International Consolidated Airlines Essay 2022

Running Head: International Consolidated Airlines
International Consolidated Airlines PLC
Essay
System04104
8/4/2019

International Consolidated Airlines
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International Consolidated Airlines
International Consolidated Airlines Group is an Anglo-Spanish multinational airline
company, which is often referred as IAG. The company was founded in 2011, after the
merger of British Airways and Iberia, the airways company of UK and Spain respectively
(British Airways, 2017). The registered office of the company is in Madrid and Spain and its
operational Headquarter based in London. The Chairman of the company is Antonio Vazquez
Romero and its current CEO is Willie Walsh (IAG, 2019). Both these companies ceased to be
independent companies and instead became 100% owned subsidiaries of IAG. The company
is operating its airways operations in different countries and it is the sixth largest airline
companies in the world. The annual revenue of the company was £22.972 billion in 2017
(IAG, 2019). The International Consolidated Airlines Group has 568 aircrafts including
Boeing 777-2000, Boeing 787-800, Airbus A340-600, Airbus 319, and Airbus A318 (IAG,
2019). The company operates its business over 268 destinations. The British Airways and
Iberia Airlines signed an agreement of merger in November 2009. In April 2010, both the
companies signed a full merger agreement. However, the company start its operation in 2011
after regulatory approvals. The company is often shortened as IAG (International Airline
Group) and it is a public limited company. The IAG group is providing services such as
Airline services, Airfreight services, and Passenger air transport services. There are so many
subsidiaries of this group such as Aer Lingus, British Airways, Iberia, LEVEL, and Vueling
etc. (IAG, 2019).
Organisational Structure of the International Consolidated Airlines
The organisation structure of any organisation determines the manners through which a
company is trying to achieve its objectives and increase its profitability at maximum level
(Morrison, 2011). In other words, it can be said that organisational structure shows the roles
and responsibilities of every member of the organisation from top to bottom and their
required contribution in the achievement of organisational objectives. The figure (1) shows
the organisational structure of the International Consolidated Airlines Group (IAG).
The International Consolidate Airlines Group has five more subsidiaries like British Airways,
Iberia, Vueling, Aer Lingus etc. The IAG organisational structure chart shows that the whole
organisation is governed by the IAG board members. The company has 12 members in its
board. The Chairman of the board is Antonio Vazquez. Apart from this, there are two chief

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executives Willie Walsh (Chief Executive Officer) and Steve Gunning (Chief Financial
Officer). Apart from these three, there are 9 non-executive members in the boards. Under
these board members, there are four committees who govern the overall work of the
organisation. These committees are Audit and Compliance Committee, Nominations
Committee, Remuneration Committee, and Safety committee (Barbot and D'Alfonso, 2014).
Fig.1 (Source: Eaton, 2017)
The audit and compliance committee receives the report from different departments of the
organisation and care about the organisational performance and work. This committee is also
responsible to take care about different issues and problems of the organisation and ask the
report with the related department of the organisation. The overall objective of this group is
to ensure that every act in the organisation will be performed in right ways and if any
correction is needed then the committee suggest the better ideas to the board of members to
bring change in the organisation. The second committee is called Nomination committee.
This committee acts as part of the IAG’s corporate governance. The Nomination committee
evaluate the role of every board of members and their respective organisations. This
committee also judge the characteristics and skills of candidates who can be selected as board

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of director. The committee selects the suitable candidate for the organisation (Eaton, 2017).
However, this committee is often compromised with Chairman, deputy Chairman, and chief
executive officers. However, in the current organisation the numbers of member often vary
based on the situation. The third committee is remuneration committee, which decides the
remuneration of employees, chairpersons, and other top level of employees in the
organisation. The remuneration committee is also responsible to revise the remuneration
policy of the company on regular basis and determine the best remuneration policy for the
organisation. The remuneration committee is also responsible for observing the performance
of shares in the market and provide its recommendations to the board of directors for further
changes in the remuneration policy of the organisation (Lange, Geppert, Saka Helmhout, and‐
Ritterspach, 2015). The Committee compares overall performance of the company and pay
structure and its advices based on these observations and performance of the organisation.
Apart from this, this committee also considers the Spanish and UK market during deciding
the employment conditions and pay. The fourth committee is safety committee, which is
responsible to take measure regarding safety and security of people in the organisation. It also
ensures that no misleading or dangerous act will be performed in the organisations, which
affect the life of people (Merkert and Morrell, 2012).
Under all these committees, the IAG management committee helps the organisation to
observe the activity of all the department of the organisations. The CEO and CFO of the
British Airways and Iberia airways also report about their organisational performance to the
management committee of the IAG group, which is further analysed and discussed by the top
management of the organisation (Rahman, Azad, and Mostari, 2015). The management
committee of the group also focuses on day-to-day business operations and develop long-
term strategies so the organisational goals can be achieved in effective and efficient manner.
Although the IAG group is the parent company of so many small companies like British
Airways, Iberia, and IAG Cargo etc. so the policy formulated on the top level of the group
always affect the operations of its subsidiary groups (O’Connell and Bueno, 2018).
Effect of External Environmental Factors on International
Consolidated Airline
All the outsider factors, which affect the organisation together, make the external
environment. In other words, external environment of an organisation includes variety of
factors that affect the performance, behaviour, and even the whole existence of the

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organisation (Needle, 2010). However, these factors either directly affect the operations and
functions of the organisation or indirectly affect the organisation. For example, actions taken
by competitors or increment in the price of fuel in the international market directly affect the
business operation of IAG (Camilleri, 2018). While changes in the tax structure or changes in
the business climate may indirectly affect the business organisation. To survive in the market
and face the tough competition in the same industry required quick and continuous adoption
of environmental changes inside and outside of the organisation. These external factors not
only affect the business operations rather these factors also affect the interest of individual
groups such as customers, suppliers, owners, managers, or competitors etc. However, these
groups can also be considered as the organisational stakeholders who are directly affected or
indirectly affected by the organisational work (Hu, Lee, Chuang, and Chiu, 2018). Therefore,
there should be an agreement required between the external environmental factors (Political,
Economic, Social, Technological, Environmental, and Legal) and internal factors (resources,
organisational structure, culture, leadership style, and management power). However, the
impact of external environment not only affects the business operations of International
Consolidated Airline Group S.A. rather it also affects the business functions of other players
of the aviation industry (Boddy, 2008).
The external environment of an organisation often refers as PESTEL. PESTEL analysis of an
organisation helps to understand the impact of external factors on an organisation. PESTEL
analysis is a strategic tool that helps the company to analyse the macro environment.
PESTEL factors also affect the business operations of International Consolidated Airline
Group (Rahman, Azad, and Mostari, 2015). The impact of these factors can be analysed in
following points:
Impact of Political Factors: Political factors can play a vital role in the long-term
profitability of the company. The International consolidated Airlines operate its business in
many countries. Therefore, a small change in the political policy of a country related to
aviation industry may affect the profitability of International Consolidated Airways (Rijke,
2012). The company operates its business more than dozen countries and faces various types
of political risks and environmental risks. The company needs to identify these political
factors and its impact on the organisation so company can operate its business in smooth
ways. The company should analyse the political stability and instability conditions before
operation or starting business in a particular country (Gupta, Gupta, and Gupta, 2019). The
company can also analyse the legal framework, risk of military invasion, level of corruption

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in a particular government, antitrust laws related to aviation industry, and taxation policy of
the country before operating the business. The political party is responsible to bringing
changes in wages policy, labour policy, safety policy, consumer service policy, and labour
policy. The IAG group should identify these political changes and frame of mind to operate
in a particular country (De Neufville, Budd, and Ison, 2016). Political factors are one of the
crucial and most effective factors that can influence a business organisation. It is necessary
for the International Consolidated Airlines to identify the political stability and political
conditions in every country where it operates its business operations and adopt the changes in
the organisation to face the effect of various changes in political factors.
Impact of Economic Factors: The macro environmental factors such as saving rates,
inflation rates, foreign exchange policy, and economic cycle are the some examples of
economic factors. These factors determine the aggregate demand and supply in a country
(Reis and Silva, 2016). Although in aviation industry, it is related to increase in the fuel price,
increase/decrease in the number of people who like to travel from the plane, alternative low
cost method of transportation etc. The International Consolidated Airline can use the
country’s economic situation such as income of people, inflation rate, growth rate, spending
of people, and other thing related to economic factors during the business operation in a
particular country. The economic system of a country also affects the airline operations of
International Consolidated Airlines. The government intervention in the free market is one of
the major external factors that have significant effect on the airways operation of
International Consolidated Airlines. The unemployment rate, economic growth rate, inflation
rate, and interest rate have some major effect on the International Consolidated Airlines
(Pearson and Merkert, 2014)
Impact of Social Factors: The culture of a society and living standards of the people also
affect the business operations of an organisation. The culture of the society or of a particular
country has major influence on the International Consolidated Airlines. The belief, values,
norms, and culture of society determine the way of International Consolidated Airlines that
how the company will understand the needs and feelings of people and how the company will
design the message for Travel & Leisure industry consumers (Rijke, 2012). There are various
factors that affect the business strategy and operations of International Consolidated Airlines
such as demographics and skill level of population, culture of people, education level in the
society, health and environmental consciousness, leisure interests, social class structure, and

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interest of people in leisure activities. These factors determine the overall business
performance of International Consolidated Airlines.
Impact of Technological Factors: Technology plays an important role in the aviation
industry. It is not only necessary for stay competitive in the industry rather it also required for
the safety and security of people in flights. The impact of technological changes almost
determines the way of earning profits in a business organisation (Ustaömer, Durmaz, and Lei,
2015). For example, if the International Consolidated Airlines uses the latest technology
engines in the Jet, it will reduce the fuel consumption and improve the efficiency of engines
by increasing the speed of planes. It not only increases the profitability of the company rather
it also increases the fuel efficiency of the jet planes. The technological analysis involves in
the International Consolidated Airlines are related to identifying the recent technological
developments, impact of technology on the services offering by the company, and rate of
technological diffusion. These all factors affect the business operations of International
Consolidated Airlines (Soto, 2012).
Impact of Environmental Factors: Different countries have different environmental norms
and standards, which can directly affect the profitability of an organisation. It is also
considerable that it has been seen that within a country each state have their own
environmental standard and norms. For example, in USA – Texas and Florida have their own
environmental norms and liability clauses in the situation of natural disasters. Similarly, large
number of companies in Europe pays a high level of taxes to government because they
operate their businesses in renewable sector (Ustaömer, Durmaz, and Lei, 2015). Therefore,
International Consolidated Airlines should analyse the impact of these factors before entering
in the new market. The company needs to carefully evaluate and analyse all these
environmental rules, regulations, policies, and norms to operate in a specific market. Some of
the factors that affect the business operations of International Consolidated Airlines are
weather, climate change, recycling, laws relating environmental populations, waste
management, pollution control policy, endangered species etc. International Consolidated
Airlines should analyse all these environmental factors before operating nosiness in a
particular country because these environmental factors have significant effect on the airways
operations of International Consolidated Airlines (Teker, Teker, and Güner, 2016).
Impact of legal factors: It has been seen that many countries do not have proper policy or
regulations to protect the intellectual property rights of an organisation. Therefore, a firm
should care about such poor policy and regulations because it can lead to the theft of

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organisational secret sauce and which further leads to the overall loss in the competitive edge.
Apart from this, law related to taxation, industrial policy, and employment/ labour law also
affect the business operations of an aviation company. Therefore, it is essential for
International Consolidated Airlines to analyse and evaluate different factors related to legal of
a specific market where it is going to operate its business or planning for it (Truxal, 2016).
The legal factors include anti-trust law in travel and tourism industry, employment law,
labour law, data protection law, consumer protection law, law related to intellectual
property/copyrights/patents, or law related to consumer protection etc.
The PESTEL analysis provides a great detail about the external environment of a firm. From
the above analysis, it has been found that there are many factors that affect the business
operation of International Consolidated Airlines. There are so many factors such as political
instability in UK, taxes in the USA, and social need and culture of people etc. that affects the
business operation of International Consolidated Airlines. Although, if the International
Consolidated Airlines analyse and identify these changes in the environment and make the
required changes in the organisation according, International Consolidated Airlines can cope
up with these external environmental factors easily. It should be noted that adoption of
change is necessary for any business organisation because if the organisation fail to adopt the
future environmental changes, the organisation cannot survive in the long term. To face the
future challenges and to stay competitive in the aviation industry, the International
Consolidated Airlines must adopt the changes that are happening in the external environment.

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