Introduction: Customer service has been the central focus for British Airways from a very long time. Cutting Costs under Mr. Walsh had a very caveat “It should not negatively affect the customer service level, perhaps enhance it. So a little analysis is warranted , if that was achieved in all the shakeup which the British Airways had gone through in the last two years. British Airways won the Skytax Airline of the Year award in 2006 for the first time16. It also won OAG Airline of the Year 2007, Best Airline Based in Western Europe 2007, Best Transatlantic Airline 2007, and Best Europe - Asia/Australasia Airline 2007 in the Airline of the Year Awards run by UK-based OAG. However not all was rosy in the Customer Service front. The Airport Transport Users Council rate BA as the worst European carrier for baggage handling. BAs London Heathrow baggage system has insufficient capacity to deal with the number of bags passing through it, according to BBC news. BA lost on average 3000 pieces of baggage per day 15. In fact losing luggage had become such a chronic problem that Mr. Walsh actually put that in the business plan 2006 2008 to reduce that. How bad is it compared to the other airlines. Statistics are the best indicators. Statistics from the Association of European Airlines (AEA) were released yesterday with British Airways having the worst record for misplacing/loosing passengers luggage. With UK airports handling millions of passengers a year (with Heathrow and Gatwick being the two busiest), baggage handlers from British Airways lose 23 items of luggage for every 1000 passengers - with the average across all airlines being almost 16 items lost per 1000 passengers. Totaling this up across the year, it equates to 5.6 million bags being lost in transit in 2006. Although 85% of bags were subsequently found and returned to their owners, some luggage (approximately 85,000 bags) were never found. While this continued to be a big problem, there were improvements in other areas. British Airways is implementing RightNow 12 Web eService Centre on its UK and US Web sites. In doing so, the airline aims to improve customer service by allowing the customer to obtain the information they require directly from BA.com. Right Now Web eService Centre™ is an Internet customer service solution that automates email responses and uses proprietary self-learning knowledge base technology to accurately predict and anticipate customer support questions. The "Ask BA" functionality provides answers to a wide range of questions that customers ask BA. The Right Now software can adapt and learn from customer feedback so that it can quickly respond to new areas of enquiry. Currently, BA receives around 24 million telephone calls globally from its customers each year. 94 per cent of customers surveyed said they liked the service and wanted us to continue with it." Comparing Customer service to another airline , perhaps would not clear this as much as comparing to another service culture. Across the Pond , in the United States of America , the Customer Service culture in the Airline Industry is fast going the way of the dinosaur. University of Michigan research shows that airline passengers consistently have been among the least-satisfied consumers in the USA for the past 13 years. Even the U.S. Postal Service, once the poster child for bad customer service, now swamps most airlines with a respectable 73 on the 100-point American Customer Satisfaction index.19 The airlines scored an abysmal 63 in the annual ratings issued earlier this year. The ratings included one airline industry bright spot: Discount giant Southwest scored 76, 1 point above the average for all companies whose customers were surveyed. The airline industry score is low enough, says Michigan business professor Claes Fornell, the ACSIs creator, that most carriers would be in danger of failing if their customers had travel options. Something to mull on when the New Open Sky agreements come into place between U.K and the U.S. although British Airways is unlikely to get domestic routes in the very near future in the U.S. the peculiarities of the airline business will forever leave the industry below average in satisfying travelers. Its just not a business thats wired for pleasing customers in the way that, for example, retailer Nordstrom is. Airlines in the United States arent convinced that money spent improving customer service will lead to bigger profits. Theres "little hard evidence" that spending more to improve customer service will have a significant positive impact on profits. On the Other hand British Airwayssees it as a means of distinguishing BA from the competition and there is a strong belief in BA management that customers will still be willing to pay extra for added levels of service. There is a strong feeling among U.S. customers that Airline executives from the CEO on down, should fly their planes like any other customer figuring that if the bosses had to endure what the masses do, changes would happen faster. Willie Walsh regularly travels around the world in the Economy class. So there is a definite connection between how the average traveler travels in British Airways and the very top management. Customer Service is a very top priority at British Airways. That was again reflected in the implementation of Astute’s ePower Center 30 integrating BA’s 29 global customer relations centers on a single-system platform, providing contact center agents and employees, worldwide, with immediate visibility into consumer interactions. Astute developed a compensation solution to integrate with the ePower Center platform, further enhancing BA’s consumer service responsiveness to include rapidly compensating passengers if the need arises – whether it is through a representative on the phone, or an agent at the gate. BA identified the need to improve its customer compensation procedures, so it put forward a request to Astute to develop a solution. Astute developed an integrated compensation card solution capable of being issued from ePower Center, BAs global service recovery system.To arrive at the optimal solution, Astute partnered with global leaders in the card services, currency exchange and travel money services industries to create an integrated compensation platform. Based upon three core currencies—pounds, U.S. dollars and euro—this platform enables card activation and fund loading in real time. When there is a need to issue compensation, a BA representative simply activates the card, which simultaneously creates a record of the transaction in the service recovery system. From there, they are able to give the compensation card to the customer over the counter. The card is ready to use at thousands of ATM or Point of Sale (POS) locations worldwide. Customer satisfaction is a key priority for British Airways their objective is to avoid service disruption, but when it is unavoidable , our state-of-the-art compensation solution allows them to offset the impact to the customer for a service disruption. And that is the key difference between the Airlines operating in the United States and British Airways. Airlines in the U.S. operate under a paradigm that there will be inconvenience to the Airline customer, that is just part of flying. British Airways tries to ensure that there is no inconvenience and quickly compensates the customer if there is some inconvenience. Conclusion: British Airways maintains a high level of customer service and that is a differentiator between it and the other airlines. Though it is no longer the World’s “favorite airline” and it has some serious issues with baggage losses , customer service is a primary focus for it. It is more than possible that such customer service focus has given it higher operating margins than other airlines. Customers , perhaps truly are willing to pay more for better service. Question Three: By developing appropriate models to support your answer, evaluate the potential for British Airways to remain as a major player in the global Airline Business, bearing in mind the imminent development of a 5th terminal at Heathrow and the deregulation of North Atlantic Flights a few days later Introduction: Both the opening of the 5th terminal at Heathrow and the deregulation of North Atlantic flights “Open Skies agreement” a few days later were major events for British Airways. This analysis will try to prove that British Airways received substantial competitive advantage because of them. Heathrow Terminal 5 was built exclusively for the use of British Airways at a cost of £4.3 billion9 and officially opened on the 14 March 2008. It opened to passengers on 27 March 2008, however a number of serious problems immediately arose. Staff were unable to find the car parks and there were not enough spaces available leading to confusion and delays getting to work. Long queues formed for staff security checks and the belts carrying the bags became clogged as they were not being unloaded quickly enough. The baggage handling system also malfunctioned due to technical problems. At one stage, BA were forced to stop checking in bags as large queues formed at the fast bag drop and seven flights departed with no baggage loaded.in the first five days, a backlog of 28,000 bags built up and over 300 flights were cancelled. BA initially handed out leaflets to passengers of delayed or cancelled flights offering up to £100 compensation to cover the cost of a hotel room for two passengers. In many ways it seemed that this was an unqualified disaster for British Airways Three days after the opening of Terminal 5 was another milestone date the Open Skies agreement on flights between Europe and the US came into force. Only four airlines could fly between Heathrow which handled most transatlantic flights in Europe and the US, including BA and Virgin Atlantic. But, from the end of March, any airline would have been able to fly to and from the two continents. BA has the most to lose from the agreement, as it operated the most flights from the UK to the US. Controversially, the US won a two-year moratorium on opening its own domestic market to European airlines. Until then, only US carriers could fly domestic routes. Now both these events look like, not only do they no confer any advantage to British Airways but actually cause them to lose any advantage they might have in this area. Walsh, not surprisingly, said this wasnt fair. The US is saying "your skies are open, ours are closed"13 - thats its definition of open skies, he says. Its a poor settlement. He predicts the US will not meet its side of the bargain by opening its domestic market by 2010. But rather than cut back the number of BA flights to the US as new competitors start their own, he says the airline will increase the number of flights. It’s not, because the “open skies” deal is a first stage agreement that runs until 2010. We want to see an open aviation area and the deal is clear that, if we don’t achieve an open aviation area by 2010, then the benefits that the American carriers were given in this agreement will be withdrawn. Most people external to BA view view “open skies agreement” as a lost opportunity, because the negotiators failed to achieve what they were asked to do the mandate that they were given was to negotiate an open aviation area and they failed to do that. But there are immediate positives , while the Open Skies agreement does not immediately open up U.S. routes , it brings competition on to British Airways home turf and the competition will definitely help in increasing the efficiency of the Airline .There are some serious opportunities to British Airways here , and that’s a real positive. The first stage agreement gives them some opportunities to adjust their transatlantic business by moving some of the activity that’s in Gatwick to Heathrow10. A step they may not have considered prior to the Open Skies agreement. This also gives them two years to plan their foray into the U.S. skies , they have already identified three Airports Houston, Dallas and Atlanta, and they’re very different from each other. Houston is a double-daily operation with a daily to Dallas and Atlanta. According to Mr. Walsh , if they were to prioritise them in terms of the move from Gatwick, he would put Houston one, Dallas two, and Atlanta three. British Airways has a profitable long-haul operation at Gatwick and the opportunity for them to move these to Heathrow is a network opportunity, particularly in relation to Houston, where it’s an oil business and there are connecting traffic flows into other regions that we serve where there are oil businesses. The same would apply to Dallas in terms of network benefit. There’s also an opportunity for them to expand their services into North America, serving destinations from Heathrow that they previously couldn’t, and they have started looking at some of those destinations at the moment. British Airways are restricted by Bermuda II (the current US/UK bilateral air services treaty)4 Bermuda II was extremely restrictive, and British Airways had always campaigned for total deregulation of the market, and though there is disappointment at this new agreement did not go far enough , there still was a substantial opportunity here. In the approach that the European Commission adopted in the negotiations, they were naïve in expecting that they could achieve their ultimate objective of an open aviation area by conceding to the US the bits that they wanted in this first stage. Despite the seemingly unfair Open Skies agreement and the disastrous opening of the 5th terminal at the London Heathrow, as stated earlier these confer some competitive advantages to British Airways. Using Porters generic competitive strategies model let us look at this. Overall Cost leadership: Despite some serious cost savings in the last two years , the British Airways is not known for cost leadership even though it has a higher operational margin than most airline. The open skies agreement will create more efficiencies and also force British Airways to create new ones in order to compete on own turf. So the result could only be increased margins from where it is already. Differentiation: British Airways has already differentiated itself worldwide as a customer service leader , the spectacular Terminal 5 will only enhance that reputation. More customers will also have the opportunity to directly compare British Airways and other airlines , because of the open skies agreement and there is a good chance that British Airways would win a lot more customers because of it’s better customer service. Focus: The British airways focus will continue on remain on being a full service airline and would not need to move from it’s fundamental paradigm of “ Customers are willing to pay more for better service”. It’s margins also allow more leeway to compete with various low cost airlines , without compromising on this. Conclusion : Both the Open Skies agreement and the terminal 5 will immensely benefit British Airways , though it may not look like that immediately. Appendix: Exhibit 1 : Income Statement for British Airways Exhibit 2 : Balance Sheet for British Airways Reference section SWOT Analysis for British Airways PEST Analysis for British Airways. INCOME Statement for British Airways Plc Currency in Millions of British Pounds As of: Mar 31 2004 Restated Mar 31 2005 Restated Mar 31 2006 Restated Mar 31 2007 4-Year Trend Revenues 7,560.0 6,982.0 7,562.0 7,881.0 Other Revenues -- 790.0 651.0 611.0 TOTAL REVENUES 7,560.0 7,772.0 8,213.0 8,492.0 Cost of Goods Sold 7,008.0 5,942.0 6,337.0 6,684.0 GROSS PROFIT 552.0 1,830.0 1,876.0 1,808.0 Selling General & Admin Expenses, Total 147.0 490.0 438.0 436.0 Depreciation & Amortization, Total -- 723.0 727.0 716.0 OTHER OPERATING EXPENSES, TOTAL 147.0 1,213.0 1,165.0 1,152.0 OPERATING INCOME 405.0 617.0 711.0 656.0 Interest Expense -279.0 -265.0 -215.0 -166.0 Interest and Investment Income 63.0 86.0 92.0 143.0 NET INTEREST EXPENSE -216.0 -179.0 -123.0 -23.0 Income (Loss) on Equity Investments 58.0 24.0 28.0 5.0 Currency Exchange Gains (Loss) -- 41.0 7.0 -5.0 Other Non-Operating Income (Expenses) 29.0 14.0 2.0 -33.0 EBT, EXCLUDING UNUSUAL ITEMS 276.0 517.0 625.0 600.0 Merger & Restructuring Charges -- -30.0 -48.0 -84.0 Gain (Loss) on Sale of Assets -46.0 71.0 27.0 47.0 Other Unusual Items, Total -- -45.0 12.0 48.0 Legal Settlements -- -- -- -350.0 Other Unusual Items -- -29.0 -- 396.0 EBT, INCLUDING UNUSUAL ITEMS 230.0 513.0 616.0 611.0 Income Tax Expense 85.0 121.0 152.0 173.0 Minority Interest in Earnings -15.0 -15.0 -16.0 -14.0 Earnings from Continuing Operations 130.0 377.0 448.0 424.0 EARNINGS FROM DISCOUNTINUED OPERATIONS -- -- 3.0 -134.0 NET INCOME 130.0 377.0 451.0 290.0 NET INCOME TO COMMON INCLUDING EXTRA ITEMS 130.0 377.0 451.0 290.0 NET INCOME TO COMMON EXCLUDING EXTRA ITEMS 130.0 377.0 448.0 424.0 balance sheet for British Airways Plc Currency in Millions of British Pounds As of: Mar 31 2004 Restated Mar 31 2005 Restated Mar 31 2006 Restated Mar 31 2007 4-Year Trend Assets         Cash and Equivalents 64.0 549.0 398.0 713.0 Short-Term Investments -- 1,133.0 2,042.0 1,642.0 TOTAL CASH AND SHORT TERM INVESTMENTS 64.0 1,682.0 2,440.0 2,355.0 Accounts Receivable 676.0 685.0 685.0 654.0 Notes Receivable 1,606.0 -- -- -- Other Receivables 96.0 32.0 67.0 68.0 TOTAL RECEIVABLES 2,378.0 717.0 752.0 722.0 Inventory 76.0 84.0 83.0 76.0 Prepaid Expenses 247.0 269.0 214.0 200.0 Other Current Assets -- -- 177.0 78.0 TOTAL CURRENT ASSETS 2,765.0 2,752.0 3,666.0 3,431.0 Gross Property Plant and Equipment 13,195.0 13,465.0 13,525.0 13,374.0 Accumulated Depreciation -4,558.0 -5,136.0 -5,643.0 -6,017.0 NET PROPERTY PLANT AND EQUIPMENT 8,637.0 8,329.0 7,882.0 7,357.0 Goodwill 93.0 72.0 72.0 40.0 Long-Term Investments 531.0 156.0 164.0 232.0 Other Intangibles 75.0 182.0 161.0 172.0 Other Long-Term Assets -- 180.0 229.0 152.0 TOTAL ASSETS 12,101.0 11,671.0 12,174.0 11,384.0         LIABILITIES & EQUITY         Accounts Payable 840.0 897.0 752.0 723.0 Accrued Expenses 166.0 1,441.0 1,583.0 1,419.0 Current Portion of Long-Term Debt/Capital Lease 682.0 559.0 479.0 417.0 Current Portion of Capital Lease Obligations 580.0 -- -- -- Current Income Taxes Payable 6.0 36.0 75.0 54.0 Other Current Liabilities, Total 443.0 333.0 528.0 988.0 Unearned Revenue, Current 859.0 3.0 15.0 24.0 TOTAL CURRENT LIABILITIES 2,996.0 3,269.0 3,432.0 3,625.0 Long-Term Debt 1,235.0 4,045.0 1,030.0 878.0 Capital Leases 3,911.0 -- 2,572.0 2,051.0 Minority Interest 210.0 212.0 213.0 200.0 Pension & Other Post-Retirement Benefits 53.0 1,820.0 1,803.0 1,142.0 Deferred Tax Liability Non-Current 1,137.0 816.0 896.0 930.0 Other Non-Current Liabilities 372.0 324.0 367.0 347.0 TOTAL LIABILITIES 9,914.0 10,486.0 10,313.0 9,173.0 Common Stock 271.0 271.0 283.0 288.0 Additional Paid in Capital 788.0 788.0 888.0 933.0 Retained Earnings 897.0 153.0 589.0 903.0 Treasury Stock -31.0 -26.0 -- -10.0 Comprehensive Income and Other 262.0 -1.0 101.0 97.0 TOTAL COMMON EQUITY 2,187.0 1,185.0 1,861.0 2,211.0 TOTAL EQUITY 2,187.0 1,185.0 1,861.0 2,211.0 TOTAL LIABILITIES AND EQUITY 12,101.0 11,671.0 12,174.0 11,384.0 References: ( Items cited in the paper) Bibliography (Articles or sites researched but not cited) 1. Income statement and Balance sheet of British airways for the years Available online at [http://investing.businessweek.com/] 2. Financial Audit analysis of British Airways Available online at http://library.corporate-ir.net/library/ 3. Comparative study of airlines available online at http://www.airguideonline.com/airguideskytalk0601.htm 4. Airline news on British Airways available online at http://www.centreforaviation.com/aviation/Info_Services_News/Aviation_News/ 5. Bloomberg analysis forecasting the predicted performance in the Next Fiscal available online at [http://www.bloomberg.com/apps] 6. Marriot L ABC British Airways book , 2nd Ed 7. Gaskel K British Airways ( Hard Cover Ed.) 8. The main website of British Airways available online at www.britishairways.com/ 9. The main website of terminal 5 available online at www.terminal5.ba.com 10. Interview by Mr. Walsh to Financial Times available online at http://www.ft.com/cms/ 11. Interview by Mr. Walsh to the Gaurdian outlining the Business Plan 2006 2008 available online at http://www.guardian.co.uk/ba/archive/ 12. The main website for the right now customer service system for British Airways available online at http://www.rightnow.com/news/ 13. A news article on British Airways available online at http://www.justtheflight.co.uk/news/ 14. A news article on British Airways available online at http://news.bbc.co.uk/2/hi/business 15. An Interview with Mr. Walsh CEO of British Airways available online at http://www.investegate.co.uk/ 16. An analysis of British Airways available online at www.centreforaviation.com/ 17. A news article on British airways available online at www.noticias.info/Archivo/2006 18. A news article on British Airways available online at www.guardian.co.uk/business/2006/ 19. A press release on the opening of terminal 5 available online at www.reuters.com/article/pressRelease 20. An analysis of the British Airways stock available online at www.bashareholders.com 21. A Market study on British Airways available online at www.researchandmarkets.com/reports/ 22. Market research on British Airways available online at www.marketresearch.com 23. Comparative study of Airline stock available online at www.mbdltd.co.uk/UK-Market-Research-Reports/Airlines.htm 24. A study of airline industry available online at www.datamonitor.com/industries/research 25. An analysis of British Airways stock available online at moneycentral.msn.com/investor/invsub/ 26. A news article on the Airline Industry available online at quicktake.morningstar.com/ 27. Designing and Executing Strategy in Aviation Management , Flouris , Oswald 28. MCcarthy S The Nordstorm way , 2nd Ed. 29. Outlook on the British Airways stock available online at www.forbes.com/markets 30. A financial performance analysis of British Airways available online at www.allbusiness.com/company-activities-management/financial-performance PEST Analysis on British Airways The four different environments are often referred to as PEST and allow a PESTanalysis to be conducted this allows the organisation to review and consider the environment in which it operates. Political environment Due to the terrorist attack many airlines such as British Airways stopped flights to certain countries such as the middles east and the main countries involved with the fear of their planes being attacked. This is therefore caused up a political stir with the fact that Britains fear them maybe the next victims of terrorist attacks. This has had a many negative effects on the airlines as they have lost out on a lot of money because of the stoppage of flights to certain destinations Economic Environment : With the open Skies and the influx of low cost carriers there are are severe cost pressures on British Airways as it focuses heavily on customer service, that may lead to additional pressure on it’s margins. However the Airline is well funded and has low debt and good infrastructure . The current high petroleum prices are also putting additional pressures on the margins. The operational margins themselves are one of the best in the industry for British Airways. Social: British Airways has been known for a long time as the World’s most favorite airline, because of it’s huge popularity and having the number one status in the world in terms of passengers. Though it is number two now in terms of passengers it is still renowned for it’s customer service. Technology: British Airways uses state of the art technology and has acquired a lot of new aircraft while phasing out old aircraft. It uses technology like ready now for a better customer experience . British Airways is constantly looking at technology innovations to better the customer experience. SWOT ANALYSIS , BRITISH AIRWAYS Strengths: Worlds leading Airline, traveling to 135 Countries Very strong record of Customer Service A rapidly growing newer fleet A new terminal Strong Financials with high operating margins and low debts. Strong Technology. Weaknesses: Over reliance on a few routes Labor Problems, and more to come because of transitioning. Opportunities: Open Skies Agreement presents new markets in the United States Emerging Markets of India and China Threats: Low cost airlines Internal Chaos because of transitioning Read More