BA is one of the world's largest international airlines, providing travelers with a broad network to and from the U.K. and has a total service for premium travelers in co-operation with world alliance partners. The company expanded rapidly in the 1990s, which led to overcapacity, lower fares and a collapse in profitability. These difficulties were compounded by the rapid growth of the low-cost carriers.
Material roofing stones in 2000 led to a radical restructuring which was accelerated post 9/11. The company holds United Kingdom Civil Aviation Authority Type as its Operating License, and it is permitted to carry passengers, cargo liner and an aircraft with 20 more seats. British Airways is based at London Heathrow Airport in London, England.
It also has a commanding presence at Gatwick and Manchester International Airport. BA has succeeded in dominating Heathrow as the airport that is commonly referred to as the fortress within both the airlines and its competitors. BA had acquired the rights to around 36% for takeoff and landing slots at Heathrow, many of which are used for the lucrative trans-Atlantic market.
Its competitors, such as Virgin Atlantic and bmi, assert that this stifles competition and political think-tanks recommend a year's auction of slots. In recent years British Airways has been buying slots from other airlines including United Airlines, SN Brussels and International Swiss Air Lines, and now owns 40% of slots at Heathrow.
Although British Airways is described as the "National Carrier of the United Kingdom", it has been criticized for its lack of presence in Northern Ireland, with BA now still only offering flights from George Best Belfast City Airport to Manchester, leaving direct to London.
Neither does it stop by any destinations to and from Wales. It does, however, possess broad engineering bases in broad Cardiff where it carries out all scale modifications to its fleet.
The global airline thesis remains the same with strong corporate profitability and continued globalization driving strong demand for premium travel. Coupled with this is the current tight supply situation which is particularly positive for Europe as Asia and the Middle East are taking more than their fair share of new orders from Boeing and Airbus. These factors are particularly important to BAY.
It recently unveiled the new Club World seat, which will reduce capacity in FY08 as economy seats are taken out for additional premium seats. The new product should be well received by customers and keeps BAY at the forefront of the premium service. BAY has a patent on the seating configuration which allows 15-20% better use of the cabin space which means airlines cannot copy BAY's product.
Over the last three years BAY has significantly reduced the risk of its business both by paying down debt and taking out fixed costs. The reduction in risk affected by the company has come through a period where the external risks have been heightened with global terrorism, war and political instability in the Middle East continuing to feature in the paying customers thinking.
Tags: British Airways, performance, analysis of the working of BA
[...] Drucker, 1985; Peters, 1989; Zairi, 1996a QSeries ©: Can the corporate travel boom continue?; Horth/Crissey/Marshal Global Airlines Strategy: Attractive supply/demand augmented by A380 woes; Horth/Marshall/Crissey). Altman 1968; Altman, Haldeman, and Narayanan 1977; Altman 1984 Robert Morris Associates' Annual Statement Studies and the Financial Research Associates' Financial Studies of the Small Business both use size categories in the reporting of financial ratios Dyson J.R. Accounting for Non-Accounting students, 4th edition London, Pitman 2003. T. W. Harris, "Control Budgeting in Commercial Banks," "N.A.C.A. [...]
[...] It would be a reasonable prediction that greater standardization of budgeting practice is likely to come. Already, certain tendencies in this direction are discernible. Dyson defines master budget as a combination of a budgeted profit and loss account, a budgeted balance sheet, and a budgeted cash flow statement . Generally a comprehensive or master budget is supported by a number of subsidiary budgets or budget schedules. The controller for the Armstrong Cork Company writes: "The operating budget is the coordinated plan of operations of a company for a budget period. [...]
[...] Most criticisms of CVP relate to its basic underlying assumptions. Economists[12]. have been particularly critical of those assumptions. Their criticisms take many forms, but they all arise from CVP's departures from the standard supply and demand models in price theory economics. Perhaps the most basic difference between CVP analysis and price theory models is that CVP ignores the curvilinear nature of total revenue and total cost schedules. In effect, it assumes that changes in volume have no effect on elasticity of demand or on the efficiency of production factors. [...]
[...] Assuming the capex does rise to £600m in FY09 (our last forecast year) at our price target of 600p would still mean that BAY would have a cash flow yield of 14% which in our view is a more realistic level than 18% which is the number at the current share price. This along with headline multiples should support a higher price. Catalysts - pensions The resolution of the NAPS pension deficit is not quite there yet. The company has agreed in principle with the trustees, although the unions are still trying to influence the details of the settlement. [...]
[...] BAY will hold an Investor Day as usual in March. As we approach that date, we believe the market will begin to discount more fully the value of Terminal 5. We are aware that using DCFs in valuing airlines is a fairly subjective exercise and have therefore included a comparison of BAY against its global peers in the table below. On EV/EBITDAR multiples BAY remains one of the cheapest global airlines that we cover and we expect it will be a beneficiary of the key tenants of our global investment case for airlines; strong premium demand, tight supply. [...]
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