British Airways-Airline Portfolio

British Airways-Airline Portfolio

1.0       Organization introduction

Turning to Baysura (2001) one finds that the inception of the airline was in the year 1971, following a merger between British European Airline and British Airline Corporation. Formation of the carrier happened after the establishment of British Airways board in 1971 under the civil aviation act. According to Berner (2010), the Corporation is the largest airline globally, in terms of fleet size and passengers. The carrier has its core operation base at Heathrow Airport in London, considered the hub of international flight operations in the entire world. The corporation has established a global flight network through business partners such as America Airlines and Qantas Australia. British airline serves as the sole global network carrier, transporting approximately 36 million passengers yearly. The organization avails flight services to close to 268 destinations and operates in 97 countries globally. The work of Berner (2010) reveals that today the airline comprises of 282 air crafts, the largest aircraft size in Europe. The fleet includes 66 Airbus A319/320/321s, 33 Boeing 737s, 57 Boeing 777s, 13 Boeing 757s, 57 Boeing 747s, 43 Boeing 777s, 21 Boeing 767s and 49 other smaller air crafts used for local business purposes. Keith Williams leads the corporation as the airline CEO. The illustrations depict some of the aircrafts owned by British Airways.

 

2.0 British Airways financial performance and economic standing

International Consolidated Airlines Group S.A (IAG) reported that as at the end of 2014 fiscal year the airline posted one of the best financial results. The airways revenue rose by 2.6 per cent to an impressive figure £ 11, 719 million. The operating profits before exceptional items stood at £ 975 million. The carrier realized an operating profit of £975 million, a rise from £708 million from the previous year 2013. The profit from continuing operations increased by £559 million from the year 2013 when the company had registered £300 million. Elliot (2013) reports that the £975 operating profit was a substantial achievement attributed to the solid leadership and management foundation set in the previous year. The remarkable results also got backing from the arrival of the airline first Airbus A380 and Boeing 787s. Moreover the use of technology-enabled innovation in the organization as well as enhancement of customer service. The financial review indicated that the revenue for the year stood at £ 11, 719 million reflecting a 2.6 percent increase from the latter year. The carrier further reported an increase in the passenger revenue to £323 million an equivalent of 3.2 per cent improvement in volume from the previous year. A study by Elliot (2013) shows that the airline’s available capacity rose by 5.9 per cent following an increase in the number of aircraft. The number of passengers consequently went high from 40 million to 42 million resulting in a strong commercial performance (Foster, 2015).

The airline fuel cost went down by £214 million from £3, 755 million to £3,515. Economists attributed the decline from global falling fuel prices. British airline group expenditure excluding fuel expenses rose by £214 million to £7, 229 million an equivalent of 3.1 percent increase. According to Jackson (2005), the scenario represents a fall in non-fuel costs per ASK propelled primarily by cost saving initiatives implemented in the airline. Elliot (2013) further attributes the decrease to a favourable impact on the foreign currency exchange rate. The non-fuel costs went down at a constant 1.1 percent rate comparing with the previous year. The profit before tax was £859 a rise from £300 million recorded in the year earlier. The airline’s net deferred tax liability decreased by £222 million as a result of a decline in deferred tax assets. British airline recorded a £702 million profit after tax a rise from £281 million in the later year.  The total capital spending for the year stood at £1,494 million, inclusive of £1,296 million in the fleet related spend. Elliot (2013) notes that the corporation’s liquidity position stood at £2.5 billion while the net debt remained £ 2.0 billion.

The impressive airline unit cost performance through increased productivity, supplier cost savings and low fuel prices have made the carrier the airline of choice by customers and global investors. The achievement made international investors view the corporation as having a promising future. The work of Foster (2015) shows that the company shares closed at 580p a rise by 3.6 per cent.  The company has maintained an increasing profit curve for the last three years earning the airline a firm economic standing. The fall in fuel cost has made the company reduce flight cost, consequently attracting rising number of customers each year. The high number of clients have enabled the airline to remain competitive amidst stiff competition from rival carriers (Foster, 2015).

British airline performance

 

 

3.0       Route structure and airport hub strategies

Jackson (2005) reports that British Airways has diverse routes serving destinations across all the six continents. The airline undertakes passage and cargo flights in multiple countries globally. British Airways fly to Aarhus Denmark in Aarhus airport. Also, the carrier serves other airports such as Aberdeen Airport, Port Bouet, Abu Dhabi and Nnamdi Azikiwe International Airport in the United Kingdom, Cote D’Ivoire, United Arab Emirates and Nigeria respectively. In an article authored by Jackson (2005) reported that that the largest carrier has additional destinations in Kotoka International Airport, Bole, Adelaide, Al Massira, Alexandria, Houari Bournediene, Alicante, and Almaty international airports. Moreover, the corporation has routes and destinations in other airports such as Auckland, Austin-Bergstrom, Baghdad, Bahrain, Herder, Baltimore, Bengaluru, Suvarnabhumi and Grassley in countries such as New Zealand, United States, Iraq, Bahrain, Azerbaijan, India, Thailand, and Barbados. According to Kupper (2007), in the home country the United Kingdom the airline serves Belfast International Airport, Georgie Best City, Birmingham, Blackpool, Bournemouth, Bristol, Campbell, Cardiff, East Midlands and Eday international airports among others.

Klein and Cameron (2013) postulates that the airline commutes cargo as well as passengers on routes connecting Faro airport, Frankfurt, Lungi, Friedrichshfen Airport, Madeira, Sir Seretse Khama International Airport, Fagernes in Norway and Geneva International Airport in Switzerland. The carrier also operates in Genoa Cristoforo Colombo airport in Italy, Gibraltar International Airport, Gothenburg-Landvetter airport in Sweden as well as Guadalajara International Airport in Mexico (Kupper, 2007). The flight operations manager reported that the corporation commenced flight operations serving routes to more destinations such as Harare International Airport in Zimbabwe, Oued Irara- Krim Belkacem Airport in Algeria, Jose Marti international airport in Cuba, Angelholm-Helsingborg Airport in Sweden, and Helsinki Airport in Finland as well as East Gate Airport in South Africa. The corporation fly to Hong Kong airport in Hong Kong, George Bush Intercontinental Airport in the United States, Rajiv Gandhi International airport in India, Ibiza Airport in Spain, Innsburk Airport in Austria and Benazir Bhutto International Airport in Pakistan. Aslay airport, Istanbul Ataturk Airport in Turkey as well as Soekarno-Hatta International Airport in Indonesia serve as some of the airline routes. Müller (2004) reports that the carrier serves countries such as Greece, Canada, Sudan, Ukraine, Jamaica, Poland, Malaysia,  Kuwait and Cyprus in airports such as Kalamata International airport and Mallam Aminu Kano Airport. Moreover, the organization operates on other routes like Kelowna, Khartoum International airport, Boryspil Airport, Norman Manley, John Pail two International Airport and Larnaca Airport.

In the United Kingdom, the carrier operates to other destinations such as Gatwick Airport, London City, Luton, Stanstead and Londonderry airports (United States, 2002). Regions such as Los Angeles International Airport, Quatro de Fevereiro Airport, Lugano, Fidel Airport, Luxor and Lyon-Saint Exupery Airports have the Airline undertaking passengers and cargo freight operations.  Countries such as Philippines, Swaziland, Morocco, France, Belarus, Liberia, and Russia have flight operations connection routes such as Ninoy Aquino International Airport, Matsapha Airport, Marrakech-Menara Airport, Marseille Provence, Minsk International airport as well as Montpellier-Mediterranean and Montreal-Pierre Elliot Trudeau International Airports (United States, 2002). British Airlines has additional routes in Komaki Airport Japan, Jomo Kenyatta International Airport in Kenya, Naples Airport in Italy, Lynden Pindling International Airport, John f. Kennedy International Airport in the United States and Newark Liberty International Airport. Newcastle Airport, Newquay Cornwall, Nice Cote D’Azur Airport, Norrkoping in Sweden, North Ronaldsay in the United Kingdom, Norwich International Airport, Nuremberg Airport as well as Orlando International Airport in America include some of the airline’s established routes. Also, Kansai International Airport in Japan, Fornebu Airport in Norway, Paphos International Airport in Cyprus, Paris-Charles de Gaulle Airport, Plymouth City Airport in the United Kingdom and Port Elizabeth airport in South Africa serve as British airline routes.

The work of Zim, Skelly, and Cuffari (2010) indicates that British Airways created a hub strategy to strengthen flight operations and implement a wave structure in London Gatwick International Airport to find solutions to capacity problems. The plan entails reorganization of flight schedules to and from Gatwick to make a 26 minutes connection possible in Gatwick North Terminal (Zim, Skelly & Cuffari, 2010). Furthermore, the airline has enacted a strategy that entails the introduction of regional jets cargo and passenger flight operations to ensure full exploitation of the entire market potential in the United Kingdom. British Airline has implemented Cost leadership hub strategy to make the carrier one of the lowest flight cost service providers. The airline focusses on low-cost inputs and capital programs by availing standardized services to realize a high volume of operations and economies of scale. British carrier has effected tight cost controls, structured organization, and responsibilities and put a policy that entails basing of incentives on meeting strict quantitative targets. The management of the airline positions the two largest airports as United Kingdom’s low-cost model airport hub. Also, the carrier has embraced broad differentiation hub strategy by creating a range of flight products and services perceived to be unique compared with services offered by competitor airlines. The airline offers a superior in-flight service.

The corporation has ensured access to sufficient funding to support service and product development initiatives. Establishing subjective measures and incentives instead of quantitative measures has helped in successfully implementing the hub strategy. Zim et al., 2010) observes that the company employs concentrated growth hub strategy to direct airport’s resources towards capturing a large market share by increasing use rate of existing clients and luring competitors clientele.  Market development hub strategy enables British airline to market airports services to customers in new market segments. The product development strategy adopted by the airline entails creating new freight goods and services for existing markets. Globalization hub strategy has enabled British Airways to become global aviation leader. The hub approach involves expanding global route network through the acquisition of a robust global brand reputation (Muller, 2004). Moreover, the strategy emphasizes on upholding quality in customer service and enacting effective cost control measures to improve efficiency. Concentric diversification hub strategy implemented by the airline entail pursuing synergistic opportunities that are in line with the airline’s aeronautical services.

British airline route diagram

 

4.0       Aircraft Fleet management and scheduling

A study by Müller (2004) shows that British airline has over the years acquired an extensive experience in managing the aircraft Boeing types. The carrier maintains the aircraft in-house, where the company’s engineers undertake regular checks, overhaul and avail solutions utilising the advanced equipment and technology. The corporation ensures safety, quality, reliability and continuous improvement in fleet management operations. The top management in coordination with employees maximize total network profitability by matching appropriate aircraft with each flight leg to minimize spoilage effects and potential spill (Klein & Cameron, 2013). Assigning planes to scheduled flight segments ensure increased profitability. The airline combines economic and operational operation from across the airline to establish robust, profitable and feasible fleet recommendations. The engineers in British Airways develop optimal fleet assignment based on average forecasted demand on passenger flows.  Also, the carrier improves aircraft utilization by providing resources to planners, enabling the experts to develop profitable schedules.

The management focusses on matching aircraft to route demand with re-fleeting to improve short-term planning. The operational flight team in the airline ensures safe operation of aircraft and undertakes recruitment training and support functions for the pilots (Klein & Cameron, 2013). The expert technical team works in coordination with aircraft manufacturers and airline engineers to establish policies and standards for the safe and efficient operation of the planes. The flight planning specialist creates plane routing, performance and briefing materials for the organization’s daily 400 departures. The commercial team undertakes revenue management, pricing, sales, marketing, distribution as well as network and fleet planning. Moreover, the team monitors the sale of seats during booking and maintains friendly relationships with esteemed customer groups. The engineers manage and keep the plane fleet in the corporation’s maintenance bases (Jackson, 2005). The airline has different departure and arrival programs and timetables that depend on the time of booking and the distance between the place of departure and destination.

5.0       Personnel issues

The world’s largest airline has had personnel issues characterised by a long-running dispute between the carrier and the cabin crew. The organization addresses such rising problems in an amicable style to reach a lasting agreement. Jackson (2005) reports that a bitter dispute existed between the corporation and the employees following a spying operation that involved accessing of the cabin staff phones and emails. The carrier focusses on building employee respect and a firm relationship with unions representing employees. British airline has enacted reforms to form close bonds with workers and help settle rising personnel issues in a professional and objective way. Jackson (2005) postulates that the top management acknowledged that a need existed to form cordial relationships between the company managers and the employees. The chief executive stated that the airline would work on developing a constructive and professional union between managers, workers and staff unions.

6.0       Pricing schemes and fare wars

According to Foster (2015), freight charges applied by British Airline depend on the travel classes that include economy class, premium economy, business class and fist class. Foster (2015) reports that a basic economy class ticket from London dropped from 3,458. British airline has engaged in slashing freight fares in a price war between the carrier and rival companies such as Virgin Airlines. The corporation imposed discounts of almost 50 per cent on the 80 of the carrier’s routes (Foster, 2015). Charges from Athens dropped from £216 to £140. The return journey from Madrid Spain went down from £209.50 to £120. Foster (2015) observes that a two-way fare to Paris shifted from £130.60 to £80. The cut was a deliberate strike against no-frill airlines providing competitive fare prices. The fare trimming was inclusive of food, drinks and entertainment.

7.0       International operations

Baysura (2001) illustrates that the airline operates in almost all countries across the globe. Berner (2010) describes the company as an international airways scheduled airline operating to over 300 destinations worldwide. The airline undertakes global cargo business in conjunction with the passenger services.  The organization conducts international flights that carry over 45.5 million travellers yearly. Elliot (2013) reports that British airline has a worldwide network in 75 countries. The corporation operates in regions like the middle-east, Africa, Asia and the entire America region. Berner (2010) reports that the carrier serves countries such as Greece, Canada, Sudan, Ukraine, Jamaica, Poland, Malaysia,  Kuwait and Cyprus in airports such as Kalamata International airport and Mallam Aminu Kano Airport. Also, the corporation undertakes international flights in Kelowna, Khartoum International airport, Boryspil Airport, Norman Manley, John Pail two International Airport and Larnaca Airport. Regions such as Los Angeles International Airport, Quatro de Fevereiro Airport, Lugano, Fidel Airport, Luxor and Lyon-Saint Exupery Airports have the Airline undertaking passengers and cargo freight operations (Elliot, 2013).

British Airlines has additional international routes in Komaki Airport Japan, Jomo Kenyatta International Airport in Kenya, Naples Airport in Italy, Lynden Pindling International Airport and John f. Kennedy International Airport in the United States. The carrier also serves Newark Liberty International Airport, Newcastle Airport, Newquay Cornwall, Nice Cote D’Azur Airport, Norrkoping in Sweden, North Ronaldsay in the United Kingdom and Norwich International Airport. Nuremberg Airport, Orlando International Airport in America, Kansai International Airport in Japan and Fornebu Airport in Norway comprise of some the multiple international regions served by the corporation. The diagram shows distribution of the airline international freight operations

 

8.0       Cargo Management

The work of Foster (2015) reveals that British Airways is the world’s fifth largest international cargo carrier. The carrier undertakes cargo management practices in stations such as Manchester, Birmingham and Glasgow airports transporting million tonnes freight, mail, and courier consignments. The corporation has a reliable cargo transportation schedule and owns advanced automated freight handling systems in the world (Jackson, 2005). The elevated transfer vehicles and tracking bar coding system assist in efficient consignment management. British Airways operate premium loads and fresh produce handling through the airline’s carrier’s regional cargo. The company owns 83,000 square kilometres technologically advanced structure symbolizing the airline’s commitment to global cargo freight operations (Küpper, 2007). The carrier avails a safe, fast, secure and reliable as well as cost effective cargo transportation. Robust IT solutions simplify handling processes and provide innovative tools and capabilities for efficient cargo manage

References

Baysura, K. (2001). British Airways Cargo carrier. Vero Beach, FL: Rourke. N.p.

Berner, K. (2010). Airways industry in Britain, 201-210. doi:10.1017/cbo9781316151617.054. N.p.

Elliot, C. K. (2013). Cargo management. A case study for British airline New Delhi: Random Publications.

Foster, S. (2015). Airlines economic crisis a case study for British Airways 24(14), 761-761. doi:10.12968/bjon.2015.24.14.761.N.p.

Jackson, A. S. (2005). Imperial Airways and the first British airlines, 1919-40. Lavenham, Suffolk: T. Dalton.

Klein, A. F., & Cameron, C. (2013). Cargo Freight in British airways. North Mankato, MN: Stone Arch Books.

Küpper, T. (2007). Medizinische Ausrüstung bei Airlines (3) – TUI Fly und British Airways. Flug u Reisemed, 14(02), 72-75. Doi: 10.1055/s-2007-984566. N.p

Müller, M. (2004). Safety lessons taken from the airlines. British Journal of Surgery, 91(4), 393-394. doi:10.1002/bjs.4617. N.p

United States. (2002). Executive Airlines, British Aerospace J-3101, N16EJ, Bear Creek Township, Pennsylvania, May 21, 2000. Washington, DC: National Transportation Safety Board.

Zim, H. S., Skelly, J. R., & Cuffari, R. (2010). British airline cargo carrier. New York: Morrow. N.p. 

 

 

 

 

 

 

 

 

 

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