SWOT Analysis Report of British Airways Plc- Five Forces Analysis Assignment Writing Help
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Case Study on British Airways Plc
Strengths
Strong market position and brand image in the UK
British Airways is the UK's largest international scheduled airline. It is also one of the world's leading global premium airlines.The company's principal place of business is London with significant presence at Heathrow, Gatwick and London city airports.The company has a strong brand image. For instance, in January 2012, the company won the first place in the “Favorite Airline” category at the Globe Travel Awards. In March 2012, the company won the gold award for best UK based airline. In addition, in the British Travel Awards 2012, the company won the gold for the Best shorthaul airline and best airline for customer service.The company also won the silver for best longhaul airline at the awards. The company's strong brand image gives it significant competitive advantage and helps it to register higher sales growth in domestic, as well as in international markets. Brand recognition also allows British Airways to charge premium prices than its competitors and thus register relatively higher margins. (Source- British Airways Plc, Company Profile, MarketLine, Datamonitor Business, 2013)
Diversified geographic presence
British Airways maintains diversified geographic presence. The company is a full service global airline providing both passenger and cargo services globally. The company serves more than 400 destinations worldwide and generates significant amount of revenue from all these locations. For instance in FY2012, the company's largest geographic region, the UK, contributed 44.3% to the total revenues. In addition the company generated 19.9% of its total revenues from the US and Canada,16.4% from Continental Europe. Moreover, Africa, Middle East and Indian sub-continent accounted for 10%, Far East and Australasia accounted for 6.5% and the remaining 2.8% from the rest of Americas, highlighting the geographic diversification. Hence, a diversified geographic presence offers the company more avenues for attaining significant revenue growth. It also reduces the company's exposure to risk associated with a particular market, including geo-political and socio-economic reasons, and facilitates a strong positive global image for the company. (Source- British Airways Plc, Company Profile, MarketLine, Datamonitor Business, 2013)
Weaknesses
Labor disputes
The company has been involved in a conflict over wage and labor issues. British Airways has a large unionized workforce and collective bargaining takes place on a regular basis. Any breakdown in the bargaining process may disrupt operations and adversely affect business performance. For instance, in 2010, British Airways faced its first national strike since 1997 following a dispute over pay and conditions of its cabin crew.The dispute over working practices escalated as British Airways withdrew staff travel concessions from workers who joined strike action and employed disciplinary procedures to sack and suspend crew members, including many union representatives. The Unite union held 22 days of strikes in 2010 that resulted in over £150 million ($239.5 million) in costs to the company. Unite represents majority of the workers at British Airways, such as baggage handlers, engineers and check-in staff.
Additionally, in 2012, a group of non-UK based cabin crew accused the airline of discrimination over the withdrawal of travel concessions during strikes of 2010. The group alleging indirect racial discrimination is seeking compensation of up to £8,000 ($12,681) each. A total of 30 staff are seeking redress from British Airways because they live outside the UK and relied on discounted fares in order to commute into and out of Heathrow airport. Such labor issues disrupt operations which can hinder the reputation of British Airways. Further, the company also has to incur higher expenses to meet the expectations and demands of the workforce which could strain its revenues. (Source- British Airways Plc, Company Profile, MarketLine, Datamonitor Business, 2013)
Opportunities
Accelerating UK airlines industry
The UK airlines industry showed stagnation over the last couple of years. However, the industry is expected to reverse this trend with high growth rates expected in the forthcoming years up to 2016. British Airways is the flagship carrier airline of the UK with strong presence in London, with significant presence at Heathrow, Gatwick and London city airports. Also, the recent takeover of bmi by IAG has resulted in IAG controlling more than half the take-off and landing slots at Heathrow Airport. Specifically, this acquisition gave British Airways an additional 56 average daily slot pairs at Heathrow. Therefore, the growing market in the UK coupled with the acquisition of bmi represents an opportunity for the company to capitalize and increase its revenues and profits from this region.
Growing global tourism industry
The global tourism industry has witnessed a strong recovery since its downfall due to recession in 2008. The recovery is primarily boosted by improved economic conditions worldwide. According to the World Tourism Organization (UNWTO), international tourist arrivals grew by 4% in 2012 to a total 1,035 million, up from 996 million in 2011. In terms of regions, Asia Pacific was the best performer with a 7% growth in arrivals. The sub-region of South-East Asia and North Africa with 9% growth in arrivals and the Central and Eastern Europe with 8% growth topped the ranking. Furthermore, UNWTO forecasts international tourism to continue growing in 2013. Arrivals are expected to increase by 3% to 4% globally. In terms of region, prospects for 2013 are stronger for Asia and the Pacific with (5% to 6%) growth, followed by Africa with (4% to 6%), the Americas (3% to 4%), Europe (2% to 3%) and the Middle East (0% to 5%). Thus, British Airways, with its strong operational base and expertise, is well positioned to benefit from increasing global tourism industry, which in turn would help the company to generate additional revenues. (Source- British Airways Plc, Company Profile, MarketLine, Datamonitor Business, 2013)
Fair outlook for the global air freight market
The global air freight sector is forecast to achieve fair growth rate over the forecast period to 2017. The air freight sector recovered from substantial decline in 2009 by posting strong growth in value and volume in the past few years. According to MarketLine (a unit of Informa plc), the global air freight sector generated total revenues of $120,582 million in 2012, representing a compound annual growth rate (CAGR) of 0.4% between 2008 and 2012. Furthermore, the performance of the sector is forecast to accelerate, with an anticipated CAGR of 1.6% for the five-year period 2012-17, which is expected to drive the sector to a value of $130,378.1 million by the end of 2017. (Source- British Airways Plc, Company Profile, MarketLine, Datamonitor Business, 2013)
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