Aviation Management | Report

Running head: AVIATION MANAGEMENT
Aviation Management
Name of the student
Name of the university
Author note

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Table of Contents
Introduction......................................................................................................................................2
Background of the British Airways.................................................................................................2
Macro environmental analysis (PESTLE).......................................................................................2
Micro environment Analysis (Porter’s Five Forces).......................................................................4
Internal Analysis (SWOT)...............................................................................................................6
Conclusion.......................................................................................................................................7
References........................................................................................................................................9

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Introduction
This report examines the business environment of a company in the Aviation industry.
Business environment analysis is a process of examining the internal and external analysis of any
organisation and is a key role to play in understanding the strengths, weaknesses, opportunities
and threats faced by a company. In this report, British Airways has been selected as the airline of
choice. Even though, it is one of the major global airlines, with BREXIT round the corner, there
has been instability in the macro environment so that report aims to highlight and analyse the
current changes in the business environment of British Airways.
Background of the British Airways
The British Airways is a global airline company offering full services to their consumers.
The company offers low fares year round and follows a global route through airports that are
located centrally. It has been a flag carrier in the United Kingdom and is only second to easyJet
in terms of passengers carried and fleet size (Britishairways.com 2020). The company merged
with Iberia in the year of 2011 and developed International Airlines Group (IAG) which became
the third largest airline in terms of revenue in the global market and second largest in Europe
(Britishairways.com 2020). British Airways has been one of the major players in the United
Kingdom and holds a position of dominance.
Macro environmental analysis (PESTLE)
Political There is a lack of stability in the current political environment in the United
Kingdom. BREXIT bill has been rejected in the house of commons a
multiple times. However, even though the bill has been passed in the house
of commons but it has ways to go before making an exit on January 31st,
2020 (Barnes 2020). In this respect, BREXIT has led to frequent strikes
from the trade unions which affects the brand image and services of the
airline (Barnes 2020). British Airways have an employee union as earlier it
was owned by the state. This has emerged from problems such as poor pay,
lack of benefits, pensions and job redundancies. British Airways is a
member of European Aviation Safety Agency (EASA) and EASA is
responsible for setting the framework and regulations in Europe. United

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Kingdom has been provided privileges like access to clear sky all over
Europe. Post BREXIT, United Kingdom’s withdrawal from EASA may lead
to non-approval of maintenance and airworthiness of flight. UK may stay a
member of these aviation body but as UK will have to follow the mandates
set by European courts and EU aviation laws, it may not be acceptable.
Therefore, UK needs to develop a bilateral relationship with each country
which would make it complicated and time consuming. This would affect
British Airways significant as they may have to change their flight routes
and schedules.
Economic The economy of the country is in turmoil with the political and declining
relationship with other European countries. The planned third runway at the
Heathrow airport will result in shifting of airlines offices for British
Airways. It will increase the overall cost of the organisation. Higher fuel
prices in the airline industry is expected to increase the overall cost of the
organisational operations (Beresnevicius 2019). The airlines industry is
already struggling due to the increase in the fuel prices. BREXIT has led to
an uncertainty in the industry which may reduce the major investments
made on the airline organisations in United Kingdom. BREXIT affects the
airlines industry the hardest and airlines have already lost 33% of their share
values and due to the European open Skies laws traffic coming and going to
and from United Kingdom will be stopped which would also affect their
economy significantly. The rise in inflation rate and change in currency
rates are expected to affect all the companies in the airlines industry.
Social With BREXIT causing huge job churns and negative impact on the
economy, the disposable income of the general population in United
Kingdom has decreased (Beresnevicius 2019). The population in United
Kingdom has become conservation and looking for low cost airlines to
travel. The increase in low cost airlines in the industry has made British
airways take the position of being a low cost airline. Therefore, it may have
positive impact on the low cost carriers as majority of the population will be
looking for cheaper flights for both domestic and international travels (Bose

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2018). The consumers are perceiving British as low cost airline which will
increase their sales volume and occupancy rate.
Technological United Kingdom has been diligent in investing in technological
development of the country and can be considered as one of the
technologically advanced nations (Barnes 2020). British Airways has also
been active in investing in technology and developing effective warehouse
management system. It has helped in improving the experience of the
consumers and reducing the overall cost.
Legal The airline industry in the United Kingdom still operate under the laws
developed by the European Union. ECAA, ECI and EASA are responsible
for regulating the unified airspace above Europe (Barnes 2020). This would
result in stopping of airline operations. British airways has been struggling
to keep up the rise in the number of passengers. It would definitely affect
their revenue if they are forced to stop their operations for few days.
Environmental The environmental rules and regulations are strict in EU and the European
aviation laws strictly focuses on reducing the carbon emission and have set
clear goals (Beresnevicius 2019). Carbon population permits are required to
operate in Europe and with Britain’s exit from the European these
environmental laws are expected to change and affect British Airways
negatively.
Table 1: PESTLE analysis
Source: (Gupta, Gupta and Gupta 2019)
Micro environment Analysis (Porter’s Five Forces)
Bargaining power of the
suppliers
The suppliers of British Airways consist of suppliers
supplying fuel, aircrafts and labourers. However, the
companies offering fuel and aircrafts are fewer in
number as they require huge investment to supply such
aircrafts. Therefore, as there are minimal suppliers, the
bargaining power is with the suppliers. British Airways
cannot perform well without good long term

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relationship with the suppliers as they require regular
supply of aircrafts and fuel. Similarly, the company
requires good crew to manage operations of their
airlines so they also required to maintain good
relationship with aviation employment providers.
Therefore, the bargaining power of the suppliers are
high.
Bargaining power of the buyers Consumers in the United Kingdom market has become
highly sensitive to price changes and well versed with
their rights. They are significantly aware of the various
choices they have while choosing an airline. Moreover,
the switching cost for the consumers while choosing an
airline is almost zero so consumers sensitive to prices
will definitely switch if they do not like the prices
unless they are loyal consumers of the company. It
reflects that consumers in the airline industry have
higher buying power in the market and with BREXIT,
the consumers have become more conservative in terms
of spending.
Threat of substitution The other modes of transport such as buses, cars and
trains are potential substitutes for the company. These
transports can easily pose threats especially for domestic
travelling consumers. However, the perspective of the
consumers determine how they perceive each of the
transport options. Consumers searching lower prices
have more chances of choosing a different mode of
transport than an airline. On the contrary, the consumers
looking for means providing convenience and time
saving have high probability of choosing an airline.
Therefore, it can be said that the threat of substitution
for the British Airways is moderate due to the difference

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in perception among different consumers.
Threat of new entrant The threat of new entrant in the airline industry is
relatively low due to the high cost of investment and the
amount of effort required to gain the desired consumer
base. There are already huge number of airlines in the
industry and there is no or little differentiation in terms
of product offered. Therefore, it is quite difficult to
develop competitive advantage, maintain the cost and
deal with the lack of distribution channel.
Competitive rivalry British Airways faces huge competition at different
levels in both local and global level. The competition in
the global and local market is intense with the presence
of large number of reputed airlines. Moreover, the
company faces tough competition from the airlines in
the Middle East. Therefore, it is essential for the
company to maintain highest level of value both locally
and globally. Therefore, the competitive rivalry in the
market is high due to the presence of large number of
companies.
Table 2: PORTER’S FIVE FORCES
Source: (Moreno-Izquierdo, Ramón-Rodríguez and Perles-Ribes 2016)
Internal Analysis (SWOT)
Strengths Weaknesses
 British airways has a strong global
brand name and trusted by majority of
the consumers
 It is a market leader in the airline
segment in the United Kingdom
 British Airways uses Heathrow as a
hub for operations which provides
 British airways face operational issues
from time to time due the protests and
agitations from the employee union.
This hinders the operation of the
company and they incur immense
losses.
 British Airways also faces disruptions

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them significant competitive
advantage over other airlines.
 The company spends huge sum of
research and development. They have
developed technologically advanced
services which are better integrated
with the information technology
services.
due to the infrastructure system issues.
The company faced significant issues
of flight delays due to technical glitch
in check in systems. The company has
also faced issued in respect to power
surge which had a global effect on
their systems. It resulted in
cancellation of majority of the flights
and the company to pay a
compensation of £ 100 million.
Opportunities Threats
 The company has the opportunity to
tap into global markets and especially
emerging markets.
 The company has the opportunity to
improve their consumers experience
and improve the efficiency of their
organisational processes.
 The company also faces intense
competition from the companies in the
global market, especially the
companies in the Middle East.
 The company also faces threats from
high speed railway services and other
substitute travelling options.
Table 3: SWOT
Source: (Sezgin and Yuncu 2016)
Conclusion
The analysis of the business environment clearly shows that British Airways has been
going significant problems while operating in the United Kingdom market. The instability in the
political and economic environment has taken a negative impact on the business. The aviation
industry has been struggling due to BREXIT and post BREXIT, the company has to change their
policies and processes based on the new aviation rules and regulations. United Kingdom’s
withdrawal from EASA may lead to non-approval of maintenance and airworthiness of flight.
Moreover, due to the decrease in disposable income of the consumers due to increase in inflation
rate and unemployment, the competition has intensified. The bargaining power of the suppliers
and consumers are relatively higher which makes it tough for British Airways to operate in the

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market. The SWOT analysis shows that even though the company has many strengths and
opportunities, BREXIT poses a major threat for the company as EU regulates the aviation rules
in Europe.

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References
Barnes, P. 2020. How soon will Brexit happen?. [online] BBC News. Available at:
https://www.bbc.com/news/uk-politics-46393399 [Accessed 20 Jan. 2020].
Beresnevicius, R. 2019. How Will Brexit Affect Aviation And Travel?. [online] Aerotime.aero.
Available at: https://www.aerotime.aero/rytis.beresnevicius/23062-brexit-affect-aviation-travel
[Accessed 20 Jan. 2020].
Bose, I., 2018. The Strategic Environment of the Aviation Industry in UAE: A Case Study on
Etihad Airways. IIUM Journal of Case Studies in Management, 9(1), pp.21-27.
Britishairways.com 2020. About BA | British Airways. [online] Britishairways.com. Available at:
https://www.britishairways.com/en-gb/information/about-ba [Accessed 20 Jan. 2020].
Gupta, A., Gupta, N. and Gupta, M., 2019. British Airways-A SWOT and PESTLE Analysis-The
impact of Europe 2020 policy. NOLEGEIN-Journal of Corporate & Business Laws, pp.1-11.
Moreno-Izquierdo, L., Ramón-Rodríguez, A.B. and Perles-Ribes, J.F., 2016. Pricing Strategies
of the European Low-Cost Carriers Explained Using Porter's Five Forces Model. Tourism
Economics, 22(2), pp.293-310.
Sezgin, E. and Yuncu, D., 2016. The SWOT analysis of Turkish Airlines through Skytrax quality
evaluations in the global brand process. In Development of tourism and the hospitality industry
in Southeast Asia (pp. 65-81). Springer, Singapore.