Budget Management Plan of British Airways
Executive Summary
British Airways is the biggest airline in the United Kingdom and is listed in the New York Stock Exchange and the London Stock Exchange. The main headquarters of British Airways is the London Heathrow Airport and London Gatwick. On the annual report of British Airways, the company was able to achieve its goal for the year 2005-2006.
The 2005-2006 business plans of British Airways were successful and this paper examines that plan and integrates it with the company’s budget for 2007. In addition, this paper gives discussion on the sample budget, market analysis, and the strategies that will be employed by the British Airways. Moreover, issues regarding people management and communication will also be tackled in this paper.
Company History
British Airways is the largest airline in the United Kingdom, the origins of the British Airways dates back to the beginning of the aviation industry. According to (2006) the Aircraft Transport and Travel, the predecessor of British Airways launched the first daily international flights between London and Paris on August 25, 1919. Moreover, on March 31, 1924, the our aviation companies in Britain the Instone, Handley Page, Daimler Airways and British Air Marine Navigation merged and form the Imperial Airways which has routes in Australia and Africa. In 1935 smaller aviation companies merged and formed the British Airways Ltd, and in 1939 the Imperial Airways and the British airways become state-owned and formed the British Overseas Airways Corporation. In 1949 Continental European Airlines together with some domestic flights became British European Airways. In 1974 the British European Airways and the British Overseas Airways Corporation were merged to form the British Airways.
Company Information
Principal activities
The major activities of British Airways and its subsidiaries are the function of international and domestic flights, as well as, hire air services for the passengers’ carriage, freight and mail. Last 2006, British Airways was able to carry about 35 million passengers on its air services, with its broad international airline routes include 148 destinations in 75 countries.
In the year 2005-2006 the company was able to generate revenues of over £8.5 billion which is an increase of 9.6 per cent from the previous year. Moreover, about 795,000 tonnes of freight was carried to various destinations across Europe, the Americas and throughout the world. For the year 2007, the company aims to mange and accomplish the goals of the company responsibly. British Airways also ensures its stakeholders that the company will produce a maintainable return on the investment and a targeted increase of 10 per cent operating perimeter to assure adequate returns of the financial investment. Aside from the business and stakeholders, British Airways is also responsible to its customers and employees.
Market Analysis
Market Segmentation
The aviation industry is governed by major companies such as the British Airways. The industry of aviation is described by acquisition of smaller airline companies, merging and consolidation. It has rapidly progress into a business for the major players and niche participants. In the niche participants there are two segments that are being exploited by the airline industries and these are the price and route niche. Due to the deregulation of the fares in the airlines the customers are now expecting to get the best and cheapest deal. Therefore the market segmentation of British Airways is a mixture of service, price and route choice. British Airways is a major player in the aviation industry therefore it has sustainable long haul carriers which serve limited routes. On the other hand, short-haul carriers are now becoming popular with its lower fares and greater flexibility.
The British Airways feels that the competition in long-haul carriers will be stiff this year 2007, as well as, the short-haul carriers. However, with the sustainable status of the long-haul carrier the airline will not have a problem regarding this market segment, on the other hand, with the increase of smaller aviation companies the short-haul carriers is now having stiff competitions. Therefore, the British Airways will give focus on this particular aspect.
Service Business Analysis
Prior to the deregulation of the airline industry routes were limited, the fares were fixed and the costs got out of hand. Major carriers are the only players during that time but after the deregulation, a number of budget airlines have started to operate and become successful. Due to that, major carriers such as the British Airways had jumped in the trend of budget airlines. Low cost airlines have demonstrated its profitability and were able to acquire a considerable market share, added to the fact that these budget airlines have raised travel because it attracted individuals using bus, and trains.
Distribution Patterns
The typical way in which a consumer can buy and book airline tickets is through the ticketing office of the airlines or through travel agencies. With the rapid advancement of technology, modern computers and communications are transforming the way tickets are booked and bought. The new technology enables the consumers and the airline companies to buy and sell tickets directly, thus, eliminating middle men and the physical ticket altogether which adds to the cost of the fare. The British Airways has its own reservation agents, and internet sites for every country wherein schedules can be seen and consumers can book tickets online.
Competition and Buying Patterns
The British Airways has been in the industry ever since the birth of civil aviation; therefore consumers are now aware of the brand name. The company has already built a strong reputation and consumers know and trust the airline. British Airways does not rely on heavy advertisements. The budget for advertisements is minimal because it is already an established airline not just in Europe but in the whole world. Aside from brand awareness, British Airways has a reputation of being a safe airline.
Main Competitors
The major competitors of British Airways are the Virgin Atlantic and the British Midland Airways. These competitors declared that the British Airways is suppressing competition because BA has been dominating the major airport in Britain which is the London Heathrow, Gatwick and Manchester International Airport. Aside from dominating the major airports it also buys slots from other airlines. The competitions of British Airways will have a hard time coping up because BA is the national carrier of the UK, aside from the fact that it is the pioneer in the civil aviation in the world, therefore it knows the ups and downs in the aviation industry. However, with the short-haul carriers and budget friendly airlines offered by Virgin Atlantic, BA will have a stiff competition on that particular aspect of the aviation industry.
Strategic Developments and Investments
Business Plan 2006/2008
The business plan of British Airways is for two years which will end on March 2008. The plan has four priorities and these are:
Restructuring of the short-haul business
The short-haul carriers in the UK have stiff competition that is why British Airways made substantial transformations. The changes include the pricing structure of the short-haul carriers which provides consumers lower fares. BA recently launched its cheaper one-way fares and the capability of consumers to change bookings for only £30. British Airways also made bookings on their short-haul carriers available online thus it decreases the distribution costs.
Fleet and Network Strategy
The fleet and network strategy for short-haul carriers are also going to be restructured in order to match the capacity to the demand of the consumers. Through this the company will decrease the exposure in markets that are fruitless.
Future Fleet Commitments
Last year, British Airways made additional transformations by revising the dates of delivery because of fleet commitments, in order to simplify the continuing strategy of BA which is to match capacity to profitable demand, at the same time, respond to the changes in the market and operations.
Issues of British Airways
People Management
The British Airways has a number of issues that needs to be addressed as soon as possible. One of the latest issues that the British Airways will have to face is the possible strike of its employees at the end of January of 2007.
According to (2007) thousands of British Airways cabin crew will hold a three-day strike at the end of January in order to protest over issues regarding sickness absence, pay and staffing.
This is a big blow on the British Airways on the first year because without the cabin crews various flights would be delayed and the business would be impaired. Cabin crews are one of the most important elements in the aviation industry; therefore the British Airways must address this issue as soon as possible because a three-day strike will mean huge loss.
Aside from the strike, the British Airways also had an issue on its management of its people. (2006) reported that Nadia Eweida was put on an unpaid leave after she refused to cover up the necklace that depicts a Christian Cross. British Airways received a number of criticisms from various Christian groups of having double standards in terms of religion.
Communication
In association with the strike AFX reported that cabin crews decided to held a strike because the Union leaders and the management of British Airways was unable to communicate and broke down on the 21 of January 2007. The management of British Airways also has a problem with its communication with its employees because it leads into a possible strike at the end of January.
Another issue that British Airways have faced regarding communication is when it banned men from sitting beside children. This is an issue in communication because the airline is sending a message that all men must not be trusted by children and a number of men felt insulted because they are perceived as possible sex offenders even if they are not (2006).
British Airways is one of the pioneers in the civil aviation industry; it has one of the largest fleets and extensive routes all over the world. The company is the leading airline in the United Kingdom. In their annual report the company have increased its revenues and in the year 2007, BA is planning to have more increase. However, with the possible strike at the start of the year, it would generate loss. In order to prevent British Airways must have an efficient communication with its employees.
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