Register to read the introduction…
Today, according to the International Air Transport Association (IATA), the airline industry is going through ‘the worst crisis in history’ (BBC, 2006) British Airways operates within the highly competitive airline market. The UK market for airlines grew by 1.2% since 2003 to reach a value of £8.7 billion in 2004. The number of passengers flying from UK airports alone has increased from 70 million in 2000, to 86 million. The development of a fifth terminal at London Heathrow testifies this growth. However, against this expanding consumer market, the airline industry continues to struggle with the continuous threat of terrorism, high fuel prices and increased competition. The two main sectors of the market are long-haul and short-haul, both of which BA operate in. 2.1.2 Competitor Analysis The airline sector is more competitive today than it has been at any time in the past, providing consumers with more choice and cheaper fares than ever before due to the emergence of low-cost airlines British Airways operates within two strategic groups within the airline sector – the short-haul and the long-haul.
…show more content…
Each of these sectors has different competitors (see fig 1). One group consists of airlines with regional operations offering scheduled flights and competing on costs. The second group offer long haul flights, with quality environments and services to a range of destinations. Therefore, BA competes on a global, European, national and regional scale.
Within the UK, BA is the largest carrier in the market accounting for 45.1% of passengers in 2004 (Euro monitor) with Virgin Atlantic being the second largest carrier in the market with 9.2% market share. It is also likely that long-haul licenses will be granted to low-cost airlines which will enable them to compete in both strategic groups increasing its influence on BA’s strategy (see appendix 6). In Europe, the UK’s EasyJet and Ryanair were the pioneers of budget airline travel. Their initial business model was based upon offering low fares through outstanding cost management.
Lufthansa’s change in strategy will have direct affect on BA as they continue to attract customers for their high quality standards. Another strategy that seems to be emerging amongst traditional carriers is to reduce fares in order to become more competitive with the low-cost airlines. New planes, new routes, additional flights and management changes are all factors that impinge a business. Such changes made by a competitor need constant monitoring in order for BA to examine its current position and develop future strategies. 2.2 Macro Environmental (PEST Analysis) 2.2.1 Political and Legal Factors The start of the millennium is turning out to be some of the most difficult times that the airline industry has ever faced. The events of terrorism attacks in September 11, 2001 in New York and July 7, 2005 in London along with the wars in Iraq have no doubt caused an unprecedented crisis and political instability. The events have caused the introduction of new security regulations from the EU and US that come into effect in summer 2006 and a fall in customer travelling confidence. Governments have controlled where airlines can fly, and aspects of their product planning and pricing policies. In recent years, substantial regulatory reform has taken place, giving carriers more opportunity and increasing the market competition. Deregulated companies like BA require systems that enable decisions to be made quickly open skies is an agreement which changes the regulatory landscapes significantly (appendix 1). A significant legal factor affecting BA is the power of trade Unions. BA has suffered many strike actions (August 2004 and August 2005) and is aware of the implications that the trade unions can cause. Legal regulations on employee rights, customer rights and an upsurge in environmental and ecological issues are more factors that BA must consider. 2.2.2 Economic Factors The demand for air travel is characterised by a very high income elasticity. Therefore, as the world economy grows, so the demand for air travel can be expected to increase too. The political situation in Iraq has helped to drive oil prices to a record …show more content…
Hooley et al (1998) suggests these wider non-marketing assets include how innovative the organisation is and its organisational climate, the skills of the management team, the financial resources and information systems. A specific review of BAs marketing activities is required and includes analysing the following distinct
Each of these sectors has different competitors (see fig 1). One group consists of airlines with regional operations offering scheduled flights and competing on costs. The second group offer long haul flights, with quality environments and services to a range of destinations. Therefore, BA competes on a global, European, national and regional scale.
Within the UK, BA is the largest carrier in the market accounting for 45.1% of passengers in 2004 (Euro monitor) with Virgin Atlantic being the second largest carrier in the market with 9.2% market share. It is also likely that long-haul licenses will be granted to low-cost airlines which will enable them to compete in both strategic groups increasing its influence on BA’s strategy (see appendix 6). In Europe, the UK’s EasyJet and Ryanair were the pioneers of budget airline travel. Their initial business model was based upon offering low fares through outstanding cost management.
Lufthansa’s change in strategy will have direct affect on BA as they continue to attract customers for their high quality standards. Another strategy that seems to be emerging amongst traditional carriers is to reduce fares in order to become more competitive with the low-cost airlines. New planes, new routes, additional flights and management changes are all factors that impinge a business. Such changes made by a competitor need constant monitoring in order for BA to examine its current position and develop future strategies. 2.2 Macro Environmental (PEST Analysis) 2.2.1 Political and Legal Factors The start of the millennium is turning out to be some of the most difficult times that the airline industry has ever faced. The events of terrorism attacks in September 11, 2001 in New York and July 7, 2005 in London along with the wars in Iraq have no doubt caused an unprecedented crisis and political instability. The events have caused the introduction of new security regulations from the EU and US that come into effect in summer 2006 and a fall in customer travelling confidence. Governments have controlled where airlines can fly, and aspects of their product planning and pricing policies. In recent years, substantial regulatory reform has taken place, giving carriers more opportunity and increasing the market competition. Deregulated companies like BA require systems that enable decisions to be made quickly open skies is an agreement which changes the regulatory landscapes significantly (appendix 1). A significant legal factor affecting BA is the power of trade Unions. BA has suffered many strike actions (August 2004 and August 2005) and is aware of the implications that the trade unions can cause. Legal regulations on employee rights, customer rights and an upsurge in environmental and ecological issues are more factors that BA must consider. 2.2.2 Economic Factors The demand for air travel is characterised by a very high income elasticity. Therefore, as the world economy grows, so the demand for air travel can be expected to increase too. The political situation in Iraq has helped to drive oil prices to a record …show more content…
Hooley et al (1998) suggests these wider non-marketing assets include how innovative the organisation is and its organisational climate, the skills of the management team, the financial resources and information systems. A specific review of BAs marketing activities is required and includes analysing the following distinct