Executive Summary
The report below presents the market analysis of British Airways (BA), beginning with an overview of the organization’s fleet composition. This type of aircraft, owned by Airways, cuts through the network structure, examining the airways’ various destinations and travel routes. The traffic and services offered by the organization, as well as the different traveling classes offered by the airways,
The financial status of the company, for instance, includes how the organization has performed financially and how it was financially affected by the COVID-19 pandemic, as well as the competitive environment, which involves some of British Airways’ competitors (Bilotkach & Hüschelrath, 2019). Moreover, the employee population at BA is looking at the population of staff, mainly the PESTEL analysis (political, economic, social, technological, environmental, and legal factors affecting the business), and how various forecasting methods have been applied in the report to try to predict the financial future of the company.
Introduction
Air travel underwent significant changes after the establishment of the world’s first scheduled air service. British Airways launched its first international scheduled air service between London and Paris on 25th August 1919. It has since significantly developed from pioneering routes to Africa, the Middle East, and India. It then merged with other small airlines to form the independent British Airways Limited (Bilotkach & Hüschelrath, 2019). The compiled report shows the market analysis and forecasting needs of the company.
Company Overview
Fleet Composition
British Airways has one of the most sophisticated and biggest fleets of any airline in the world, with over 280 aircraft, including Boeing and Airbus series. Examples include the Boeing 777-300, often referred to as the ‘triple seven. ‘ It was the first commercial airplane with a speed of 950km/hr (Bilotkach & Hüschelrath, 2019). British Airways also possesses the Airbus A350-1000 airplane, which offers a greener way to fly with the least carbon emissions.
Network Structure
British Airways offers domestic and international flights to destinations such as the Americas, Africa, Asia, and Europe. The airline operates out of London Heathrow, the busiest international Airport in the world, and travels to more than 200 locations in 80 different countries. BA offers travel to around 34 European countries from Albania, Croatia, France, and Spain. They also have flights to North and South America, covering the US, Canada, Bermuda, and finally (Hendricks et al., 2020). They also offer transportation to most parts of the African continent, spanning African states from south to central, western, and northern Africa.
Traffic and Products
British Airways, the UK’s largest airline, flies under the RAF flag. BA and its subsidiaries transported 10.3 million passengers in 2021, despite COVID-19 restrictions (Tilford, 2021). The 2010 reporting period’s lowest value was this. It handled 47.7 million passengers worldwide in 2019, the highest between 2011 and 2021 (Hendricks et al., 2020).
The company offers four classes, including economy, which is ideal for family travel or visiting friends and relatives. Leisure travel encompasses business, premium economy, and first-class options (Tilford, 2021). Economy class offers two fares: basic, which is the lowest cost for the specified seat, and standard, a fully inclusive economy ticket with seat selection.
The economic level provides several meals and backpacks with flat screens and headphones for everyone; the economy class caters to families with TVs and food. British Airways’ Club World offers top-notch luxury and service, providing the freedom and flexibility to personalize each journey, whether for business or pleasure. They also provide a worldwide food selection, and passengers select their courses, appetizers, and desserts. Business class also features speedier check-in and boarding, as well as luxurious departure lounges where travelers can rest before and after flights.
Competitive Environment
According to the website Comparably, British Airways’ CEO Score is higher than that of any of its rivals. By passenger volume in 2021, it was the top airline in the United Kingdom. With approximately 9.4 million people uplifted, the EasyJet Group, comprising its two subsidiaries, EasyJet UK Ltd and EasyJet Airline Company Ltd, came in second (Tilford, 2021).
Although BA is one of the best airlines in the world, it is in a very competitive market. Some of its competitors are Virgin Group, Singapore Airlines, EasyJet, and Cathay Pacific Airways Limited (Hendricks et al., 2020). The company is ranked 1st in CEO rank, gender rank, and diversity; it was ranked 2nd in the ENPS rank and 5th in product quality, pricing rank, PS rank, and customer rank.
Employees
British Airways, headquartered in Harmondsworth, United Kingdom, is a group of close to 30 firms (UK). The number of employees remained largely steady until 2020. However, due to the coronavirus pandemic in 2020, the organization had 33,898 employees. In 2021, the number of staff decreased further to 26,890 (Salehzadeh et al., 2020). BA offers low-cost flights for both domestic and international travel, as well as cargo and passenger services.
Financial Status
British Airways has raised its full-year profit prediction after seeing its sales return to pre-pandemic levels. Since 2011, its finances have been strong due to the high number of travelers flying in; only 10.3 million people were carried in 2021, compared to 47.7 million in 2019. This was a result of the COVID-19 pandemic’s travel limitations, which were the lowest value recorded since the start of the reporting period in 2010 (Salehzadeh et al., 2020). BA recorded an early net profit loss of 1.65 billion British pounds compared to 2019 levels; sales decreased by more than 70%, falling to 3.7 billion British pounds in 2021 (Hendricks et al., 2020). The standard industry revenue metric per available seat kilometer would continue to be higher than before the outbreak.
PESTEL Analysis
Political Structure
Business is affected by numerous external factors, including politics; good managers predict trends. If they want their company to succeed, managers must understand government policies and regulations. Following the Russian invasion of Ukraine, Russia banned UK aircraft from using its airspace; British Airways also suspended Russian flights. Politics will hurt BA’s market share.
It will have to find alternative routes, which will increase costs and prevent them from using Russian airspace. In 2015, the company and the British government clashed over the construction of a third runway at London’s Heathrow Airport (Salehzadeh et al., 2020). Government regulations often exacerbate the conflict between businesses and governments.
Economic Structure
Economic variables and economic changes directly impact the British airline industry’s business. Their economic climate directly influences the profitability of airline brands in a given nation or region. These variables impact air travel and flight operators, including economic stability, unemployment, and GDP.
The economic slowdown negatively impacts the profitability and revenues of airline operators (Salehzadeh et al., 2020). However, since the Brexit announcement in 2016, the UK’s economic climate has been highly unpredictable. Since then, the uncertainty brought on by Brexit has significantly hurt the UK economy.
The UK experienced a sharp rise in COVID-19 cases at the beginning of 2020, and the authorities implemented lockdowns to prevent the virus from spreading. British Airways suffered considerable financial losses due to the COVID-19 pandemic, and its business activities declined. The aviation sector is also directly impacted by changes in fuel prices (Salehzadeh et al., 2020). High-profit margins from lower gasoline costs will strengthen the company’s financial condition. For instance, BA saw a 65% increase in revenue in 2016 due to lower fuel prices.
Social Structure
Many people lost their jobs following the COVID-19 pandemic, leading to an increase in the unemployment rate and a decrease in disposable income. Since consumers do not want to spend additional money on airfare, cheaper plane tickets are a huge tourist attraction. Knowing this, British Airways decided to add more seats and reduce legroom on its aircraft to compete with low-cost airlines and provide more affordable fares.
Technological Structure
Due to advanced technology, British Airways customers may now provide comments on their flight experience automatically after landing. This technology will minimize data collection costs and provide global access to its customers. The company also has a fuel economy initiative aimed at saving costs and boosting profits. Moreover, a company’s success may be significantly influenced by its online presence and ability to serve customers (Tilford, 2021). BA has launched its website for electronic bookings to better serve passengers in the age of emerging technology; delighted customers are more likely to remain loyal to the airline.
Legal Structure
British Airways adheres to all relevant aviation regulations, including those governing fairness, disability, and anti-discrimination legislation. In the worst instance, a ban will damage the brand’s image. It suspended flights during the COVID-19 pandemic; BA failed to compensate consumers after canceling their tickets, sparking a lawsuit. It is subject to labor regulations and operational quotas.
This year, the corporation was affected by a pilot strike (Tilford, 2021). The corporation lost its legal battle to end the strike and agreed to a wage settlement instead. Whether they affect labor standards, consumer rights, or passenger safety, such mishaps can harm the company’s reputation and lead to operational disruptions and costly penalties.
Environment
Airline emissions concern worldwide regulators; British Airways has made significant improvements in both environmental and economic models in this area (Tilford, 2021). The corporation places a premium on environmental responsibility; therefore, it is making strides to improve the fuel efficiency of its fleet and reduce carbon emissions. The IAG, the parent corporation of British Airways, has committed to achieving net-zero carbon emissions. The corporation has set a goal to achieve net zero CO2 emissions by 2050, known as Flight Path Net Zero (Salehzadeh et al., 2020). By 2030, the corporation aims to reduce its net CO2 emissions by at least 20% (Hendricks et al., 2020).
British Airways also intended to make its domestic flights inside the UK net carbon neutral by 2020, offsetting its carbon emissions (Tilford, 2021). The business continually explores new technologies and strategies to reduce carbon emissions (Tilford, 2021). While there are many causes for this shift in emphasis, improved reputation and social standing are among the most significant ones.
Forecast Methodologies
Quantitative Method
- Straight-Line Approach. The straight-line approach relies on the firm’s previous growth rate being constant. To predict future revenue, a corporation’s previous year’s revenue is multiplied by its growth rate. Although straight-line forecasting is a good starting point, it does not account for supply chain issues or market fluctuations.
- Moving Average Method. Using a moving average, you may predict the future by averaging—or weighting—previous periods. This strategy involves examining a company’s high or low needs more closely and is often beneficial for short-term forecasting. By averaging the prior quarter, you may use it, for instance, to predict the sales for the following month.
- Growth Compound Projection. The rate of return (RoR) required for an investment to increase from its starting balance to its ending balance, assuming profits are reinvested after each period of the investment’s lifespan, is known as the compound annual growth rate (CAGR).
Econometric Method
One of the techniques economists use to predict future economic changes is an econometric model. Simply put, econometricians analyze historical correlations between variables, such as consumer spending, household income, tax rates, interest rates, employment, and similar factors, before attempting to predict how changes in one variable will impact the future direction of another.
Qualitative Method
- Bottom-Up Approach. Bottom-up forecasting is a technique for predicting an organization’s future performance by beginning with basic company information and moving “up” to revenue. This strategy begins with thorough customer or product data before expanding to revenue.
Forecast
Quantitative methodology was used in this forecasting because it is more effective than other methods. British Airways’ primary forecasting techniques include market share analysis, estimation techniques, time series analysis, and simulation modeling. The forecasting method can help the company understand what it is doing correctly. Equally, it is convenient since it enables the corporation to make informed decisions and establish appropriate objectives to drive growth and success.
BA allows investors to purchase shares of International Consolidated Airlines. Its share price is currently at 139.3992p, a 25-minute delay (Tilford, 2021). IAG, founded in 2011, is the parent organization of British Airways, Vueling, LEVEL, Iberia, and other companies. It is a Spanish-registered company with stocks traded on the Spanish and London markets. IAG’s corporate headquarters are in London, United Kingdom.
Seasonal forecasting, also known as seasonal indexing, predicts what future seasons will look like based on historical seasonal data. The tendency of hub airports to benefit in terms of market share compared to non-hub airports is supported by the slow recovery of traffic from the COVID-19 pandemic. In line with that pattern, Heathrow does not seem to lose market share to other hubs. During the H7 period, the London market will surpass 2019 levels (Tilford, 2021)
While operating a vast body on these routes is not sustainable in the long term, airlines can offset some of their fixed costs by operating them on shorter routes until profitable long-haul operations can resume. Recent statements from British Airways and the industry indicate that BA will utilize larger aircraft to operate leisure and VFR routes to short-haul European destinations.
Conclusion
In conclusion, according to the prognosis shown above, it is clear that British Airways will soon return to its former financial glory. However, it will take significant time before it reaches that position. The company’s continued intense rivalry with other airlines, the fallout from the COVID-19 outbreak, and the ongoing conflict between Russia and Ukraine are among the issues preventing the company’s revenue from increasing.
References List
Bilotkach, V., & Hüschelrath, K. (2019). ‘Balancing competition and cooperation: evidence from transatlantic airline markets’, Transportation Research Part A: Policy and Practice, 120, 1-16. Web.
Hendricks, K., Deal, N., Mills, A. J., & Mills, J. H. (2020). Intersectionality as a matter of time. Management decision. Web.
Salehzadeh, R., Tabaeeian, R. A., & Esteki, F. (2020). ‘Exploring the consequences of judgmental and quantitative forecasting on firms’ competitive performance in supply chains’, Benchmarking: An International Journal, 27(5), 1717-1737. Web.
Tilford, E. H. (2021). ‘Air Power Lessons’, In Military Lessons of the Falkland Islands War: Views from the United States (pp. 37-50). Web.