Introduction
British Airways is an international airline that has been in operation for more than one hundred years. The airline brings people with diverse cultures together by connecting them to different destinations on the international front. The headquarters of British Airways are in Harmondsworth, United Kingdom. The Chief Executive Officer of the airline is Sean Doyle, who started his tenure on 12th October 2020 until now. The airline was founded in 1974 and is the official carrier of the UK’s flag. British Airways is the largest airline in the UK considering fleet capacity and the second largest in the country, after easyJet considering passenger volume. Since its establishment in 1974, the state owned the airline until 1987, when it was privatized.
The principal subsidiary airlines of British Airways are BA CityFlyer and OpenSkies. In 2003, British Airways halted its Concorde Operations due to substantial financial losses incurred by the airline. In 2007, the United States Department of Justice charged the airline a fine of three hundred US dollars for price-fixing (Tan, 2019). In 2011, British Airways amalgamated with Iberia (a Spanish airline) and formed the International Airline Group (a holding company). British Airways is a founder member of the Oneworld airline alliance. Other constituent organs of the association are American Airlines, Canadian Airlines, Qantas, and Cathay Pacific.
Fleet Analysis
British Airways comprises a vast and diverse fleet served by jet-engine-powered passenger aircraft (airliners). The airline prides itself on possessing more than two hundred and fifty aircraft in its service. CityFlyer (the regional auxiliary airline of British Airways) has twenty-four active airliners. Data obtained from ch-aviation.com indicates that two-hundred and fifty-three aircraft are in active operation in the mainline fleet of British Airways. One-hundred and forty-two aircraft of the total number of aircraft constitutes a narrowbody fleet, including Airbus jets only (Tan, 2019). The most miniature aircraft in the narrowbody fleet category is the Airbus A319, and there are about twenty of them, operating short-haul flights of thirty minutes. The Airbus A320 contributes to most aircraft in the narrowbody fleet category and the entire British Airways fleet.
There are sixty-seven A320s in the British Airways fleet, with forty-nine of them in active operation, while eighteen of them are in maintenance or storage. Another narrowbody aircraft is the A320neo, which contributes to seventeen aircraft in the fleet; BA has made another order of five A320s. The BA narrowbody fleet comprises the A321 aircraft, with all the eighteen listed currently listed as inactive (Li & Cui, 2018). The A321s are some of British Airways’ oldest aircraft; on average, they are sixteen years and three months old. The much younger A321neo contributes to ten of BA’s fleet, and all of them are in active operation: the airliner has an order for two more A321neo.
The British Airways fleet constitutes widebody Boeing aircraft, the dominant force in the twin-aisle airliners. The BA fleet has a majority of Boeing 777 in the Boeing family. Boeing 777s popular in the BA fleet include forty-three 777-200ERs and sixteen 777-300ERs. The UK flag carrier has ordered eighteen aircraft of the next-generation Boeing 777-9 (Stone, 2018). The airliner prides itself in flying all three classes of Boeing 787, commonly known as the Dreamliner. The Boeing 787 variants operated by British Airways include twelve 787-8s, eighteen 787-9s, and two 787-10s. According to data obtained from ch-aviation.com, all three variants are in active operation (Stone, 2018). Furthermore, the airliner has ordered ten aircraft for the stretched Boeing 787-10.
British Airways operates fewer widebodies in its fleet; narrowbodies are the most dominant. However, Airbus-widebodies are crucial in the fleet of the airline. The BA widebody fleet comprises eight Airbus A350-1000s, all in active operation (Stone, 2018). In May 2021, the Airbus A350-1000 was endorsed as a possible bellwether for British Airways. The airline has ordered 10 A350-1000 aircraft, likely to join the fleet in the following years. Additionally, the airline prides itself on the possession and operation of the double-decker Airbus A380, which is commonly known as the superjumbo. The airline’s widebody fleet constitutes twelve A380s, but only five are in active operation.
Issues Associated with Feet Composition
The fleet composition can be defined as the resemblance and contrast in each aircraft’s mechanical and functioning features in a specific fleet. Fleet composition constitutes several factors, such as minimum cockpit crew and equipment required for aircraft servicing. Two main structural components of an aircraft (engine and fuselage) are used in fleet composition assessment (Li & Cui, 2018). With that in mind, British airlines comprise widebody aircraft and narrowbody aircraft in their fleet. Therefore, it implies that BA’s fleet’s technical and operational characteristics are different. The narrowbody fleet’s cabin crew and cockpit crew differ from the widebody fleet in terms of number and expertise.
Additionally, the fleet comprises two types of aircraft, Airbus and Boeing, which have different families. Therefore, it means that the maintenance and servicing of individual aircraft are unique and different from other aircraft (Li & Cui, 2018). BA, the aircraft operator must obtain specific maintenance manuals from the aircraft manufacturer for its varied aircraft types. Additionally, the fuselage and engines used by each aircraft are unique from others; this implies that if the BA maintenance crew uses a manual that is not specified for a particular aircraft, problems are likely to arise during flight. In addition, the tools and equipment needed for servicing and maintenance of aircraft components vary from one aircraft family to another. Therefore the operator must obtain tools and equipment for each aircraft within the fleet according to the manufacturer’s specifications.
Critical Analysis of the Route Structure
Since the coronavirus pandemic, British Airways has reviewed most of its route structure, especially flights to destinations considered highly risky, but operations to such destinations are slowly resuming. British Airways uses robust route structures to serve passengers traveling to and from various destinations. The route structures include point-to-point and hub and spoke networks. Point-to-point course framework refers to a network where all the travelers embark and deplane at a specific terminal (Stone, 2018). A hub and spoke route framework is a structure where all travelers, excluding those whose terminal is the hub, relocate to another aircraft at the hub and embark on their specific destination.
The British Airways hubs are Heathrow Airport, London City Airport, and Gatwick Airport. In 2021, Heathrow Airport had 86% of all British Airways flights. It was followed by London City, which operated 10% of BA’s flights, and Gatwick Airport operated 2% of the total BA flights (Stone, 2018). Notably, Heathrow Airport has risen to dominate other British Airways’ hubs by 19% versus its points in 2019 (Stone, 2018). Nevertheless, Gatwick fell by 10% of its effectiveness in 2019. In April 2020, British Airways halted short-haul flights from Gatwick Airport.
Focusing on London as of 8th November 2021, the airline had two hundred and nineteen destinations from the city, acting as a hub for various spokes. One-hundred and seventy-two destinations were from Heathrow, while twenty-nine were from London City, and eighteen were from Gatwick. There were fifteen top routes from measurements done by the number of flights made via each course in the same year (Efthymiou et al., 2018). Fourteen out of the top fifteen routes originated from Heathrow to Edinburgh, Glasgow, Aberdeen, Manchester, JFK, Nice, Belfast City, Athens, Geneva, Jersey, Barcelona, Amsterdam, Larnaca, Dublin, and from London City to Edinburgh (Efthymiou et al., 2018). As of April 2022, British Airways serves thirteen domestic destinations and two-hundred and two international destinations in seventy-nine countries worldwide.
Cost Control Analysis
Cost control can be defined as a mechanism applied by finance experts in analyzing the overall expenses of an enterprise to reduce project costs and maximize profits. Cost control is vital for any business’s success because it helps maintain a budget for all projects to maximize profitability. British Airways has applied various cost control methods to optimize its profitability (Douglas, 2019). The cost control methods include fuel hedging, minimizing compensation costs, and managing the cost of operational changes.
Fuel hedging is a strategy utilized by companies to minimize or eliminate their exposure so potentially rising fuel costs. Fuel hedging is a robust cost control method that BA uses to cushion the airline against abrupt changes in fuel costs. Notably, fuel expenses amount to a more significant percentage of the expenses incurred by any airline. Fuel hedging works through purchasing fuel futures contracts, swap agreements, call options and implementation of a collar hedge (Liu, 2018). A futures contract refers to a standardized official agreement between two parties to purchase or sell a commodity (Li & Cui, 2018). The delivery and payment will happen at an agreed date in the future. A future contract ensures an obligation for the provider to sell the fuel at a specified price and the buyer to purchase the fuel at an agreed price. Essentially, if fuel prices skyrocket in the future, the airline will be protected against the rise since it will buy the fuel at a price agreed upon in the contract.
In addition, minimizing compensation costs and setting up a robust mechanism is another cost control method utilized by British Airways. Compensation costs are incurred by an airline due to flight irregularities, including flight cancellations and flight delays. Notably, flight irregularities destroy the airline’s reputation due to the negative reviews by passengers (Chang et al., 2019). Therefore, the airline needs to formulate strict rules for the proper compensation for affected passengers. Control of compensation could help the airline reduce errors during settlement that may increase the cost.
British Airways is likely to incur the cost of operations changes, which are inevitable since the airline is trying to recover from the losses incurred during the coronavirus pandemic. Costs are likely to be incurred due to changes in the equipment used, the type of aircraft operated, and crew (Douglas, 2019). Developing a robust model to calculate the cost of such changes effectively manages expenses while maximizing profitability.
The Profitability of British Airways
Profitability is a standard used to ascertain the degree of a business’s profits relative to the enterprise’s capacity. Profitability can be considered a measure of efficiency and essentially a determinant for the success or failure of a business. A business enterprise that gains profits is not necessarily a profitable business; the potentiality of an enterprise determines profitability to generate a return on costs or investment according to its assets in contrast to a substitute investment. With that in mind, it is possible to analyze the profitability of British Airways.
The profitability of British Airways varies from year to year. The airline’s profitability between 1999 and 2005 was measured in terms of return on net operating assets (RNOA). The RNOA dropped from 5.67 % in 1999 to 2.09 % in 2000 (Tan, 2019). The RNOA skyrocketed to 6.00 % in 2001 but plummeted to an astonishing 0.94% in 2002 (Tan, 2019). In the following years, the RNOA increased consecutively from 2.79% in 2003 to 4.01% in 2004 and 5.85% in 2005 (Tan, 2019). The airline’s profit margin increased after 2002, meaning betterment of the business’s capability to maintain sales as operating profits. The profitability recorded by the airline from 2002 to 2005 indicates efforts of cost control and subsequent efficiency in operations. In that period, BA managed to maximize profitability while reducing its fleet.
In 2007, the airline’s balance sheet indicated total assets that were only 88% of its net value in 2003; this showed a total loss of 1.5 billion British Pounds. BA’s aircraft were disinvested by 1.7 billion British Pounds, with land and buildings reduced by three hundred million British Pounds (Tan, 2019). The airline indicated a drop of 2.8 billion British Pounds in the hire and leasing position. A profitability analysis between 2008 and 2009 suggested that the airline’s profitability was lower than the previous years.
The UK flag carrier recorded a steady increase in profitability from 2011 to 2019. In 2021, the profitability was greatly affected when the airline reported a record net loss of 8.5 billion US Dollars; this was due to the coronavirus pandemic, which led to the halting of operations (Hamawandy et al., 2021). In 2020, the revenue earned by the airline from passengers dropped from 27.2 billion USD to 6.7 billion USD. The ban on flights in 2020 affected the operations and, subsequently, the profitability of British Airways (Hamawandy et al., 2021). In 2021, the UK flag carrier reported only 3.7 billion British pounds in revenue (Hamawandy et al., 2021). In February 2022, the airline, through its CEO Sean Doyle, expressed optimism about a return to profitability. Sean Doyle indicated that the UK was moving from being one of the countries with stringent travel restrictions to being one of the most open nations, and they were prepared to exploit the opportunity to ensure a return to profitability.
BA’s Policies and Practices to Counter Cyber-Threats
A cyber security threat can be defined as any potential malicious attempt or attack to illegally obtain or access data, and digital assets, or destroy digital information. Cyber security threats can emanate from different groups of unscrupulous people, including criminal enterprises, corporate spies, hostile nation-states, lone hackers, hacktivists, and disgruntled workers. Recently, many cyber-attacks directed at high-profile organizations have led to the exposure of sensitive data (Škiljić, 2020). In the aviation industry, cyberattacks could lead to aircraft hijacking and potentially lead to the loss of lives and property. It is, therefore, paramount for airlines to take measures that prevent cyber-attacks. Here are some of the policies and practices applied by British Airways to counter cyber threats:
Following a cyber security attack on British Airways in 2018, Britain’s Department for Transport formulated the Aviation Cyber Security Strategy to guide airlines in protecting their data. BA has implemented these guidelines in its operations to protect data for its passengers. The airline has worked towards developing a comprehensive understanding of the cyber vulnerabilities across aviation to help them form a robust system for the protection of their computer systems and data (Škiljić, 2020). It is clear that for cyber risk to actualize, there must be a vulnerability to exploit and the existence of an immediate threat. BA has put effort into understanding the vulnerabilities in their systems by identifying the critical nature of their systems and platforms and the subsequent impact of a probable loss in their integrity and confidentiality.
British Airways has identified and maintained all of its critical digital operational technology and information technology systems, technologies, and platforms throughout the airline and its entire supply chain. The UK flag carrier has practiced a clear understanding of why such digital assets are supercritical to the airline’s operations and where there might be potential vulnerabilities. Additionally, the airline has continually managed cyber risks within its systems (Klenka, 2021). The UK’s technological advancement has continuously changed the operations within the aviation sector. British Airways has implemented a cyber security management regime to help manage cyber risks. The system constitutes continuous identification and assessment of cyber threats, mitigation of vulnerabilities, efficient governance structures, and risk ownership.
The airline has ensured that cyber risks are effectively managed throughout the lifespan of all of its new and advancing technologies, systems, and platforms. In terms of policies, BA is working in partnership with the Civil Aviation Authority to help in the development of a robust, effective, and equitable cyber regulatory framework (Klenka, 2021). The framework aims to enhance the flexible and dynamic risk moderation adopted by the airline to ensure it manages probable cyber risks continuously.
Recommendations and Conclusion
British Airways should develop a robust mechanism for reporting, managing cyber-attack incidents, and sharing information. It is not a question of if but when cyber-attacks are likely to compromise operations in the aviation industry. Therefore, it is prudent for British Airways to sufficiently prepare itself for such occurrences by ensuring clear lines of reporting the cyber-attack. BA should develop and implement robust response plans for cyber-attacks and procedures to enable the airline to identify, manage, beat and recover from a cyber-attack.
The UK flag carrier should ensure adequate allocation of resources to train its cyber security personnel to equip them with skills to prevent and manage cyber-attacks. The airline should develop clearly defined career development paths and further development opportunities for its cyber security experts. Such measures will ensure the growth in the number of efficiently qualified and experienced cybersecurity professionals. It will ensure advancement in the capability of the existing cyber security personnel.
In conclusion, British Airways was one of the most successful airlines before the coronavirus pandemic halted its operations and adversely affected its profitability. BA’s fleet is composed of both narrowbody and widebody aircraft. Airbus aircraft are dominant in BA’s short-haul flights. The airline’s route structure constitutes both point-to-point and hub and spoke networks. Though most of BA’s routes were halted during the coronavirus pandemic, the airline is slowly returning to normal operations in almost all of its routes. The UK flag carrier uses multiple cost control methods, including fuel hedging and mitigation of compensation costs. The airline’s profitability has varied from year to year, with 2021 being the worst year for the airline due to the significant losses incurred. The airline has put up measures to manage cyber-attacks and improve its profitability.
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