Assessment of Macro-Economic Factors Influencing Virgin Atlantic

This report assesses the impact of macro-economic factors on Virgin Atlantic's business environment. It examines the influence of employment rates and fiscal/monetary policy, including inflation, on the airline's outputs. The report further analyzes how the UK's current growth rate, particularly the drastic reduction in passenger numbers due to the COVID-19 pandemic, affects Virgin Atlantic. Government intervention methods, such as financial support and regulatory adjustments, are also evaluated for their effects on the airline. Finally, the report identifies current global challenges, primarily the COVID-19 crisis, and offers recommendations for Virgin Atlantic to overcome these challenges, emphasizing the need for demand stimulation and business safeguarding. Desklib provides comprehensive study tools and resources for students seeking similar assignment solutions.

Business Environment
Assessment 2
Influences of macro-economic activity
Virgin Atlantic
1

2

1. Introduction
Business environment is undertaken as the combination of external as well as internal aspects
which influences a firm’s operating conditions. Moreover, this can incorporate factors like
suppliers & customers; their owners and rivalry; developments into technology; government and
regulations practices; economical and societal trends (Akhmad and et. al., 2019). Additionally, it
is closely related with general business cycle that opposed to individual business sector
performance. As per the scenario, the undertaken company for this report is Virgin group which
is founded by the Sir Richard Branson. It owns a few businesses that ranges from Virgin Atlantic
Airlines to Virgin media. As it is indeed of cash during global pandemic and British government
has bought range of measures which may aids business at difficult times. For this, Virgin
Atlantic is chosen which a well-known British airline is and having headquarters is in Crawley,
England. The topics which are going to be discussed in this report are macro –economic factors
that influence their business outputs and UK current growth rate that have impact upon business.
Apart from this, the government current intervention methods impact, and recent global
challenges faced by selected business and recommendations are also provided in respect of
selected business.
2. Explanation of two macro- economic factors that Virgin Atlantic will need
to consider and the influences it could have on its business outputs.
Macro - economics is considered as a branch of economics which researches how a whole
economy, market or other system which performs upon huge scale (Chaouk, Pagliari and Moxon,
2020). The macro – economic factor is undertaken as influential fiscal, geopolitical, or natural
event which widely impacts a national or regional economy. This tends to affect board swaths of
population instead of some persons. As there are various macro – economic factor such as
unemployment, inflation and many more that influences the business output. So, two of them are
discussed below in context of Virgin Atlantic:
3

Employment
The unemployment rate of country provides an indication of economical health into nation.
Moreover, a higher rate of employment versus those unemployed represents stronger economy.
In addition to this, when huge numbers of citizens are employed and its spending enhances
amount of money into circulation as well as boost the economy (Dellink, Van der Mensbrugghe
and Saveyn, 2020). The Aircraft to reduce out up to a few, one hundred fifty positions just as
near London Gatwick activities as these scales returned to secure business. In regard of Virgin
Atlantic, it prepares to cut almost a third of their 10, 000 personnel as well as closes their London
Gatwick practices as scales of airline back to sustain into corona-virus crisis. Furthermore, their
plan for reshaping. The enterprise comes after fierce week for flying region alongside huge range
of organized positions what cut at British Airways and others.
However, Virgin Atlantic would exit Gatwick airport in which this have been based for previous
35 years as well as shift leisure flying to London Heathrow and keep their Base at Manchester air
terminal. Alongside this, the move might come as additional blow at air terminal after British
Airways that flagged this may likewise undergo brunt in their personal cuts of employments
warn their Gatwick operation cannot return following crisis of corona virus.
Fiscal and monetary policy
Monetary policy is essentially shaped through huge financial institutions into both private as well
as public sectors. Moreover, large banks and government institutions formulate decision which
affects the inflation rate, interest rates and federal budgets. Also, it guides the fund flow into
circulation in an economy. The economy of United Kingdom has experienced a wave of
economic challenges over last few years. Moreover, economy was pessimistically impacted and
international economic recession. Additionally, the recession led towards effective reduction into
demand level with economy. In addition to this, the economy of United Kingdom slipped into
recession, so this also impacting their economic growth. Beside this, the prevailing economic
fluctuations have negative impacts upon the entity’s performance within various economical
industries. The regulators as well as other public authorities has been announcing essential new
4

initiatives as well as facilitating vital rules clarifications for responding to COVID-19 pandemic
as well s their affects upon financial service sectors.
Inflation
Inflation is undertaken as the minimisation of buying power of given currency upon times.
Moreover, it intent to evaluate whole impact of change in price for diversified set of good &
services as well as permit for single value representation of enhancement into products &
service’s price level into economy over time. In addition to this, the annual inflation rate within
UK is enhanced up to three.2% in yr 2021, the most noteworthy in view that March 2012, from 2
% into July simply as extra than marketplace figures of 2. Nine %. Moreover, a decrease base
effect from earlier 12 months had gigantic effect as in part of restricted eatery simply as bistro
cost in August 2020 those results from authorities’ Eat out for supporting plan and to less degree,
minimisation into Value brought price all over comparative enterprise. Likewise, the important
thing vertical anxiety got here from leisure costs simply as culture (2.4% VS 0.7% in month of
July), transport (7. Eight% as opposed to 7.7%) and others. The month-to-month rate improved
to 0.7% m maximum noteworthy inner three years.
3. How will the UK current growth rate impact on the Virgin Atlantic
Within year 2020, Virgin Atlantic Airways experiences a drastic reduction into passengers’
number that amounted only to 1.14 million. Moreover, it presented a minimisation of around
80% from 5.6 million passengers transported into previous year. Moreover, it is undertaken as
British airline having headquarters that is in year Crawley, United Kingdom which was founded
in year. In addition to this, it's miles more element – possessed via Virgin Group this is based
totally at Heathrow Airport. Into year 2019, Virgin Atlantic applied around 8, 357 humans
simply as brought simply interior 3 billion British pounds in profits. Furthermore, the provider
occurred a 48.5 million British pound losses within those similar year.
Impact of COVID-19 upon European aviation
5

The huge minimisation into Passenger numbers as well a monetary performance of various
airlines that was caused through emergence of COVID-19 pandemic. Internationally, several
countries executed many regulations as well as restrictions in respect to travel that intent in
curbing spread of virus (Gaur, Kant and Verma, 2020). As an outcome, enterprise aircrafts
internal Europe introduced as ordinary deficits that sum as 34. Five billion U.S. Dollars in 12
months 2020. On figure 1 is shows Number of passengers uplifted by Virgin Atlantic Airways
Ltd in the United Kingdom (UK) from 2008 to 2020.
Figure 1: Number of passengers uplifted by Virgin Atlantic Airways Ltd in the United Kingdom
(UK) from 2008 to 2020 Source: (Statista, 2020)
4. How can the government current intervention methods affect the Virgin
Atlantic?
Government intervention is undertaken as the regulatory actions which are consider through
government that seek to modify the decision formulated by person, groups, and firms regarding
6

economical as well as social matters. Within, aviation sector, previous government policy
interventions had various rationales. Moreover, most intercessions have plane manufacturers.
Also, these elements are for the maximum element uncovered to research by intending simply as
essential economies scale, which could motive beneath-hobby into innovation, developments or
assembling administrations and thus, legitimize the assist of public (Gupta, 2019). Likewise,
public arrangements were additionally planned to co-ordinate a board cluster of carriers simply
as a few capacities and guarantee aircraft well-being. At gift, the maker of aircraft has
additionally been the goal of inexperienced modern-day preparations, searching for dashing up
shift closer to decrease carbon plane. Moreover, apart from supporting plane makers, authorities
have additionally mediated for preserving employment into huge air transport firms. In response
to COVID- 19 pandemic crisis, various industry or entity particular measures so far have
targeted air transport. In August 2020, governments have facilitated around USD 160 billion
helps to airlines (OECD, 2020). In around 2-3 rd of those support includes of direct assistance
(Loans, cash injection, subsidies, and others), whereas first quarter undertakes the kind of wages
subsidies. Interventions are usually undertaken as three types that are:
 Untargeted support schemes, formulated to facilitate liquidity to entity irrespective of its
practices, involving the extensions of existent job retention schemes or introduction of
new ones.
 Sectoral schemes (example, airlines performing into UK or overall aviation sector into
France) along with those assisting airline staff (such as payroll support programme).
 Entity specific support measures, incorporating whole or partial nationalisation, executed
through few countries sue to presence of huge firms within air transport industry.
Figure 2 shows Government support to airlines in the aftermath of the COVID-19 crisis.
7

Figure 2: Government support to airlines in the aftermath of the COVID-19 crisis.
Source: (OECD, 2020)
Due to COVID-19 pandemic crisis within aviation industry, it has been represented that UK
government executes support measures which intended particularly at aviation industry for
stimulating demand as well as safeguard the businesses (Nofitasari and Kurniasih, 2020).
Additionally, the UK government as well as devolved administrations introduce twelve months
business rate reliefs for airlines as well as air terminals and half year impermanent suspension of
air Passenger duty instalments. In addition to this, the UK government have facilitated
unprecedented packages of measures for assisting the respective country economy. This measure
incorporates Bank of England conspire for detail to enhance capital, opportunity to pay
adaptabilities alongside charge payments, monetary backings for employees and VAT deferrals.
 Additionally, the Civil Aviation Authority (CAA) have done with vendors simply as air
terminals to deliver adaptability into administrative machine to aids in managing as well
as mitigating COVID-19 affects in which it is effective.
 Behind those various entities are obtaining guide from set up market additives, as existent
traders, financial institution loaning simply as enterprise finance. Also, various aviation
businesses like Virgin Atlantic airlines have undertaken benefits of Government’s
8

corporate finance assisting involving the COVID Corporate financing facility (CCFF) as
well as corona virus business interruption loan scheme (CBILS).
 Entity holds on including with businesses all around the international to apprehend the
impact of Government's cross economy guide conspires just as any difficulties the
enterprise may be going through into getting to the ones (Venkatamuni Reddy, Nayak
and Nagendra, 2019).
 Furthermore, the Air tourist responsibility (APD) is pushed via HM depository. The
office for delivery and HM Treasury is such as intently within sector, by expert steering
team for understanding its evaluation of outlooks for respective industry as well as
implication of any industry particular assistance measures.
 The UK government have facilitated unprecedented measures packages to assists the
economy of economy. Also, the measures are open to ventures all over the aviation
industry as well as incorporate a Bank of England scheme for company like Virgin
Atlantic airline to maximise capital, time to pay flexibilities along with tax bills,
monetary supports for staff and VAT deferrals. Within exceptional situations, in which
viable firm have exhausted whole options and their failure would disproportionately harm
economy. Also, government is developed to enter discussions with individual’s firms
looking bespoke support as last resort. Any interventions would require to highlights
value for money for taxpayers. They would continue to involve with stakeholders all over
the industry, incorporating regional airports to acknowledge the circumstances they go
through (Parliament, 2020).
5. What are the current global challenges facing by the Virgin Atlantic with
recommendations on how to overcome them in this current time?
The key current global challenge faced by airline business is COVID-19 pandemic crisis.
Moreover, the businesses across sector all over the arena are confronting emergency within the
midst of the global COVID-19 pandemic (Sargu, 2020). In addition to this, the airline sector is
initiating at same fate with essential reduction into the number of passengers. Additionally, the
9

revenue losses value of USD252 billion have been estimated in year 2020. Furthermore, to
prevent sector from collapsing, government support worth USD200 is being looked at..
Additionally, as exceeded through European Securities simply as enterprise sectors authority and
other global controllers, there may be a squeezing need for cantering upon straightforwardness
inner cash associated saying just as market exposures (Tleuberdinova and et. al., 2021). In
addition to this, airlines are in needs to effectively evaluate how fleet grounds, travel bans,
uncertainties of economy as well as market volatility can impact accounting conclusions. Those
considerations can incorporate modification into deterioration techniques, modification of
forthcoming compensation suspicions into existent liabilities, impacts of augmentation into
unwaveringness focuses lapse dates, re-evaluation of anticipated fuel utilization just as gas
supported volumes, re-assessment of existent operating leases (instalment plans, preference to
shop for and others), change of plane maintenance as well as overhauling cost, among others
(Sibirskaya and et. al., 2019).
10

However, the international air transport industry represents that airline are going through the
losses of $ 84.3 billion within year 2020. In addition to this, the economic consequences of
COVID-19 had been bigger to flight place. Also, the International Air Transport Association
(IATA) introduced hobby of traveller internal April at their lower plunging by using 94.3% in
contrast with April 2019. Worldwide Air Transport Association (IATA) before everything starts
that aircraft tourist salaries should drop down via $314 billion in year 2020 because of COVID-
19, a downfall of 55% in comparison to year 2019. In respect of regions, it has been analysed
that, Asia pacific have viewed that huge net profitability affect. Also, the Africa have highest
reduction into demand of passenger with desires for this region to experiences worse impacts in
upcoming months. Figure 3 shows how COVID-19 has affected the aviation industry and its
approach to risk. The forecasts of IATA for regional demands, capacity and affect upon net
profitability for 2021 are summarises into below mention table:
Figure 3 How COVID-19 has affected the aviation industry and its approach to risk.
11

Source: (Willis Towers Watson, 2020)
Rather the downturn, figures represent that regular flights totals rose around 30% among lower
point upon April and May 2020. In addition to this, it is fundamentally into domestic practices as
well as an outcome is already much lower base (five.7% of 2019 hobby). Also, the plane
directors might wish perfectly tuned healing designs that backings via outside offices for
securely recapture practical rhythm just as recharge coins saves. The huge challenge for sector
would incorporate competent staff required to assists practices. Moreover, the pandemic
outcomes into international travel shutdown that left various forced for undertaking leave as well
as others without jobs (Susanti and Sholeh, 2020). In respect of all these challenges, some
recommendations are provided to Airline Atlantic Airline are discussed below:
They require adopting new safety as well as risking management measures in conjunction with
operators. Also, it must comply safety restarting aviation-ACI as well as IATA joint approach
released by joint publications along with Airports council International as well as IATA
(Tleuberdinova and et. al., 2021).
6. Conclusion
As per the above report, it has been concluded that Business environment is undertaken as the
combination of external as well as internal aspects which influences a firm’s operating
conditions. Moreover, this can incorporate factors like suppliers & customers; their owners and
rivalry; developments into technology; government and regulations practices; economical and
societal trends. Government intervention is undertaken as the regulatory actions which are
consider through government that seek to modify the decision formulated by person, groups, and
firms regarding economical as well as social matters. Apart from this, the huge challenge for
sector would incorporate competent staff required to assists practices
12

7. References
Akhmad, A. and et. al., 2019. The impact of fuel oil price fluctuations on Indonesia’s macro-
economic condition. International Journal of Energy Economics and Policy, 9(2), p.277.
Chaouk, M., Pagliari, R. and Moxon, R., 2020. The impact of national macro-environment
exogenous variables on airport efficiency. Journal of Air Transport Management, 82,
p.101740.
Dellink, R., Van der Mensbrugghe, D. and Saveyn, B., 2020. Shaping baseline scenarios of
economic activity with CGE models: introduction to the special issue. Journal of Global
Economic Analysis, 5(1), pp.1-27.
Gaur, M., Kant, R. and Verma, N.M.P., 2020. Macro-Economic Determinants of High
Technology Exports. European Journal of Business and Management Research, 5(5).
Gupta, N.O., 2019. A Study of Impact of Selected Macro Economic Variables on
Nifty. IBMRD's Journal of Management & Research, 8(1), pp.18-27.
Nofitasari, O. and Kurniasih, A., 2020. The Influences of Company's Internal Factors and
Macroeconomics against the Stock Return from the Construction, Property and Real
Estate Sectors Registered on Indonesia Stock Exchange.
Sargu, L., 2020. The influence of atypical situations at macroeconomic level in Republic of
Moldova: case study. Cogito-Multidisciplinary research Journal, (1), pp.160-178.
Sibirskaya, E. and et. al., 2019. Remote education vs traditional education based on effectiveness
at the micro level and its connection to the level of development of macro-economic
systems. International journal of educational management.
Susanti, E. and Sholeh, M., 2020. Indonesia Economic Growth Determinant: The Impact of
Macro Economic Variables and International Trade. International Journal of Economics
and Financial Issues, 10(5), p.70.
Tleuberdinova, A., and et. al., 2021. Macro-economic Factors Influencing Tourism
Entrepreneurship: The Case of Kazakhstan. The Journal of Entrepreneurship, 30(1),
pp.179-209.
13

Venkatamuni Reddy, R., Nayak, R. and Nagendra, S., 2019. Impact of macro-Economic factors
on indian stock market-A research of BSE sectoral indices. International Journal of
Recent Technology and Engineering, 8(2 Special Issue 7), p.597.
Yilmaz, b., özkurt, f.y.ö. and selcuk, s.k., The Impact of Macro-Economic Drivers in Housing
Markets: The US Case. İzmir İktisat Dergisi, 36(2), pp.259-273.
OECD. (2020). COVID-19 and the aviation industry: Impact and policy responses. [online]
Available at: https://www.oecd.org/coronavirus/policy-responses/covid-19-and-the-aviation-
industry-impact-and-policy-responses-26d521c1/ [Accessed 22 Oct. 2021].
Parliament.uk. (2020). Readying the NHS and social care for the COVID-19 peak - Public
Accounts Committee - House of Commons. [online] Available at:
https://publications.parliament.uk/pa/cm5801/cmselect/cmpubacc/405/40502.htm [Accessed 22
Oct. 2021].
Statista. (2020). Virgin Atlantic’s UK passenger numbers 2008-2020 | Statista. [online]
Available at: https://www.statista.com/statistics/309373/virgin-atlantics-uk-passenger-numbers/
[Accessed 22 Oct. 2021].
Willis Towers Watson. (2020). How COVID-19 has affected the aviation industry and its
approach to risk. [online] Available at:
https://www.willistowerswatson.com/en-GB/Insights/2020/06/how-covid-19-has-affected-the-
aviation-industry [Accessed 22 Oct. 2021].
14