UK Airline Industry - Report Example

UK AIRLINE INDUSTRY By 14th, November, UK Airline Industry The airline industry in the UK is one of the largest in the world. The airline industry employs more than 113,000 people directly and a further 276,000 indirectly where the company has a turnover of more than $19 billion (Bajawa, & Woodall 2006). The UK airline industry is composed of several airline industries such as British aero systems, which is the world’s second largest defense contractor, Rolls-Royce, which is the world’s second largest aircraft engine maker, among others. The UK airline industry has made numerous important contributions to the development of rules and regulations as well as the standards required operating airlines in the country. It is very important for any organization to consider the PESTEL analysis before it can engage in marketing its products. This is more important in that it allows companies to plan their future. PESTEL analysis describes a series of macro-environmental factors, which are used in environmental planning. This paper looks at the impacts of government intervention in the airline industry in using PESTEL. It is very important of external analysis when doing a market research since it gives an overview of the different macroeconomic factors, which the industry has to take into consideration. Some of the Political factors considered are the taxation policy in the industry, the laws related to employment, trade restrictions, and regulations on the environment, tariffs, and political stability in the industry. Economic factors considered in this case are economic growth of the industry, changes in interest rates, changes in exchange rates of the industry, and the rate of inflation that affects the industry (Zhou, & Stuart 2008). Social factors considered in their case includes, cultural concepts of the entire industry, health consciousness of the industry, the rate of growth of the population, the distribution of age, careers attitudes in the industry and emphasis laid on safety in the airline industry. Technological factors are also considered in this case and includes environmental and ecological aspects, which determines the barrier to entry in the industry, the minimum level of efficiency and production in the industry which effect outsourcing decisions. Moreover, technology factors cover research and development activities the level of technology and automation incentives used in the industry rate at which technology changes in the industry (Sajeev 2012). PESTEL PESTEL is a way of analyzing the different environments that affect the industry. Pestel deals with political, economic, social, technological, environmental, and legal environments that affect the market. The airline industry in UK is a subject of these environmental changes. It is very important for any organization to consider the PESTEL analysis before it can engage in marketing its products. This is more important in that it allows companies to plan their future. PESTEL analysis describes a series of macro-environmental factors, which are used in environmental planning (Lea 2004). Political Environment The airline industry in the UK can never be overlooked due to the political factors that every industry in the country. The airline industry in the UK is very vulnerable to changes in the political environment, which tends to create bearings in the travelling habits of customers. When there is an unstable political environment in UK, the level of uncertainty in the minds of travelers’ increases thus altering the travelling habits of customers (Barnard 2010). The airline industry in UK is greatly affected by the trade relations formed by political matters in the country. Moreover, the airline industry in UK is greatly affected by international relationship and events with other countries. More recently is the just concluded 2012 Olympic Games held in London this year. This has created a positive impact in general and created a good reputation of the industry. Unlike other industries whereby the level of corruption is very high, the aviation industry in UK has benefited from transparency thus obtaining with ease licenses and permits to operate in other countries. The airline industry in UK has suffered due to old aged laws, which has increased the retirement age of airhostesses and pursuers. The labor regulations have also made the airline inflexible in making decisions due to the formation of strong unions, and heavy control from the government (Lea 2002). Economic Environment The effects of boom and bursts in the market have wide reaching effects on the airline industry. During the periods of recessions, the airline suffers in that most people avoid using the industry as it turns out to be an expensive means of transport. However, during the times of economic prosperity, people engage themselves in more travelling and the prices of air tickets increases. Depressed sentiments of the consumers after September 11 caused the world to plunge into a global recession that led to a decrease in the level of profits made by the airline industry in the UK. Large airlines in the UK airline industry such a British Airways were forced to cut costs so that they would increase profits (Oster 2002). Low demand for airlines, high operational costs, and higher insurance costs led to a loss of income for airlines whereby the costs increased after the bombings on the world trade center. The loss of demand created led to the airline industry in the country to lay off some employees that further increased recession and spending due to a rise in unemployment (Bajawa, & Woodall 2006). Social Environment According to Lea (2004), travelling habits of the people have wide implications of the trends in airline industry. In UK, people who use the airline industry come from different income groups. It is important for the industry to recognize these differences and serve the different classes of people accordingly. The airline industry in UK needs to focus in providing maximum satisfaction to the all classes of customers since the industry has both high and low class customers. The airline industry has also to take into consideration the availability of mixed races in the country and therefore implement policies, which treat all people as equal and in accordance with the preferred taste of their majority clientele. Government intervention in the industry should also ensure that issue of religion and castes in the industry is prominent in the and therefore should form policies that are appealing and satisfactory to all religious groups (Zhou, & Stuart 2008). Technological Environment Sajeev (2012) posits government intervention in airline industry in the in the UK has had tremendous impacts on technology used. For instance, the government has laid foundations for the industry to provide better communication that would facilitate business activities such as internet. The airline industry in UK has made it possible for people to book air tickets and updating flight information. This has provided a better avenue for the government to collect its taxes as well as make the necessary recommendations that will shape the future of the industry. The government has also facilitated development of modern communication in the industry, especially through setting up of an ultramodern communication facility for the industry, which makes it easy for controlling aircraft movements. One of the main impacts of technology can be seen when the government made recommendations to the airline industry in the country to get rid of its obsolete an unused hangars, which is a closed structure that is meant to hold aircraft in a protective storage. Environmental Factors Barnard (2010) learns that, the government of UK has made various regulations, which tends to control the impact of aviation industry on the environment. Examples of these regulations include noise pollution controls and energy consumption controls. Some of these controls were brought about by the recommendation of the global community that developed nations should control the negative impacts they cause to the environment through pollution of air and noise. It therefore became necessary for the airline industry in UK instill these recommendations, which made it necessary for the airline industry to pass over these recommendations to companies, which operate under it, such as British airways. An example of such legislation is the climate change bill that enforces tighter environmental regulations. Moreover, consumers of the airline industry are becoming more sensitive to the need for economic friendly airline industry. If the industry fails to adapt to this environmentally friendly strategies, it could lead to disadvantageous effects on the reputation of the industry hence a bad reputation for the airplane operators under the industry (Zhou, & Stuart 2008). Legal Environment Zhou and Stuart (2008) assert that, the airline industry in UK has seen the rise in collusions and price fixing emerges in the country. Due to these factors, the government has made regulations that restrict on mergers in UK, whereby big companies such as British Airways will oppress small and emerging airlines thus hampering their growth and forming unfair competition in the market. The government and the airline industry in UK have seen the need for recognition of trade unions and industrial action to help create awareness for the rights of the industry workers such as cabin crews. The implications made by the trade unions are that employee relations are essential for the airline industry to grow. The government also intervened in the running of the industry when it facilitated the formation of open skies agreement. This agreement created opportunities for the airline industry and its competitors from other nations to spontaneously transport airplanes between the European Union and the United States (Bajawa, & Woodall 2006). Works Cited Bajawa, A., & Woodall, J 2006. Equal opportunity and diversity management meet downsizing: A case study in the UK airline industry. Employee Relations, 28 (1), pp. 46-61. Barnard, B 2010, British Airways Seeks Volcano Compensation. Journal of Commerce. ISSN 15307557. Lea, R 2002, British Airways Sees Profits But Keeps Dividend on Hold. Knight Ridder Tribune Business News, 1-1. Lea, R 2004, British Airways Soars to UK pound 230 Million, But Dividend Stays Grounded. Knight Ridder Tribune Business News, 1-1. Oster, C 2002, U.S. Future as Insurer Is Unclear --- Airlines, AIG Disagree on Governments Role in Terrorism Liability. Wall Street Journal, 0-A.4. ISSN 00999660. Sajeev, K 2012, Airline industry faces turbulent year: Expert. McClatchy - Tribune Business News. Zhou, C., & Stuart, J 2008. Web Site Quality in the UK Airline Industry: a Longitudinal Examination. The Journal of Computer Information Systems, 49(2), pp. 50-57. Read More