FE4355 - Tourism Industry: British Airways Business Environment

This report provides an in-depth analysis of the business and economic environment surrounding British Airways, a leading intercontinental airline in the UK. It begins by outlining the structure of the airline industry, highlighting its significance to the UK's GDP and employment. A detailed company profile of British Airways is presented, followed by a PESTLE analysis examining the political, economic, social, technological, legal, and environmental factors impacting the airline. Key challenges faced by British Airways, particularly in the wake of the COVID-19 pandemic, are discussed, including travel restrictions, financial losses, and strategic decision-making. The report concludes by emphasizing the need for effective strategies to navigate the volatile and competitive business landscape, noting both positive and negative implications for stakeholders. Desklib offers a wide range of similar solved assignments and past papers for students.

FE4355 Understanding the
Business and Economic
Environment The Tourism
Industry

CONTENTS
INTRODUCTION......................................................................................................................1
MAIN BODY.............................................................................................................................1
The structure of the airline industry.......................................................................................1
Case study company’s profile................................................................................................2
PESTLE analysis....................................................................................................................2
Business challenges and its implications................................................................................4
CONCLUSION..........................................................................................................................4
REFERENCES...........................................................................................................................5

INTRODUCTION
Speaking about the business environment, it is being referred as the business
surroundings and encompasses the factors which impacts the operation of the company.
There are many internal and external environmental and economic factors that influence the
business. considering this, the main aim of the present work is to focus on understanding the
environmental and economic context of the case study company that is British Airways. It is
one of the leading intercontinental airline companies of UK. The report will throw some light
on the industry in which the company operates along with the overall company profile.
External environmental analysis will also be done through adopting PESTLE tool. The final
section of the report will highlight some business challenges and its implications on the
company.
MAIN BODY
The structure of the airline industry
According to Cole (2018), the travel & tourism industry is one of the most significant
sectors in the economy of nation. This industry is forming around 5 percent of the gross
domestic product of UK. This industry has different sectors, however the sector in which the
case study company that is “British Airways” operates is transportation or airline sector. In
the present time, UK has the third largest airline network across the world and has acquired
the second largest position in aerospace manufacturing sector. The airline sector has a
turnover of over £60 billion and is making a contribution of around £22 billion to the national
Gross Domestic Product. Additionally, this sector is also making an important contribution
towards generation of one million jobs directly as well as indirectly being assisted by it.
Furthermore, the airline industry of UK is offering different advantages to the country and its
society in both economic as well as social context.
This sector has boosted the other sector of the travel and tourism industry such as
hospitality, hotel and leisure industry. Currently, the residents of UK make almost 60 million
visits overseas each year. Out of which eighty percent are being made by air because there
are very few substitutes available to air travel for long haul and short haul destinations
(Alkhafaji, 2019). Moving further, the airline industry of UK is very competitive and
dynamic because of the presence of different players and driving trends in the market.
Companies such as Emirates, Lufthansa, EasyJet, Air France and Ryanair are tough rivalries
of the company in the UK market. However, British Airways have maintained a leading
position in the market by offering high quality with high prices.
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Case study company’s profile
Talking about the British Airways, it is being one of the leading and largest airline
companies of UK and is a member of the royal family of the European airlines. From the past
several years, the company has been the national flag bearer of the United Kingdom. The
firm is operating in 160 destinations across the world and has a presence in more 70 nations
of the world. the company is affianced in the process of both international as well as domestic
carriage of cargo along with the parcel and additional services. From time to time, the
managers and leaders of the company have developed and executed strategic approaches
which has led the firm towards the path of success (British Airways, 2017). Nevertheless,
there are many challenges being brought by the Covid-19 pandemic which were both
operational as well as strategic. The company is not emphasizing on becoming a sustainable
aviation brand. other than attaining the network growth, the brand is also planning to make
investment in most crucial areas and sustaining its financial performance in the longer period
of time.
PESTLE analysis
Political factor analysis
Political factors are playing a crucial role in the airline industry as the environment in
which the British Airways has a direct influence in the profit margins of the company. The
European Union legislations was the regulatory body of the airline industry earlier and has
affected most of the regulations such as traffic lights, safety regulations, licensing, operator
and personal licensing. The uncertainty being caused by Brexit has impacted the operation of
the brand including the areas such as immigration, border and customs laws. Further, because
of the political instability in the middle east, there has been rise in the prices of crude oil
which has influenced the prices of the brand as well. Currently, after the Russian invasion of
Ukraine, Russia has banned UK flights from utilizing Russian airspace (Gupta, Gupta and
Gupta, 2019).
Economic factor analysis
In the beginning of the year 2020, there has been rise in the number of cases of
Covid19 in the UK which has prompted lockdowns and travel restrictions. Due to this, there
has been significant financial losses of British Airways as economic activity was declined
significantly. There has been increase in the prices of fuel due to decreased passenger
revenue and currency hedging as the pound experienced a notable condemnation throughout
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the pandemic. Fluctuation in the prices of fuel, inflation and economic downturn directly
impacts the working of the company (Afonso and Sousa, 2020).
Social factor analysis
Social factors are required to be concentrated by each and every company operating in
the market. consumer choices, upcoming trends, preferences and demographic alteration in
the societies needs to be considered by British Airways as it directly affects their business
and profitability. People demands economic airfare and this has led the company to reduce
the legroom of the planes for offering cheaper tickets to passenger. Further, the business
strategy of the firm has also been impacted by the rising level of globalization. British
Airways used cross-cultural communication in their advertainment considering the global
village concept.
Technology factor analysis
In this rising level of technological advancement, the company is required to adapt
and execute technology. British Airways makes use of automation technology for collecting
post flight feedback from the passengers. This has helped the company is saving cost related
to collecting information (Glasson, Therivel and Chadwick, 2018). Furthermore, different
engineers are being working on development of fuel-efficient engines. In addition to this, the
company has also introduced websites where online bookings are made for facilitating
passengers. This has helped the company in having online presence and has also increased
the satisfaction level among the clients which in turn increases the brand loyalty.
Legal factor analysis
The company is being subject to different aviation concerned and nation specific
regulations encompassing discrimination, disability as well as fairness. Violation of any such
kind of laws might leads to heavy fines and even a ban of flights in case of worst situations.
All this can damage the image of the brand (Dosi and Galambos, 2021). There are different
laws present for preventing the data breach. For example, in the year 2018, a heavy fine of
£20 was imposed on British Airways for data breach charges. Because of this, the company
has to bear a heavy financial loss and has also earned a bad reputation and name in the
market.
Environmental factor analysis
For the purpose of attaining sustainable growth, environmental factors that influence
the business need not to be ignored. The company is required to acknowledge the issues
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related to global warming and is working on the same through mitigating carbon emission. It
is the first airline that has utilized sustainable fuel in its jets for decreasing carbon emission
by eighty percent. This has helped in increasing the brand image of the company. Further,
because of the strict and tighter rules regarding the environment has influenced the operating
cost of the company.
Business challenges and its implications
British Airways is quite large business organization and managing such company is a
daunting prospect even at the best of time, however due to present coronavirus pandemic, the
company has undergone its worst ever crisis and there are different challenges which the
company is facing post covid19. Firstly, because of the quarantine and lockdowns, there has
been restrictions on travel and this has significantly impacted the profit levels and revenue of
the company. Further, there has been job cuts due to travel down turn and this has impacted
the employees of the firm as they become jobless (Campbell and et.al., 2018). In addition to
this, the company is also coming across with the issues related to making radical decisions for
steering the giant firm to maximize the profit, staying in the market and maintaining its
leading position in the market. to counter all these threats and challenges, it is important on
the part of the firm to develop a strategic plan and must determine their strength and initiate
working on this. Cost cutting measures also needs to be performed by British Airways for
enabling the company to face the challenges positively and profitably. These decisions will
have both positive as well as negative implications on the different stakeholders of the
company (Bazerman and Moore, 2019).
CONCLUSION
Therefore, from the above evaluation it can be concluded that there are many external
environmental factors that impacts the functioning and effective working of British Airways.
It has been also found out that the current business environment and the sector in which the
company operate is very volatile and competitive due to which they are coming across with
different challenges. Effective strategies need to be adopted for overcoming these challenges.
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REFERENCES
Books and journals
Afonso, A. and Sousa, R.M., 2020. The macroeconomic effects of fiscal policy. Applied
Economics. 44(34). pp.4439-4454.
Alkhafaji, A.F., 2019. Strategic management: formulation, implementation, and control in a
dynamic environment. Development and Learning in Organizations: An International
Journal. 25(2).
Bazerman, M.H. and Moore, 2019. Judgment in managerial decision making. 7thed. New
York: John Wiley & Sons, Inc.
Campbell, A., Goold, M., Alexander, M. and Whitehead, J., 2018. Strategy for the Corporate
Level: Where to Invest, What to Cut Back and How to Grow Organisations with
Multiple Divisions. 2nded Jossey BassLtd, GB.
Cole, A.G., 2018. Strategic Management. Cengage Learning EMEA publications
Dosi, G. and Galambos, L., 2021. The Third Industrial Revolution in Global Business.
Cambridge: Cambridge University Press.
Glasson, J., Therivel, R. and Chadwick, A., 2018. Introduction to environmental impact
assessment. Routledge.
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 &Amp;
Business Laws. 1(1). pp.1–11.
Online references
British Airways. 2017. British Airways Invests to Boost Customer Experience for All.
[Online]. Available through:
<https://mediacentre.britishairways.com/pressrelease/details/86/2017-228/8421>.
[Accessed on 7thJuly 2022].
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