British Airways - Global Operations

Abstract

British Airways (BA), a flagship carrier airline in the UK, was created in 1974 and is headquartered in Waterside. It was privatized in February 1987 and is the largest airline in the UK based on fleet size, international destinations and international flights. BA's - British Airways World Cargo subsidiary is the world's twelfth largest cargo airline in terms of total freight tonne-kilometers flown. However, the company reported its biggest annual loss of £531m in FY2011 due to lower passenger numbers, higher costs and the impact of strike action.

British Airway's Product and Pricing Strategies

The company's core brand philosophy has been 'Quality Flights for All Classes'. Unlike its major competitor Virgin Atlantic that has ventured into radio stations, cola, insurance and financial products, BA have chosen to concentrate on the flight industry. The company flies to 95 of the busiest airports in European cities, 58 destinations around the world and provides a range of augmented services to its passengers to serve their varied needs. These include separate lounges for executive class fliers, different on-board menu and wines for the business class, two in-flight magazines, four radio channels, free food and drinks on the flight and more. The company's pricing policy allows the customer to choose the extras which they prefer to be included in their tickets the company is providing.

Market Trends and Competition

The global aviation industry has been through turbulent times in the recent past. On the one hand, fall in traffic, soaring fuel prices and beefing-up of security procedures in the face of global terrorism have led to higher operating costs and lower profit margins. On the other side, air travelers are not only looking for high-quality services and on-time arrival, but also low fares. And, perhaps the most significant development of these all, that has considerably changed the way the global airline industry operates, has been the rise in the number of low-cost carriers. Traditional carriers have had to try and achieve low cost and product differentiation simultaneously, a strategy that is a sure recipe for disaster. These trends have forced big airlines across the board to consolidate their businesses.

Changes and Innovations

With an increase in competition, BA has changed its pricing objectives from maximizing profits to market share maximization. In keeping with the global trend of consolidation, the company has ventured into agreements and mergers with various airlines like the Spanish Iberia, UK based ICRR that manages 'Eurostar' and 'Flybe' another UK based regional airline.
The company has also launched a low-cost carrier called OpenSkies, a unique concept as it offers the perks of a traditional carrier and does business outside its parents home based while operating at lower costs.

Future Trends

The airline industry is an intensely competitive market and despite the recent recession it remains a large and growing industry. According to a research agency, the global aviation industry is expected to grow at a CAGR of 5.6% during 2004-2024. While the conventional matured airline markets will see a cumulative drop in their market share from 61% in 2005 to 52% in 2025, the emerging markets such as China, India and Middle East possess great potential for this sector.
The question is, while the industry as a whole is looking up, will British Airways be successful in completing its controversial cost-cutting measures that have been a major source of strikes and losses to the company and be able to strengthen its footprint in the global aviation industry?