Analysis of British Airways' Revenue Management and Legal Issues

This report provides a comprehensive analysis of the travel and tourism business toolkit, focusing on revenue management, pricing strategies, and legal and ethical considerations, using British Airways as a case study. It defines revenue and yield management, explores the rationale and principles of revenue management, and investigates tools to maximize profit, including capacity utilization and discount allocation. The report also examines the impact of pricing strategies and covers financial statements, budget management, and statistical record-keeping. Furthermore, it addresses the potential impact of legal and ethical frameworks, including employment, company, and contract law, on business decision-making within the airline industry. The report concludes with an overview of the key takeaways and findings related to the travel and tourism industry and British Airways.

The travel and tourism
business toolkit

Table of Contents
INTRODUCTION...........................................................................................................................2
PART 1............................................................................................................................................2
Definition of revenue and yield management.............................................................................2
Rationale and principles of revenue management......................................................................2
Investigation of applying revenue management tools to maximize profit..................................3
Impact of pricing strategies on revenue management.................................................................4
PART 4............................................................................................................................................4
Managing budgets and maintaining statistical as well as financial records................................4
PART 2............................................................................................................................................7
Covered in PPT...........................................................................................................................7
PART 3............................................................................................................................................7
Potential impact of legal and ethical considerations on business ..............................................7
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11
1

INTRODUCTION
Travel and tourism industry is one of leading industry in UK. In order to operate the
business smoothly, the companies should manage their focus on finding the business toolkit
which can enhance their business productivity. In this report, British Airways Plc is taken into
consideration which is based in London with significant presence at Heathrow, Gatwick and
London city Airports. It is a founding member of one world alliance which serves in more than
1000 destinations over 150 countries. This report includes key principles of revenue management
in travel and tourism industry and management of human resource life cycle within the context
of an HR industry. Apart from that, this report also include potential impact of the legal and
ethical consideration on a travel and tourism business. In the end, the management of budget,
statistical and financial records is being taken into consideration.
PART 1
Definition of revenue and yield management
Revenue management is the art of managing the pre demand of customers and
optimizing inventory and price availability to increase the growth of revenue. This management
always deals in the demand of customer and sell the product or service accordingly. The
company will sell the product when price is higher but if price is not supposed to be higher the
company will sell the product in lower price in order to decrease the inventory cost.
Yield management is an art of settling the pricing strategy by anticipating,
understanding and influencing the behaviour of customer (Morrison, 2013). This management
help the company in maximizing the profit margin by servicing the customers according to their
demands.
Rationale and principles of revenue management
Revenue management is important for the organizations in order to manage the cost of
inventory. Apart from that, it also help the companies to identifying when the price of
commodity will be higher and lower. Accordingly, organizations can easily forecast the demand
of customers. This will help them in producing the services or products according to the
marketing conditions. In case of British Airways, the demand of customers in future can be
predicted by the management of company and thus increasing the profitability. The fare of
2

company can also be set according to the situation and hence can company can also prepare itself
to grab the opportunity.
Principles of revenue management
The principles of revenue management are stated as follows:
Market segmentation
In this principle, customers are divided as per their attributes and thus services of British
Airways supplies to them (Lamsfus and et, al, 2013). This will help the company in satisfying
the needs of customers and thus profit increases.
Historical demand and booking patterns
As per this principle, the demand history of customers is investigated so that their choice
of interest can be identified by British Airways. This will help the company in providing their
needs and thus profit increases.
Demand forecasting
Demand forecasting is the method through which future demand of customers cab be
identified. This principle help British Airways to predict the needs of customer before their
demand and thus providing services to them. The profit margin of company increases as
satisfying their demand.
Investigation of applying revenue management tools to maximize profit
Revenue management tools help the company in identifying the ways through revenue
can be maximized. Following are the tools of revenue management.
Capacity Utilization
Capacity utilization is the process through which maximum capacity of British Airways
can be utilized. If flight is having capacity of 90 passengers the company should consume all of
them for maximizing their profit (Mowforth, 2015). This can be done with the help of providing
overbooking facility to the customers in case of cancellation of reservation.
Discount allocation
This process is settled for the customers who are willing to travel frequently in British
Airways. The company should gather the data of such customers and can provide discount to
them. This strategy will be helpful in off season to encourage the customers to go some other
place. Hence increasing the revenue of company.
3

Impact of pricing strategies on revenue management
There are various types of pricing strategies used in Airline industry. One of the
commonly used pricing strategy is variable pricing. This pricing strategy differentiated the
customers on the basis of their economic conditions. The person having low budget can travel
into business class and the person who is willing to travel with luxury facility can travel with
economic class (Lamsfus, 2015). According to the principle of revenue management i.e. market
segmentation, the customers can be divided on the basis of their capability to pay for British
Airways. Since the customers who are eligible to pay for luxury travelling will surely increase
the revenue of company.
PART 4
Managing budgets and maintaining statistical as well as financial records
Financial statements types:
These statements are refers as a formal documents which shows the overall organisational
activities of business as well as the financial performance. It is utilise by lenders, creditors and
management for ascertain the business entity. Some of the documents that are included in this
statements are mentioned below: Income statement: It is a part of financial statements that explained the organisational
financial performance. It begin from sales after that less whole expenditure and then net
profit or loss will obtain. Public held company issued this type of statements. British
Airways use this statement for viewing the performance of company. Balance sheet: This is considered as a financial report which shows the assets, liabilities
and equity of the firm. It also facilitates a base for calculating rate of returns as well as
evaluating their capital structure. It helps British airways to know about their financial
status. Cash Flows statement: This is a statement which facilitates aggregate data about whole
inflows of cash that firm receives from their ongoing operations as well as sources of
external investments (Urry, 2016). Also, outflows of cash which are paid for the activities
and investments of business at a specified period. It is helpful for British Airways
company as through this they get knowledge regarding cash inflows and outflows.
4

 Statement of changes in equity: It is refers as a reconciliation of starting as well as
ending balances within firm's equity at specified period of time. This statement includes
the, effects changes in accounting policy, issues and redemption of share capital and so
on.
Budgets importance and value
Budget is considered as a computation of income as well as expenditures in a specified
duration of time. This is the preplan process of spending amount. It is essential for British
airways and its value useful to accomplish the firm's need. So, importance of budget are
explained below:
 Budget preparation is important for some emergencies such as any serious financial
turmoil, get laid off etc.
 It will assist to track all things in an systematized manner.
Financial statements and reports interpretation:
Financial statements of British Airways are interpreted. From income statement, profit
before tax is 1744 and after deducting the tax then amount is 1403 (Hung and et. al., 2012). so,
ratios are computed below:
Computation of Ratios
5

Quick ratio = Quick assets/Current liabilities
6

Compare the performance of finance against strategic objectives as well as targets
After analysing the ratio this is ascertained that there is target strategies for all every
items are different and its objectives to accomplish their needs. As per the strategic targets, In
2017 operation costs was $7915, and revenue $ 1226. Financial performance as per profit after
tax $1447, therefore it will be better as compare to 2016. after comparing both the year 2016 and
2017, it is seen that overall outcomes are improved in 2017. also, whole strategy are performing
in an appropriate manner and accomplish whole needs.
PART 2
Covered in PPT
PART 3
Potential impact of legal and ethical considerations on business
Potential impact of legal and ethical framework on British Airways
There are three set of rules which are followed by any organisation. These set of rules include
regulations, legislations and standards. Regulations are the set of rules or directives which are
formulated for a specific conduct (Morgan, 2012). These set of rules specifies the ways through
which legislations should be interpreted and applied. Regulations can be formulated by an
specific organization either statutory or illegitimate bodies. Legislations are the set of rules and
laws which are made by the government and passed by the parliament (Legislations. 2019).
These set of rules are helpful for the business organizations so as to perform the business
smoothly. Standards are the guidelines for manufacturing, processing and testing of materials.
These guidelines are formulated to follow set of guidelines to maintain the quality of product or
service. All the above discussed set of rules have a common relationship among themselves. A
hierarchy is followed by the organizations to follow legislations, regulations and standards.
Legislations are imposed by the government of UK on the British Airways and regulations are
followed by them to maintain the decorum of specific conduct. In order to provide services to
the customers, British Airways have to follow some of the standards which allow it to maintain
quality of services. There are many legislations which are followed by British Airways in UK.
These laws include:
 Civil Aviations Act, 1982: This act is used by the government of UK in order to
7

provide effective safety for the aviation industry (Oppewal, 2015). It includes insurance,
necessary equipments etc. All these factors are necessary fro British Airways to follow.
 Civil Aviation Authority Regulations, 1991: According to this act, the airline industry
has to register the aircraft, licensing of aerodromes, noise certification, etc. All these set
of rules are necessary for British Airways to follows, otherwise they will be penalised.
 Air carrier liability (No 2) Regulations 2009 – Statutory instrument No 41 2009.
 Operation of air services in the community regulations 2009 – Statuary instrument
no 41 2009
 Civil Aviation Act 2006
Impact of employment, company and contract law on the business decision-making in
Airline Industry.
Each and every employee while working in the organization requires to sign a contract. These
contracts are signed between the employee and the employer. In case of employment law, this
law is signed to specify the particular set of rules related to the rights of employee. An
employer cannot underpay an employee below specified in employment law. This would
penalise a huge financial penalty over the company (Hunt, 2014). In case of British Airways,
the employee of company such as pilot cannot be underpaid below specified in law. This would
lead to penalty of capital thus affected the decision-making. In case of contract law, the
employee and employer are bonded by a contract of tenure etc. An employee of British Airways
cannot be fired without completing its tenure. In case of company laws, there are many
legislations which are followed by British Airways and stated as below:
Minimum Wages Act, 1998: This act restricts the organizations to underpay the employees
below the standard of wages. This act forces to organisations to provide proper wages to the
employees according to their ability. In case of British Airways, the companies should pay at
least the minimum wages according to this act. This will help them in wining the faith of
employees. The management of British Airways can provide tough tasks to its employees thus
increasing the productivity also.
Contract Act, 1990: According to this act, the employee and employer are set to manage a
contract between themselves so as to sustain the employee to a specific period of time (Cohen,
2017). The employee of British Airways cannot be fired from the company before the ending of
tenure. In case of not following this law, the company can face legal issues and thus affecting
8

decision-making.
Impact of legislation, regulation and standards on the decision-making of British Airways.
There are many aspects of rules in performing business in Airlines industry. These set of rules
include legislation, regulations and standards. The impact of these set of rules on the decision-
making of British Airways is shown below:
Legislations: Legislations are the set of rules of government which has to be followed by
British Airways. These set of rules will help the company in running the business smoothly.
Apart from that, the legislations also help in protecting the rights of employees. The
management of British Airways can win faith of its employee by implementing such as laws.
Thus the productivity increases and has become easier for them to take effective decisions.
Regulations: these are formulated in order for a specific set of conduct. These conduct are
regulated by an organisation which has its full control over itself. In case of British Airways the
employees should follow these regulations in order to preserve from the penalties. This will
help it in increasing its productivity and performance and has become easier for the
management to take effective decision.
Standards: These are made by the organizations in order to maintain the quality of product or
services. With the help of following the standards in providing the services to customers,
British Airways can increase its productivity and performance (Banerjee, 2016). All these set of
standards also help the management to make the decision effectively.
Critical reflection of the potential impact of legislation, regulations and ethical principles.
Ethical principles are used to perform the duty of employee by saving its human morality.
These principles are used to perform the business operations smoothly. These principles also
help the company in taking potential decision in favour of the organization and employees also.
Although imposing the legislations over British Airways can increase the expenses of company
but still these legislations will help them in gaining faith of employees also (Shelley, 2015).
Thus will help in decision-making. In the end, regulations also impact over the decision-making
of company as they should be implemented within British Airways. These regulations will help
the company in following the legislation with an ease. Thus affecting the decision-making in a
positive way.
9

CONCLUSION
In this report, it can be concluded that revenue management is one of the key aspect of
any organization. Key principles of revenue management will help the company in increasing its
revenue. Management of HR life cycle will help the company in getting the efficient
management of Human resources. Apart from that, legal and ethical considerations will help the
company in running the business smoothly. In the end, management of records and statistical and
financial records will help the company in managing the capital.
10

REFERENCES
Books and Journals
Morrison, A. M., 2013. Marketing and managing tourism destinations. Routledge.
Lamsfus and et, al, 2013. Conceptualizing context in an intelligent mobile environment in travel
and tourism. In Information and communication technologies in tourism 2013 (pp. 1-
11). Springer, Berlin, Heidelberg.
Mowforth, M. and Munt, I., 2015. Tourism and sustainability: Development, globalisation and
new tourism in the third world. Routledge.
Lamsfus, C., Wang, D., Alzua-Sorzabal, A. and Xiang, Z., 2015. Going mobile: Defining context
for on-the-go travelers. Journal of Travel Research. 54(6). pp.691-701.
Urry, J., 2016. Mobilities: new perspectives on transport and society. Routledge.
Hung and et. al., 2012. Construct the destination image formation model of Macao: the case of
Taiwan tourists to Macao. Tourism and hospitality management. 18(1). pp.19-35.
Morgan, N., Hastings, E. and Pritchard, A., 2012. Developing a new DMO marketing evaluation
framework: The case of Visit Wales. Journal of Vacation Marketing. 18(1). pp.73-89.
Oppewal, H., Huybers, T. and Crouch, G. I., 2015. Tourist destination and experience choice: A
choice experimental analysis of decision sequence effects. Tourism Management. 48.
pp.467-476.
Hunt, C. and Stronza, A., 2014. Stage-based tourism models and resident attitudes towards
tourism in an emerging destination in the developing world. Journal of Sustainable
Tourism. 22(2). pp.279-298.
Cohen, S., 2017. Decline, renewal and the city in popular music culture: Beyond the Beatles.
Routledge.
Banerjee, S. and Chua, A. Y., 2016. In search of patterns among travellers' hotel ratings in
TripAdvisor. Tourism Management. 53. pp.125-131.
Shelley, L. and Bain, C., 2015. Human trafficking: Fighting the illicit economy with the
legitimate economy. Social Inclusion. 3(1). pp.140-144.
Online
Legislations. 2019. [Online]. Available
through:<https://dictionary.cambridge.org/dictionary/english/legislation>
11