Business Environment Analysis: Virgin Atlantic Airlines Report

This report provides a comprehensive analysis of the business environment affecting Virgin Atlantic Airlines. It begins by explaining two key macroeconomic factors, inflation and unemployment, and their impact on the airline's business outputs, including revenue and customer demand. The report then examines the influence of the UK's current economic growth rate on Virgin Atlantic, highlighting the challenges posed by the COVID-19 pandemic and its effects on international travel and fuel costs. Furthermore, it explores how government intervention methods, such as fiscal and monetary policies, and the furlough scheme, affect the airline's operations and employment rates. Finally, the report identifies current global challenges faced by Virgin Atlantic, such as the impact of the pandemic, labor shortages, and technological advancements, offering recommendations to overcome these obstacles and secure the airline's future. The report concludes with an overview of the recovery of the airline industry from the pandemic and the importance of government support and technological advancements.

BUSINESS
ENVIRONMENT

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Explain two macro- economic factors that your chosen business will need to consider and the
influences these could have on its business outputs....................................................................1
How will the UK current growth rate impact on your chosen business......................................2
How can the government current intervention methods affect your chosen business?..............3
Current global challenges face by Virgin Atlantic Airlines along with recommendations to
overcome from them...................................................................................................................4
CONCLUSION..........................................................................................................................6
REFERENCES................................................................................................................................8

INTRODUCTION
Business environment refers to the subtotal of all the external things that has been
considered by the firm or company which have the power to influence or affects the organization
as well as their operations (Cepel, 2019). This encompasses the set of conditions that are
economic, social, political and institutional in nature within which business operations have been
conducted. There are certain significant characteristics of the business environment according to
which it is dynamic, complex, uncertain, relatable, and multi-faceted and provides far-reaching
impacts.
This report will elaborate the concepts in detail by choosing Virgin Atlantic Airlines
which is headquartered in England. This study will elaborate two macro-economic factors, UK
current growth rate impacts over the chosen business along with government the latest
interventions. In addition to this the report will also highlight the latest global challenges facing
by the Virgin Atlantic Airlines along with certain recommendations in order to overcome from
them.
MAIN BODY
Explain two macro- economic factors that your chosen business will need to consider and the
influences these could have on its business outputs.
Macroeconomic factors within the Virgin Atlantic Airlines is a phenomenon or a type that
relates to the larger aspect of the economy rather than to a particular population. These are the
broad indicators of the financial growth or decline that affect the economy of the Virgin Atlantic
Airlines. Examples of macro-economic factors in a business organization are inflation, gross
domestic product (GDP), economic output, unemployment rates etc. Macro-economic issues
within the business organization are the terms or aspects that are influenced by the performance
of the nation’s overall economy (Krajnakova, Navickas, and Kontautienė, 2018). The two
macro-economic factors to be considered in the business that can influence the output of the
business in various aspects are inflation and unemployment rates.
Inflation-Inflation is an economic term in which the price of the products and services rise for a
period of time and this has many effects on the customer as well as on the business organization.
Inflation erodes the purchasing power because it decrease the value of the cash and encourages
the customers to spend on the products which are slower to lose value.it also lower the cost of
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borrowing and reduces unemployment. The term inflation affects the business outputs in many
ways like when the price increases, businesses experience increased raw materials,
manufacturing and overhead costs and due to this the business organization will have a decrease
in the sales and started losing customers. This also reduce the revenue of the business.
Customers pay more amount for the branded products as compared to the general products and
the brand power has been converted into the pricing power. Products who have higher rates of
their products have considerably more inelastic demand and making consumers more accepting
of the increase in the price(KİRACI,and Battal, 2018).
Unemployment rates-The unemployment rates impacts the business in various ways. When the
rates of the unemployment rises one can find more employees at the open position in the
organization. The negative impact in the rise of the unemployment rates is the lower consumer
spending rates. When the employees are laid off from their jobs and did not able to find a new
job for their career then they face with the issue of having less finance and due to which they
were not able to purchase the products and services. Therefore the business owners like to sell
less products and results in earning less profit. Unemployment is good for the hiring costs as it
can hurt the revenue of the company.so depending upon the industry the unemployment rates
effect the businesses on various level of macroeconomic levels.
How will the UK current growth rate impact on your chosen business
The Virgin Atlantic Airlines have been facing a lot of problems in the current situation as the
current growth rate of the UK is impacting the industry and the organization in a very big
manner. Many issues were faced by the virgin Atlantic Airlines like economic life cycle, gross
domestic product, and inflation and unemployment rates. Due to the COVID-19 pandemic
condition the airlines have to go through lot of struggle in their field as there were no travellers
during that time and as a result this decreases the GDP of the overall economy and this also
results in the generation of lower revenue.as there were less travellers during the COVID -19
pandemic time so the airlines face the problem of low international air travellers and this can
also be seen in the upcoming years as many of the countries have banned the international flights
for reducing the effects of corona virus from one person to another. Because of this issue faced
by the company, the overall economy and revenue of the Virgin Atlantic Airlines have been
impacted very badly and due to this the fuel charges, ticket rates have drastically increased for
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compensating the profit margin which means this increases the inflammation rate and therefore
decreases the ratio of travellers or the customer who used to travel with the Virgin Atlantic
Airlines (Piranti, 2021).
In consideration with this the airline industry is recovering gradually from the COVID-19
pandemic situation but the RPKs are still calculated to be only 40% of pre-crisis level in 2021.it
has been observed that the air cargo is going to be strong in 2022 as compared to 2019 by the
support of strong global trade. Proper vaccination have been given to the customers and some
governments will allow the passengers to relax the restrictions and support the global travel by
61% in 2022 as compared to 2019.The virgin atlantics airlines is expected to recover in all the
regions in 2022 and continued to receive the life support from the governments which is $243
billion since the beginning of the COVID-19 pandemic situation. The technology advancements
have also been faced by the airlines because of the insufficient funding (Fardnia, and et.al,
2020). Due to all these factors the current growth rate has been affected and this also impacts the
business output of the Virgin Atlantic Airlines.
How can the government current intervention methods affect your chosen business?
The government current intervention methods have been affecting the macro economic factors
of the Virgin Atlantic Airlines. For example the fiscal and the monetary policies, furlough
scheme etc. The government policies can be expressed by its borrowing and spending activities.
The monetary policy refers to the activities of the central bank that are directed towards
influencing the quantity of money and credit in an economy. But in contrast the fiscal policy
have been referred to the government’s decisions about the taxation and spending. Both these
are used for regulating the economic activities that are happening in the business organization.
The aim of both monetary and fiscal policy is used for creating an economic environment where
the growth is stable and positive and inflation is also table and low(Sobieralski, 2021). The
monetary policy adversely effects the employment rates in the Virgin Atlantic Airlines as due to
this there is a leash on the spending and large incentive to save so the demand for the airlines
goes down.in the fiscal policy the government reduces the taxes and increases the spending, the
income and the gross domestic product (GDP) goes up in creating greater demand for the
services provided by the virgin Atlantic airlines and therefore improve the employment rates.
Also if the government give the cash compensation payment benefits to the airline industry, also
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by providing loan payments, loan guarantees and delay in the tax payments then there will be a
sustainable environment and improvement in the health of the airline industry and this will also
help the Virgin Atlantic Airlines in improving the employment rates. These government
regulation have been provided for federal oversight on the aircraft certification, airman
certification and also for the development of the airlines. Government policies are affecting the
airlines as the fiscal policies like taxes on the airlines tickets will increase the prices of the
consumers and that affects the demand. Customer protection legislation have been required for
the airlines to limit the tarmac time during the delays in the weather increases the cancellation
rate of the flights (Maneenop, and Kotcharin, 2020). However the monetary policies helps in
determining the interest rates and an airline’s ability of buying the aircraft. On the other hand the
Furlough scheme is a type of temporary layoff, an involuntary leave that have given to the
employees without paying them for specified period of time.it is a type of temporary halts given
to the employees and employees get their job but do not get paid for working .the benefit of this
furlough scheme is the organization can call back the trained employees and do not need to hire
new employees and train them again.UK trade association Airlines have said that the members
have paid pre-taxes losses which is running into billions of pounds and more than 30000 jobs
cuts have been announced by the airlines during the COVID -19 pandemic situation . So for this
the government have extent the furlough scheme for airline industry workers in order to protect
the jobs and employment over the winter season (Budd, Ison, and Adrienne, 2020).
-.
Current global challenges face by Virgin Atlantic Airlines along with recommendations to
overcome from them
Virgin Atlantic Airlines are the ones who work in order to secure its future with the help
of announcing plans for severe impacts that has been faced due to Covid-19 pandemic
conditions. Due to pandemic situations, the airlines have to face a lot of disasters which not only
affects human lives but also negatively impacting the means through which they can be
sustainable. There are few major challenges that have been faced by the company which
includes:
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 Less availability of airlines: Due to varied lock downs and severe bankruptcy has
bought commercial air travel to unfit for people as there are fewer airlines who have the
potential challenges to face within their businesses. The Virgin Atlantic Airlines also
faces a lot of challenges in order to make their airlines available for passengers as they
are already restricted for tours and travel (Sebastian and Louis, 2021). This specific
period creates problems for the company by enhancing fluctuations in demand and
supply with rising dependence over the reoccurrence of the pandemic condition.
 Shortage of labour: Due to lack of airport revenue brought considerable lay-offs, but to
pandemic conditions, the Virgin Atlantic Airlines are unable to retain most of their
important personnel. Due to varied job losses, the company also have to face financial
complexity as well as economic instability. Because of reduced level of capacity and
enhanced travel restrictions the company have to face shortage of labour workforce.
 Low international air travel: Reduction in overseas air travel that had been faced by the
Virgin Atlantic Airlines was one of the worst impacts of Covid 19. In addition to this,
few experts elaborate this that it also provides major impacts from upcoming few years
such as until 2024. It is all because of that various countries banned international flights
in and out in order to reduce the spread of corona virus due to various other small airline
companies have to shut down operations subsequently.
 Technological advancements: Apart from Covid-19, there are various other challenges
faced by company which occurs due to technological advancements or developments.
This might include reasons that has been arises because of insufficient funding,
upgrading crucial operations of the Virgin Atlantic Airlines.
 Global economy: The state of the world economy also becomes one of the challenge for
the Virgin Atlantic Airlines. Because of economic recession, the company have to face
drastic implications as the global economy collapse, the travel and fuel charges increases.
On the other hand, the number of passengers decreases. The impact that has been
occurred over the tourism sector is also one of the key economic factor that affects the
company in crucial manner.
In order to get rid of various challenges that had been faced by the Virgin Atlantic
Airlines especially at the time of Covid-19 condition, it has been recommended that the
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company launched a restructuring plan in order to address all the relevant issues that requires
huge amount of attention by the company. Moreover, the company requires adopting previous
crisis that had been generated during the 9/11 as well as Global Financial Crisis (Dobre, 2021).
The company have to take decisive actions in order to reduce the costs that has been incurred
into the operations along with preserve cash as well as protect various jobs as possible. The
company requires to obtain additional external funding for the firm. Furthermore, the Virgin
Atlantic Airlines also have to anticipate different opportunities as well as challenges that has
been faced by the company along with take actions to address them appropriately, facilitate
similar amount of discussions at airline as well as at alliance level, partner with government to
lay the ground work for sustainable amount of air connectivity growth, the evolution of
customer protection issues, creation of sufficient amount of pipelines of pilots in order to meet
and fulfil demand and supply, etc. In addition to this, there are various other recommendation
that also enables the Virgin Atlantic Airlines to reduce the challenges that has been faced by
them due to climatic changes, thus, the company adopts practices that are highly considered
during the time of working hard to combat wildlife trafficking, cut down noise as well as
manage wastage of the resources in fruitful and responsible manner. This helps them to improve
their sustainability and also affects their brand image which also enables them to reduce negative
implications over their business operations.
CONCLUSION
From the above report, it has been concluded that by identifying business environment
into most appropriate and timely manner, the companies are able to provide varied opportunities
along with varied opportunities in order to improve the performance of the businesses. Early
identification assist the company to grab specified opportunity instead of losing them over their
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competitors. In the above illustrated report, Virgin Atlantic Airline management regarding their
proper identification of things related to the business environment along with various challenges
faced by them had been explained in detailed manner along with various recommendations to
get rid of them.
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REFERENCES
Books and Journals
Cepel, M., 2019. Social and cultural factors and their impact on the quality of business.
Krajnakova, E., Navickas, V. and Kontautienė, R., 2018. Effect of macroeconomic business
environment on the development of corporate social responsibility in Baltic Countries
and Slovakia. Oeconomia Copernicana, 9(3), pp.477-492.
KİRACI, K. and Battal, Ü., 2018. Macroeconomic determinants of air transportation: A VAR
analysis on Turkey. Gaziantep University Journal of Social Sciences, 17(4), pp.1536-
1557.
Piranti, M., 2021. The Impact of Fuel Price Fluctuation And Macroeconomic Variables To
Airlines Performance. Turkish Journal of Computer and Mathematics Education
(TURCOMAT), 12(3), pp.5486-5494.
Fardnia, P., and et.al, 2020. Financial performance and safety in the aviation
industry. International Journal of Managerial Finance.
Sobieralski, J.B., 2021. The impact of central bank policy on transport asset prices: Evidence
from the US airline industry. Research in Transportation Business & Management, 41,
p.100649.
Maneenop, S. and Kotcharin, S., 2020. The impacts of COVID-19 on the global airline industry:
An event study approach. Journal of air transport management, 89, p.101920.
Budd, L., Ison, S. and Adrienne, N., 2020. European airline response to the COVID-19
pandemic–Contraction, consolidation and future considerations for airline business and
management. Research in Transportation Business & Management, 37, p.100578.
Dobre, C., 2021. Aviation world rethinking strategies after COVID-19 crises. INCAS
Bulletin, 13(1), pp.247-256.
Sebastian, R.M. and Louis, J., 2021. Understanding waste management at airports: A study on
current practices and challenges based on literature review. Renewable and Sustainable
Energy Reviews, 147, p.111229.
environment in the SME segment.
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