British Airways Operational Environment Essay Example

medical and security screening and frequent responses to terrorist warnings and events continue to place a burden on airline industry resources. BA remains particularly vigilant due to the UK Government’s support of the US Government’s activities and policies in the Middle East, Asia and the Far East (BBC World News and Business News–TV Broadcast Excerpts).

The fallout from these foreign policies has created homegrown terror threats such as the threat at London’s Heathrow Airport on 12 February 2003 (CNN. com/World 2003) and the London Bombings on 07 July 2005 (BBC NEWS 2005). -Passenger traffic recovered from 9/11 and the SARS scare in August 2004, and the granting of operating licences to low-cost airlines has driven passenger growth in recent years. British Airways was quoted by Reuters on 10 August 2005 as stating that the short term impacts of the London attacks were not materially significant; although Ryanair reported a drop in passenger traffic numbers as a result of the same events (Airwise News 2005). Economic Environment -Recession and high oil prices (and terrorism) are the most quoted reasons for the problems facing the airline industry.

British Airways announced that it would increase fuel surcharges on all tickets issued on or after 03 June 2008 (Airwise News 2008 a). The Association of European Airlines (AEA) stated on 03 June 2008 that struggling European airlines might ground unused aircraft next winter (Airwise News 2008 b). -On 02 June 2008 at an annual general meeting in Istanbul, the Director-General of the International Air Transport Association (IATA) stated that “a significant decline in global airline profitability, or even losses, look inevitable in 2008 as the industry struggles with sky-high fuel prices.

” The price per barrel of oil roughly doubled in the past year, reaching an all-time high of US$135.

9 per barrel on 22 May 2008, seriously threatening the outlook for the industry. A combination of high fuel prices, the US economic downturn and accelerated deliveries of new aircraft ordered at the peak of the economic cycle but delivered during a slowdown has the 2008 outlook “clouded by the perfect storm” (IATA 2008). Also at the IATA conference, British Airways Chief Executive Willie Walsh said the company expected to trim its capacity later this year, faced with high oil prices (Airwise News 2008 c). Traffic growth is expected to slow down from 5.

9% in 2007 to roughly 3. 9% for 2008 and increased liberalisation in the industry would intensify competition and squeeze profitability.

As a sign of the times, IATA revealed that 24 airlines had stopped operating or gone bankrupt in the last 6 months (BBC Bus News TV Broadcast 02 June 2008). Social Environment

The rising cost of Airline travel and the (ever-present) fear of terrorism has caused many travellers to avoid business travel whenever possible.

On the other hand, a growth in traffic has been prompted by migrant workers, especially from countries recently admitted to the European Union, taking advantage of the increased capacity offered by low-cost carriers. -Surprisingly, the holiday market has experienced little of the negative scenarios; with charter operations and package holidays experiencing business as usual during seasonal peaks. This could be explained by the fact that capacity in the holiday sector was never quite able to match the demand for budget holidays.

Global warming has become a social issue. Although the phenomenon has been

caused by the world’s (growing) dependence on fossil fuels and frustrated by the lack of political will to reduce greenhouse gases, the problem has become a rallying point for environmentalists and various other pressure groups calling for manufacturing industries and airlines to pay taxes relevant to the number of their carbon emissions.

Union demands for higher wages and protests against airline job losses have added to the industry’s long list of woes (BBC World News and Business News–TV Broadcast Excerpts). Technological Environment In an effort to keep up with competitors and to incorporate fuel-efficient aircraft into its ageing fleet, British Airways signed a firm contract on 28 May 2008 for two Airbus A138 to launch a new service between London City Airport and New York (Airwise News 2008 d). Earlier, in 2007, the airline had also ordered 12 Airbus A380 Super Jumbos and 24 Boeing 787 Dreamliners to be delivered between 2010 and 2014. Despite trying times, the airline industry has moved towards fleet modernisation to remain competitive and combat financial and environmental concerns. The new planes will be “greener, quieter, more fuel-efficient” (BBC NEWS 2007). Widespread use of the internet to allow passengers direct access to fares and reservations and ticketing has benefited passengers and airlines alike; although travel agencies (who also use the internet facilities) have lost a percentage of traditional income from providing these services.

-Video conferencing and another internet usage for business has allowed corporations to tighten their business travel budgets; thereby further depriving airlines of much-needed revenue. Conclusion and assumptions The scope of BA’s current worldwide operations renders the company vulnerable to global external forces. In addition to internal and domestic issues,

the company contends with Political, Economic, Social and Technological challenges arising beyond the national boundaries of its Harmondsworth base in the United Kingdom. In the post 9/11 operational environment, BA as with other airlines is dealing with new global realities such as terrorism, wars in the Middle East, recession, global warming and special interest groups, low-cost carriers, reduced business travel, declining investor confidence, labour demands and rising fuel costs; to name just a few. Airlines, in general, continue to earn profits at the time of this writing; however, if the ‘pundits of doom and gloom’ get it right this time, the combined and sustained effect of current world events will all but exhaust industry resources and avenues of relief; and airlines will be obliged to walk the fine line between viability and bankruptcy.

Bibliography

(Airwise News 2005)London Bombings Limit BAA Traffic Growth / online / available: http://news. airwise. com/story/view/1123680926. html (accessed on 03 June 2008)

Airwise News 2008 a  Airline News / online / available: http://news. airwise. com/story/view/1212071864.

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(Airwise News 2008 d) / online / available: http://news. airwise.com/story/view/1211930399.

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About British Airways / online / available: http://www. britishairways. com/travel/aboutba/public/en_gb (accessed 02 June 2008) (BA 1987)

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