Impact of Global Financial Crisis on Airlines

This assignment examines the profound impact of the global financial crisis of 2008 on the airline industry. It delves into the effects of disrupted credit conditions and international trade on airlines' operations and financial stability. The analysis also considers the operational challenges faced by airlines during this period, including reduced demand for air travel and heightened cost pressures. Furthermore, it explores various recovery strategies implemented by airlines to navigate these turbulent times.

Business
Environment
- BA

Table of Contents
INTRODUCTION................................................................................................................................3
TASK 1.................................................................................................................................................3
1.1 ...................................................................................................................................................3
1.2 ...................................................................................................................................................3
1.3 ..................................................................................................................................................4
TASK 2.................................................................................................................................................5
2.1 ...................................................................................................................................................5
2.2 ...................................................................................................................................................5
2.3 ...................................................................................................................................................6
TASK 3.................................................................................................................................................6
3.1....................................................................................................................................................6
3.2....................................................................................................................................................7
3.3 ...................................................................................................................................................7
TASK 4.................................................................................................................................................8
4.1....................................................................................................................................................8
4.2 ...................................................................................................................................................8
4.3 ..................................................................................................................................................9
CONCLUSION..................................................................................................................................10
REFERENCES...................................................................................................................................11

INTRODUCTION
Internal and external factors that impact the business activity of an organisation combine to
form the business environment of an economy. The following research is based on British Airways
which is the top leading airline company of UK. The report studies the structure, objectives and
purpose of the organization. Stakeholder role in the business of BA is also been discussed in the
report. The research studies the impact of legal, social and government policies on the business
prospects of the company (Balmer, Stuart and Greyser, 2009). Various global and international trade
factors also impact on the business strategies of the company as studied on the report.
TASK 1
1.1
Categories of organisation
The purpose of different type of organisation is determined by the nature of business
activity.
Private Company- There sole aim is to work for profit maximization; they are private owned entity
and not listed on any stock exchange.
Public Company- They generates money through capital from public. They work for fulfilment of
needs of their stakeholder (Lu, 2009). Their main aim is to work for product and service
development.
Voluntary organisation- The aren't operated by a group but are operated by voluntary individuals
who work for betterment of society.
Co-operative organisation- They are co-operative trust formed in autonomous association to meet
certain economic and social aim.
Charitable- They are formed for the upliftment and development of society. They are non profit
organisation working for humanitarian and philanthropic need of the society (Amankwah-Amoah
and Debrah, 2010).
Sector- The primary sector deals with extraction of minerals and raw material from earth.
Secondary sector is involved in transforming of raw material into goods. Whereas, tertiary sector
deals in providing services and products to business and consumers.
British Airways is a public limited company listed on London stock exchange. The airline
company is a separate entity from its owners (Samy, Odemilin and Bampton, 2010). BA works for
providing extraordinary services to its customers by increasing profit of the company.
1.2
Purpose
Mission- To provide excellent services to the customer by enhancing their travelling experience.
Vision- To be able to become the most responsible airline of the world.

Short term objectives- To become the leading airline by providing premium services by enhancing
international market share (Carrier, 2010).
Long term objectives- To become the top airline industry by increasing profit and market share. In
order to generate growth company aims to increase its return on investment to prepare for
expansion of business.
Key stakeholders of BA
Customers, Suppliers, Shareholders and employees are the key stakeholders of British Airways
(Martin-Cejas and Sánchez, 2010).
How an organisation meets the objectives of different stakeholders with example
To meet the demands of shareholders company aims in understanding their needs and wants,
by providing them dividend on timely basis. BA maintains its status to provide premium services to
customers generating customer satisfaction. Supplier’s relationship is harmoniously maintained
with BA. Employees perform their corporate and ethical responsibilities by achieving objectives.
In order to maintain sustainability BA had to use to use renewable source of energy this lead
to increase in price of products, which in return affected the customer. BA lost its repo with the
suppliers as it had to change the suppliers to obtain renewable energy sources (Jun, 2009). The
shareholders were not satisfied as the company was not meeting financial stability in return
generating work pressure to the employees creating de-motivation among them.
1.3
BA generates and performs different responsibility to fulfil expectations of society towards
the company.
Responsibilities of BA Legal Responsibilities- Company has to abide various consumer protection law, Competition
Act 1998, consumer right act 2015, equality act 2010 and etc. The company has to follow
the rules and regulation to maintain a healthy environment in the economy. BA has to
maintain non-discrimination within its organisation and all the employees. Health and Safety Legislation- BA has to maintain healthy and safe working environment in
the organisation by following the policies of health and safety act 1974 (Soca, 2012). The
airline company has to provide the employees with safe environment to safeguard their
health interest. Ethical Responsibility- Company has to follow its social responsibility to maintain
sustainability buy using renewable source of energy in the operations of the company. The
company has to abide by the fair trade agreements formulated by government in order to
maintain healthy relationships with international countries.
 Socio-Environmental Responsibility- British Airways has to generate a percentage of earning

for social causes and upliftment of the society (Aastveit, Ravazzolo and Van Dijk, 2014).
The company has reduces its carbon emission to reduce global warming.
Responsibilities towards Stakeholders
The company obliges in providing timely remunerations to its employees, dividends and
return on investments to its shareholders and investors, customer satisfaction to its consumers and
provides timely payment to its suppliers in order to maintain cordial relationship with its
stakeholders (Ivănescu, 2011).
TASK 2
2.1
Economic systems Command- In this economy, resources like oil, natural resources etc. are scarce. Thus, only
government has the right to operate in this economy. Free enterprise- On the other hand, the Government has provided intervention to the private
organisation to involve in decision making process in this economy (Jenica, Mihai and
Sorin, 2010). Allocation of resources is done with decision taken by compliance of the
authorities. Mixed- Private owners in this economy allocate resources as per demand factors whereas
government has low interference in this economy.
 Transitional- On the other side, this economy has observed set of transformation from
centrally planned to market economy for effective allocation of resources (Chor and
Manova, 2012).
The UK economy
UK is a mixed economy with low inflation rate floating in the economy. The gross domestic
product of UK in the year 2014 was 2941.89 billion US dollars whereas its gross national product
was recorded at 40967.70 US dollars (United Kingdom GDP per capita, 2014). The international
relationship with other countries is reflecting its excellent international trade business. The growth
of services and business is higher in contrary to 0.54% of population growth rate. Investment
opportunities in UK are very favourable because of the government and the existing business
growth in the country. In total, UK is a leading economy in terms of business prospects of the
economy.
2.2  Impact of fiscal policies on BA- Taxations, rate of interest, aggregate demand in the
economy and investment policies have created direct challenges for BA. The company has
struggled to maintain its tariffs in rising amidst the fluctuating rate in the last decade. Better
transport services provided by the government have reduce traffic to the airline industry
(Peters and et.al., 2011). The cost of services is getting higher with the use ODF renewable

source of energy impacting on the brand image of the company. High rate of loan of the
banks created borrowing issue for BA in the past years. The company has struggled to
maintain goodwill in the market.
 Impact of monetary policies on BA- Central Bank's policies to regulate monetary supply
created shortage of funds for BA in the past decade. The company had to deal with the
dropped rate of spending capacity of the consumers in the market. The company had to bear
huge expense in maintaining with private borrowing if the market. The company had to
increase its tariffs and to curt short some routes in order to maintain liquidity (Bruckner and
et.al., 2012). The power of central bank to simulative economic factors of labour and raw
material market created huge backlogs for the company in the past few years.
2.3  Impact of government regulatory- Regulatory policy committee of UK has impacted the
business activity of BA. As the organization is closely monitored by the government as per
the guideline of the committee the company has to abide by the frameworks strictly
(Claessens and et.al., 2010). The company has to audit its accounts in regular basis with
strict modules avoid any unethical or illegal activities. Impact of Competition Act- the aim of this act is to maintain healthy competition among the
airline operators of UK. The company was affected by the act as the company had to reduce
its tariff to be able to maintain the rate of tariff with other competitors in order to reduce
price hike in the economy. Whereas the negative effect of this policy is that the company
could not maintain briefly relationship worth its competitors.
 Impact of legal changes- Increase in consumer expectation made BA to reduce cost of
operations. Various legislation and policies of government forced the company to make
drifting changes in its strategies (Lamers and et.al., 2012). This impacted the efficiency and
growth of the company. In return hampered its business activity.
TASK 3
3.1
Market Structure
In monopolistic market structure there are more than one seller selling various differentiated
products in the economy. On the other hand, in monopoly market a single seller dominates supply
of goods and services in the market. In oligopoly market the few of the firms dominate and share
the market in economy (Nakano and et.al., 2009). The power to decide for production and
distribution is decided by those firms only. On the other hand in a perfect competitive market there
is a single firm who produces and supplies product and services in the economy. As compared to
others, Duopoly is a type of oligopoly market in which two competitors exist to dominate and

control the market.
Impact of price and demand
UK's airline industry works in an oligopoly market, the price and demand are affected by the
competitor’s strategy in the economy. Due to this factor, the companies are engaging in bringing
more cheap and affordable price and tariff of seats for customers. As the consumers are attracted
towards low pries the demand of services of the airlines increase. BA has the spirit to maintain this
traffic of consumer’s expectations and demand whereas many of the competitors failed to the same.
This creates tariff and price battles in the airline industry (Belobaba, Odoni and Barnhart, 2009).
3.2
The market factors like elasticity of demand and supply, customer's perceptions and actions,
price decisions, economies of scale, short and long run, labour market trends, employee's of an
organisation, etc. impact on the organization in many way. Few are explained below- Supply and Demand- The traffic of customers in the airline industry is decided by the
demand of seats of flight to particular destinations. If the demand of seats is more in the
economy the prices and tariff may decline to attract customers toward the industry. Whereas
if the airlines supply towards the customers are low the price of those seats will definitely be
high. At the time of London Olympics the demand of tickets to London was so high due to
the low tariff of the seat (Franke and John, 2011). Whereas now on usual days the price of
the tickets are high thus the sale re low as compared to the event.
 Cost and Output- As the demand changes the airline industry also changes its cost policies
and output. The output is affected by the changes in cost per seat and demand of the certain
ticket in the industry. Output affects the adjustments of cost of any service provided by the
company. For examples if the inflation rate is high in the economy the prices will be high of
the rickets this will retrospectively decrease the output (Samy, Odemilin and Bampton,
2010). As the consumers will not buy over prices tickets of the company.
3.3
British Airways covers almost all the continents as compared to its competitors, counties
like Denmark, Morocco, Belgium, United States, India and etc. Impact of PESTLE on working practices- Political and legal framework of these practices
impact the decision of BA as a business entity. The company has to abide by various
different legislations and regulation formulated by the government of the countries. This
affects the pricing and services provided by BA. The airline company has to maintain the
carbon emission and pollution level which is an environment issue being faced by various
countries. The company has to observe its corporate social responsibility to maintain
sustainability in the operating countries (Aastveit, Ravazzolo and Van Dijk, 2014). The
countries business is also affected by the technology available in the respective country.

 Impact of culture on working practices- Operating in different countries mean operating in
diversified work culture. British Airways has faced many issues in the past due to
differences in the culture. The company had to understand the cultural significance of the
market it wanted to establish its operations in. It generated huge costs ion research and
development in those countries (Jun, 2009). To avoid any cultural discrimination the
company has appointed diversified working employee to main the cultural implication of
various countries.
TASK 4
4.1
There are different global factors that affect the international trade regime of British
Airways. They are- World Trade Organizations- WTO is responsible to play the managing role for the tourism
and travel sector. The organisations member known as WTO members are emphasizing to
increase the scope of tourism in respective countries (Bruckner and et.al., 2012). The
organization global rules and regulation which are abided by BA which affects the
company’s strategies and policies and business in the overseas market. International Civil Aviation Organization- It is a specialised agency of the United Nations
which maintain the codes and principles of aviation around the globe. The agencies plans for
development of air transport in the world. The agencies policies affect the growth prospects
and help in increasing the transport scope of BA in the international market. BRIC Economies- The BRIC nations are growing on a very fast pace as compared to other
nations. A lot of traffic of tourist is from BRIC, who prefer to flight in British Airways. They
are responsible in generating business prospects to British Airways.
 Associations of British Travel Agents- ABTA is a travel association of UK responsible to
offer support services, expertise for tourists and protection of travellers and tourists (Nakano
and et.al., 2009). The organization policies affect the rights and of tourists and travelling
from BA. The company has to remain confident with these policies.
4.2
The global factors and government regulations impact the company’s line of work in many
ways. They are- Exchange rates- A decrease in exchange rate will increase the export quota as the export will
become cheaper. Whereas increased rate will inflate the export cost decreasing the export
quota of UK (Chor and Manova, 2012). BA swerves as the median to export and import
goods and services thus depreciation/ appreciation will affect the business potentials in
terms of revenue of the company

 Government’s regulations and Trade duties- Various governmental agencies and bodies levy
trade tariff and duties on the import and export of goods and services. These duties hamper
the profit making of BA as the import and export brings revenue for the airline company. A
high/low number in export/import from any country disturbs the business projection of
British Airways. Global financial stability- As British Airways operates in the global market the global
finance stability is directly correlated with the revenue of the company (Who we are, 2015).
In order to compete in the international the company has to follow the finance prospects of
various markets. Any fluctuation in the global will directly affect the output and productivity
of BA.
 Climate Change- As per the declaration of United Nations in Rio Earth Summit, the
company has to reduce the affect of toxic components on the environment. BA has to use
renewable sources of energy for the same which increase the tariffs and prices of the tickets
which in return impact on the sales of the company.
4.3
The affect of European Union is as followed- European Climate Change Programme- To follow the Kyoto protocol to reduce the affect of
greenhouse gases on the environment, EU developed a climate programmes to develop
strategies to implement Kyoto protocol in the airline industry (Belobaba, Odoni and
Barnhart, 2009). Being a part of Europe Union, BA has to also formulate strategies that
assist the business in lowering environment affect which increase the cost of services in
return affecting the revenue of the business. European Union competition policy- EU emphasizes and controls maintaining fair and
healthy competition in the airline industry. In order to maintain these policies the company
has to formulate tariff policies in accordance with its competitors. This affects BA's business
cycle by changing in its prices it has to manage its cost strategies as well. International Aviation- EU has formulated bilateral agreements with other countries to
increase and expand aviation industries scope (Carrier, 2010). Number of airline appointed,
route, traffic, air control etc. is governed by these agreements and thus BA has to follow
these regulations which lower the scope of expansion the company in the industry.
 Travel- European union's various policies for travel states that travel insurance and air
passenger has rights related to their travel. BA has to follow these policies and have to
safeguard the interest of consumers to avoid any negative impact by disrupting these
policies.

CONCLUSION
From the above report it can be conclude that business environment of an industry affects
the productivity and output of the organisation. The purpose of any business can be analysed by its
products and services. The report also studies the responsibility of the stakeholders of British
airways towards the company. International and European Policies have a great impact on the
business aspect of the company. Global and environmental factors as studied in the report have also
proven to bring fluctuations in the business of British Airways. Thus it can be said that for the
successful operation in the global market the company has to analyse the growth prospects of its
business environments in various cultures and countries.

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