Positive and Negative Impacts of PESTEL Environment on British Airways

This report provides a PESTEL analysis of British Airways, covering the positive and negative impacts of each factor on the company. It also identifies the key challenges faced by the company and examines how it responds to them in the context of business strategy. The report concludes with recommendations for the company to improve its business strategy.

Business in
Context

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY ..................................................................................................................................3
Description of Positive and Negative impacts of PESTEL environment on British airways 3
Identification of key challenges faced by British Airways ...................................................5
Examination of how British Airways responds to various challenges in context of business
strategy ..................................................................................................................................6
Recommendation ...................................................................................................................8
CONCLUSION ...............................................................................................................................9
REFERENCE.................................................................................................................................10

INTRODUCTION
The implementation of Brexit deal has changed external business environment for
various industries Collinson and et. al., (2020). British Airways is the selected firm for the
completion of this report. The company is flag carrier airline based in UK and was founded in
the year 1919. The total fleet operated by the company equals to 249 and the firm offers airline
services to 183 destinations. The present reports includes description of negative and positive
impact of PESTEL environment on British Airways. The primary obstacles faced by British
airways are also provided in this report. In addition to this, the response of British Airways to
various obstacles affecting the company is examined and recommendations for the company are
mentioned.
MAIN BODY
Description of Positive and Negative impacts of PESTEL environment on British airways
PESTEL analysis is tool used to understand external environment of business firms and it
covers political, economical, social, technological, environmental and legal factors affecting a
business firm. PESTEL analysis of British Airways is provided below including the positive and
negative impact of each factor on the company. Political Factor: The main political factor affecting growth of airline firms in UK and EU
is Brexit Folsom (2017). This is because Brexit has imposed new ownership and control
restrictions for airline firms operating in UK airspace. In addition to this Brexit limits
availability of EU workers in UK which has created labour shortage in the country. This
also impacts airline firms in UK as EU workers act as skilled and low cost workers for
business firms.
Positive Impact; The positive impact of this factor is that the new ownership and control
restrictions are relaxed for UK airlines which had operating license at the end of transition
period. This is beneficial for British Airways as the company was operating with licences during
the transition period.
Negative Impact; Lack of EU workers in UK negatively affects British Airways as it increases
labour costs amid the COVID-19 pandemic. It is important for airline firms to reduce costs until
global travelling conditions return to normalcy in order to quickly recover from, the pandemic.

 Economical Factor: The operational costs of the company will increase because the
company will have to shift airport operational offices in Heathrow Airport. This is
because Supreme Court has ruled in favour of construction of third runway at the airport.
Positive Impact; The development of third runway at Heathrow airports enables British airways
to offer more flights to the airport because of assess to new runway. This helps in financial
progress of the company.
Negative Impact; The negative impact of this economical factor is that it puts financial burden on
British Airways. Social Factor; Consumer perception about British Airways has changed as the company
is refried as low cost carrier and cost-effective airline. This change in public perception
impacts sale of the organisation .
Positive Impact; Increasing public perception of British Airways as low cost carrier helps the
company attract middle income and low income consumer. This is beneficial for the firm as it
provides competitive advantage.
Negative Impact; This social factor tarnishes premium image of British Airways. Development
of cost-effective image leads to alienation of high income consumers base of businesses because
they feel that the company will not be able to offer premium services. Technological Factor: Technological advancement is one of the key elements of growth
of airline firms as it helps improve services and reduce costs. The development AI,
machine learning and immersive technology in relation to aviation operations can help
airlines improve consumer experience and improve various operations.
Positive Impact; Utilization of technological innovation in various business operations can help
British Airways gain competitive advantage in the global airline industry. These technologies
can be used to improve flight performance, enhance communication with the consumers and
offer innovative services to secure maximise profitability.
Negative Impact; The primary negative impact of usage of advanced technology such as AI and
machine learning is that it introduces the threat of cyber security. British Airways can face
various problems because of cyber attacks on passenger data or flight control systems. Recently
the company Is facing fine of £183 million because of data breach caused by unsafe security
systems of the company (British Airways faces record £183m fine for data breach, 2021). British
Airways needs to utilize advanced security systems to deal with such threats.

 Environmental Factors: Climate change and negative impact of airline firms on global
climate is one of the main concerns of aviation authorities on global sale. On the other
hand consumers are also preferring to use services of sustainable airline. This impacts
profitability and longevity of British Airways.
Positive Impact; The company an develop sustainable brand image through CSR initiatives and
policies to save energy and reduce Carbon emissions. Global concern for climate change will
help the company attract consumers by improving sustainability.
Negative Impact; The damaging impact of air travel on environment is discouraging consumers
from using air travel over more sustainable travelling alternatives to specific location. This
reduces profitability of the company Brexit without WTO-Problems: for the UK? The EU?
Global business? (Häberli, 2017. p. 90). Legal Factors: COVID-19 flight safety restrictions imposed by governments all over the
globe impact airline firms. This is because they have to take safety measures and comply
with government regulations to prevent spread of the Sastry, 2020.
Positive Impact; Compliance with government regulations related to COVID-19 will ensure
safety in every flight of British Airways. This will protect employees and passengers of the
company and protect from lawsuits because of unsafe flying conditions.
Negative Impact; This has increased the overall costs of the company as British Airways has to
invest in PPE kits and other sanitization equipment to protect employees and passengers from
Virus. In addition to this, British Airways have to ensure that passengers gain high quality
experience while flying with the company amid pandemic and also follow various government
restrictions.
Identification of key challenges faced by British Airways
 The labour shortage created by the pandemic is one of the main challenge faced by
British Airways as it impacts financial and daily aviation operations of the company. This
labour shortage is created by the reduced access of EU labourers in UK because of
Brexit. British Airways needs to focus on ways to lower labour costs in order to maintain
profitability during pandemic.
 COVID-19 safety guidelines and regulations have completely changed air travel and
daily business operation at British Airways. The company faces the barrier of following

government regulations regarding COVID-19 for safety of consumers and employees
while also providing best consumer experience.
 The technological factor of usage of AI technology introduces the threat of cyber-
security. The firm is facing repercussions from recent data breach and needs to eliminate
the threat of cyber-attacks immediately to offer safe airline services to consumers.
 British Airways also faces the challenge of losing their high income consumers because
of changing consumer perception of the company. The cost-effective brand perception of
the firm can alienate high income passengers which is barrier to progress.
 British Airways have to take feasible steps towards sustainable in order to attract growing
environmentally conscious consumers while also maintaining profitability. This
challenge needs to be resolved in order to increase longevity of the company amid
increasing financial concern.
Examination of how British Airways responds to various challenges in context of business
strategy
British Airways has made various changes to their business strategy in order to respond
to challenges present on the external environment. The response of British Airways in relation to
various elements of business strategy is provided below; Human Resources: British Airways is terminating large numbers of workers in order to
lower human resource costs during the pandemic. This change in business strategy is in
response to the labour shortage created by the EU workers restrictions of Brexit. More
than 6,000 employees at the company are taking voluntary redundancy while the firm
plans to cut 12,000 jobs to lower labour costs during the pandemic (COVID-19
pandemic: British Airways to go ahead with job cuts, 2021). Marketing: The company has started various marketing efforts to target high income
consumers in response to the chaining brand perception that the company is low cost
carrier airline. The firm celebrated 100th anniversary in 2019 and launched an
advertisement campaign including international starts. Oscar winning celebrities such as
Olivia Coleman and Paralympian Ellie Simmonds were part of this campaign which
including appreciating people of Great Britain with focus on impeccable airline services
offered by British Airways (British Airways pens love letter to UK with help from Olivia
Colman and Anthony Joshua, 2020). This marketing campaign helps the company face

the challenges of changing brand perception by associating their company with
international celebrities. Financial Management; In order to face the challenge of sustainability the company has
made financial investment to reduce damaging impact of aviation on climate change.
This includes 400 million dollar investment in development of sustainable aviation fuels.
British Airways is also investing in construction of waste to jet fuel plant in Lincolnshire
by the year 2025. The fuel produced from this plant will power companies flight along
with ethanol based sustainable fuel which will help power flights by the year 2022. These
long-term financial investment in sustainable aviation fuel will help the company
increase sustainability save energy and develop profitable brand image to gain long-term
success. In addition to this, the company has partnered with Europe Assistance to offer
COVID-19 travel insurance to costumers in UK, France, Italy, Spain and Germany. This
includes cancellation protection for missed departure, trip interruption and other
eventualities. Multi-task trip insurance helps passenger gain protection in case of issue
arising during or before the trip. This insurance improves consumers experience as they
are able to protect themselves from loss because of travelling issues during such
uncertain times. This financial partnership is aimed to enhance business strategy of the
company in view of COVID-19 pandemic. The firm will be able to encourage consumers
to travel more during the pandemic and improve their travel experience by reducing
financial risk of travelling during COVID-19. Information System: The firm is taking various strops to increase digital security at the
company after recent data breach. This is in response to rising threat of cyber crime
targeted at business firms. The firm is implementing various AI powered solutions to
ensure safer digital experience for consumers.
 Operations: British Airways has started flying more fuel efficient aircraft including
A350's and 32 787s. This change in aviation operations is initiated in order to face
challenge of sustainability concerns of consumers. The change in operations aimed to
enhance consumer experience includes various efforts towards ensuring safety of
employees travelling amid the on-going COVID-19 pandemic. Following government
flying regulations related to COVID-19 along with developing single website dedicated
towards providing latest Coronavirus updates to global passengers are responses of

British Airways to improve consumer experience and facilitate satisfactory air travel
amid pandemic. This improves passenger experience as they are able to assess latest
COVID-19 air travel information easily. These changes in daily business operations of
the company to improve consumer experience will help British Airways position the
company as most passenger friendly airline and gain high profitability.
Recommendation
 The firm neds to offer virtual training to employees as to will further reduce Human
Resources costs and help the company recover from negative impact of pandemic and
Brexit quickly.
 Investment in Consumer relationship management and personalized marketing is key to
targeting high income consumers. This is because most high income consumers spend
high amount of time on internet. British Airways neds to offer personalized marketing
and invest in consumer relationship management to attract high income consumers and
face the challenge of changing brand perception.
 The firm needs to improve digital security by partnering with business firms specializing
in cyber security. This is justified recommendation as this investment will protect the
company from cyber security attacks and easily adapt digital security to face new cyber
threats in the long-term.
 British Airways needs to initiate CSR activities which centre around environmental
improvement of vulnerable areas or animal Species. This will create brand image of
responsible company and attract environmentally conscious consumers and help the firm
face challenge of increasing sustainability concerns Virus Halligan and Lyons, (2018).
 The respective company is recommanded to adopt internet of things to improve
efficiency and maintain social distancing during airport interactions with the consumer.
This will improve consumer experience during COVID-19.
 British Airways needs to offer consumers travel packages by partnering with hospitality
firm to encourage air travel after relaxation of COVID-19 travel restrictions in various
countries. This is justified recommendation as it will help the company recover from
COVID-19 and face increase in operational costs because of shift of airport operational
offices in Heathrow Airport.

CONCLUSION
From the above report it is concluded that business firms have to face various challenges
present in the external environment. The macro environmental factors affecting business firms
can be identified by application of PESTEL analysis. The factors covered in PESTEL analysis
are Political, Economical ,Social, Technological, Environmental and Legal Factors. Each Factor
included in the PESTEL analysis has positive as well as negative impact on business firms.
Business firms respond to external challenges by improving various element of their business
strategy such as financial management, marketing and Human resources.

REFERENCE
Book and journal
Collinson and et. al., 2020. International business. Pearson UK.
Folsom, R. H., 2017. Principles of European Union law: including BREXIT.
Häberli, C., 2017. Brexit without WTO-Problems: for the UK? The EU? Global
business?. Global Trade and Customs Journal, 12(3). pp 87-91.
Halligan, L. and Lyons, G., 2018. Clean Brexit: Why Leaving the EU Still Makes Sense-Building
a Post-Brexit Economy for All. Biteback Publishing.
MacShane, D., 2017. Brexit, No Exit: Why (in the end) Britain won't leave Europe. Bloomsbury
Publishing.
Sastry, V. V .L. N., 2020. BREXIT-and Its Impact on India’s Export Business. Idea Publishing.
Online
British Airways faces record £183m fine for data breach, 2021. [Online] Available through
<https://www.bbc.com/news/business-48905907>
British Airways pens love letter to UK with help from Olivia Colman and Anthony Joshua, 2020.
[Online] Available through <https://www.campaignlive.co.uk/article/british-airways-
pens-love-letter-uk-help-olivia-colman-anthony-joshua/1524496>
COVID-19 pandemic: British Airways to go ahead with job cuts, 2021. [Online] Available
through <https://www.businesstoday.in/industry/aviation/story/covid-19-pandemic-
british-airways-to-go-ahead-with-job-cuts-269438-2020-08-07>