British Airways Strategic Analysis

British Airways Strategic Analysis

Yilin Yang

Strategic change management

Jefferson Ashby

2015/07/11

Husson University

Abstract

The main point of this analytical paper is to analyze and identify British Airways strategic direction and its role in organizing and creating strategies based on Europe’s global market environment forces. General company competency and attitude towards success as well as providing strategies and recommendations, and how these recommendations can be implemented in British Airways future growth plans.  

British Airways (BA) has been dedicated to becoming the most money making company in the world.  The carrier was created in 1974 with the merger of BOAC (British Overseas Airways Corporation) and BEA (British European Airways). It is now considered to be one of the world’s leading premium international carriers that provides flights to 570 destinations in 133 territories. It mainly operates from the Heathrow and Gatwick Airports in England.BA is one of two Partner Companies of the International Airline Group (IAG) which was founded in January 2011following the merger between BA and Iberia Airline. Its operations expanded globally with scheduled services in Europe, US, Asia-Pacific, Africa, UK and Middle East.

In 1982, BA faced many problems that resulted in a 545 million pounds loss in revenue because of a lack of understanding the international market, poor corporate image, creative financing, huge severance pay to 25% of its workforce who were laid off and many more issues.

In 1992, the European Union issued a Single European Act. This policy allowed airline companies who are members of the EU alliance to fly free in the EU area.  British Airways did not react and change immediately.  This new policy allowed more competition of the airlines so there were many more competitors in this industry with similar products and services. This led to customer loyalty decreasing and the poor service, high prices and other reasons caused BA to lose more customers.

I thought it would be interesting to do a SWOT analysis based on research and my own experience flying on British Airways.

The strength of British airways is they made a strong brand identity as United Kingdom's leading airline based on customer trust and loyalty. Strong brand identity also brought advantages of economies of scale. They provide service to nearly 150 international destinations across 6 continents. There is a new subsidiary launched by British Airways named, Open Skies, which offers only business class for the traffic between U.S and major European countries. British Airways has a huge service capacity because of its main operating base hub at Heathrow Airport and with the merger with Iberia Airline, British Airways is aiming to become the second largest airline company in Europe after Air France. British Airways offers a variety of loyalty incentive programs for its customers to make sure they continue to travel with BA only.

A weakness of British Airways is that with the opening of the new Terminal 5 at Heathrow Airport by British Airways, the company faced staff training problems which led to flights being cancelled or delayed and complaints of missing luggage. Moreover the rising fuel prices led to increase in ticket prices. The slowdown of both the UK and US economies has affected British Airways and the company has ranged from very weak to financial instability. The bankruptcies in the US banking sector decreased the number of passengers who normally booked premium tickets from BA. The route of Heathrow and New York was a huge heavy traffic route for passengers and had formed an important part of British airways earnings. The decrease in the bookings of premium class tickets affected the profitability of the company. British Airways also suffered from an increase in non fuel costs such as, staffing, flight crew expenses and landing charges.

An opportunity of British Airways is with the increasing threat of environmental conscious consumers and stringent policies that place priorities on environmental protection.  It is important that British Airways produce a complete renovation of its brand image to become a premier environment-friendly airline service. Instead of bringing environment policies slowly into different aspects of operation, BA is completely remodeling the brand into an environmental predecessor. This will improve the reputation of the brand among the new wave of consumers in the same trend as what Toyota Prius did for Toyota in the United States and world market. Lowering cost to operate competitively should be taken as an advantage by British Airways. The resources that the company enjoys over rivals can be utilized towards diversifying into other transport markets while their cost remains low.

Some of the threats to the British Airway may be their own weakness to determine strategies and implement them; negative reactions that might result from customer increase environmental awareness; low cost airlines have increased competition; and high operating expenses, such as high fuel cost and high labor cost.

In recent years, BA executives needed an effective strategy to overcome problems. The strategy of British Airways included innovation in technological accessories, customer relationship, employee relationship, safety and security, and so on.