PEST stands for Political Economic Social cultural and Technological factors that are affecting or influencing the business environment. The SWOT half of the analysis deals with the company’s inner workings including its strengths and weaknesses. In the final stage of the SWOT/PEST Analysis, the two analyses are combined in order to get an overall picture of the threats the company faces and how to deal with them and also in order to bring into focus the possible opportunities for the company so that they may be taken advantage of. In other words SWOT looks at the business itself while PEST looks at the environment/market.
In this case a SWOT/PEST analysis of British Airways, an airline company is going to be carried out.
British Airways is the UK’s largest airline in relation to the number of destinations it covers worldwide and also the large number of aeroplanes that are owed by the company. It was established in 1971 in order to take over control of two state-owned airlines, British Overseas Airways Corporation (BOAC) and British European Airways Corporation (BEA). The airline is mainly based at Heathrow airport in London but also has a base at London’s Gatwick airport. The airliner carries mostly passengers within Europe and also overseas (flies to over 150 destinations covering all 6 continents) but also carries cargo and mail. It also has the largest fleet of long haul carriers in the world with approximately around 60 Boeing 747-400 aircrafts.
In this essay we will first have a look at the PEST analysis of British airway in order to determine what kind of environment or market BA has been working in and how it has managed to stay ahead of most of its competition.
This refers to the effect of laws, taxes and political decisions on the way a business is run. As of this year the political environment in the UK was unstable because of the coalition government and the major spending cuts that are to be made in order to make savings and reduce on the national debt. This might affect BA in a way that the planned expansion of Heathrow airport which would have brought in more revenue with increased number of flights might not go ahead due to the budget cuts.
European laws have hit BA hard in the recent past. In April this year the Iceland volcano crisis caused flights into/around and out of Europe to be grounded as a result of the volcano ash affecting the plane’s engines. As a result many passengers were stuck on holiday while trying to come home and had to spend more money on accommodation. European laws dictate that the airline companies have to refund the money spent by the passengers. It was estimated that BA lost £20million daily during this period.
A recent increase in flight taxes means that passengers will have to pay higher taxes when leaving England depending on your destination but most passenger duty is expected to raise by up to 50% this affects the business in the sense that less people will be able to afford family holidays as a result of the increased air fare.
Further more on 9th November this year (a few weeks ago) BA along with 10 other airlines were fined by the European commission for fixing air cargo prices between 1999 and 2006. The 11 airlines colluded in keeping the price per kg for all cargo at a flat rate for this whole period of time. As a result of an investigation into this by the European commission BA were fined 104 million Euros (BBC news 9th November, 2010)
The economy has had a major negative effect on the numbers of BA passengers of late. Because of the credit crunch less and less people have been taking overseas holidays meaning that airline passenger numbers are down.
BA mainly targets people going away on holiday be it in Europe or anywhere else around the world. BA flies to all the 6inhabitted continents and has the largest fleet of long haul Boeing planes to reflect their commitment to this. Compared to many airlines which have only mainly local or long haul flights BA does both and has managed to establish a good reputation for itself and is commonly regarded as a friendly safe airline. For domestic flights within Europe BA has managed to stay in competition with budget airlines like easy-jet or Ryan air by charging more for their flights but giving a better quality experience to its customers seeing as budget flights don’t usually serve meals and seating arrangements are uncomfortable.
BA has managed to increase its customer satisfaction leaps and bounds with the help of technology. Self service check-in machines at Heathrow airports terminal 5 mean passengers do not have to queue up for several minutes if not hours in order to get their boarding passes and to check into the flight. It makes checking in an easy fast process and all the passenger has to do is drop off their bags.
The airlines website BA.com offers passengers and potential clients a lot of opportunities. Passengers can check in online while potential clients can easily browse the site for cheap tickets and deals. The website also has the added advantage of cutting travel agents out of the equation saving the airline money and also this means passengers do not get a false image of the company in cases where the agent is unprofessional.
British airways also has a number of call centres which people can call in order to book, amend and buy tickets for travel. These call centres also assist passengers with any problems or complaints. This feedback helps the company better its service in order to keep the clients happy and coming back.
Now that the PEST analysis has looked at the external factors affecting the business, it’s time to look within the business in order to determine what affects in from the inside. This is the SWOT analysis.
SWOT stands for Strengths, Weaknesses, Opportunities and Threats and these are the four aspects of the business we will be analysing.
BA has managed to establish itself as the third biggest airline in the world with largest fleet of long haul aircraft in the world. In the United Kingdom it has managed to dominate the market for a number of years before easy-jet took over as the airline with the most passengers in 2008. Despite this, BA carries out a number of long haul flights (which easy-jet does not do) to various parts of the world and many different capital cities like Abuja, Paris, Sydney and New York to mention but a few as in flies to every single continent.
BA is well known worldwide for its great hospitality and this is as a result of its friendly cabin crew. This reputation keeps the customers happy and coming back
British airways have been having ongoing problems with its cabin crew as of recent. There have been several strikes which have led to flight cancellation and have cost the business a lot of money. The union which represents the cabin crew, unite and BA have failed to come to understandings several times costing the airline and damaging its reputation due to strikes.
There is a big opportunity for BA to introduce a series of cheap ‘budget’ flights within the UK and Europe. With this introduction BA can compete against easy-jet for this market as they offer a much better service and have a better reputation. The passengers they have lost to easy jet due to higher fares would quite easily return.
The major threats to BA at the moment are the poor economy, strikes from the cabin crew and competition from easy-jet. The poor economy means that there are fewer passengers and therefore planes are under filled leading to losses.
Competition in domestic flights has seen easy-jet take over the lead in UK when it comes to passenger number as a result of their cheap flights and the cabin crew strikes are damaging the good reputation the company has always had.
In conclusion, although BA has been having trouble with their cabin crew of late they have managed to operate a reasonable service during strikes and resolve the differences with their cabin crew. Despite easy-jet taking over when it comes to passenger number BA still manages to fly 34million people in the Europe every year making sure it turns over a handsome profit.
The economy though it affected passenger numbers for a while is getting back to normal and BA managed to turn over a reasonable profit during that time and keep going. If it keeps running this way British Airways will be operating for years to come.