Opportunities and threats facing the industry
In Comparison to other Area, people with higher GNP area usual will require transportation for their movement due to business and leisure (Ekamba,L. F. , 2002). Therefore, setting up a new route or maintaining operations of a route, airline needs to focus the distribution in population when in order to make profit, such as London-New York as the busiest route around the world. BA, in 2003, scheduled flight serve 552 locations in 135 countries, obliviously the majority business are in America, Europe and Asia. (www. britishways. com).
Political influences In 1978, the USA deregulation has brought a significant advantage in competition among airlines. It affected the recent growth in services by new low-cost competitor such as Easy Jet, and the cross-border acquisition of airlines. DBA, BA’s subsidiary, providing competition in Germany and Virgin Express competes internationally out of Belgium. (Ekamba,L. F. , 2002) 1. 13 Economical influences In term of currency, BA still uses the pound sterling rather than the single currency, Euro is used in the majority of its competitor.
Furthermore, the USA economy recession due to terrorism attack, on Sep11th, 2001 caused BA traffic to the US was down to 60% and the revenue loss. Besides, in 2003, BA’s deterioration in operating profit reflects as a result of economic weakness, the war in Iraq and the impact of SARS, particularly on Far East routes. (www. britishways. com) 1. 14 Natural environment influences Influence from natural environment that can affect airline industry is the weather conditions, particular in England where occur snow and high winds and freezing temperatures.
In 2002 and 2003, Extreme weather conditions in the UK have resulted in unprofitable (see 2. 2). 1. 15 Technologic influences BA has developed two systems, one in conjunction with travel agents and one for small to medium sized businesses who choose to book direct. It can offer off-line customer service and booking service for itineraries that the customer is inconvenient , and the private access website which can be personalised with corporate travel policy can also produce management information. (www.
britishways. com) 1. 2 Five forces analysis Force 1: Bargaining power of supplier In Airline Company, the aircraft is a rare, unique and high technology product which need to maintenance regularly. Therefore, it is essential to budget for maintenance due to the cost (Ekamba,L. F. , 2002). BA who has powerful supplier will adversely affect profit because the majority of aircrafts are made by Boeing which is the largest commercial aircraft manufacture in the world. Force 2: The bargaining power of buyers
In low cost airline, Ryanair is Europe’s largest ticket less airline and other no-frills airlines including Easy Jet, Go and Buzz. BA is unable to charge high prices because of those successes of no-frills airlines. (www. britishways. com) Force: The threat of substitute products In airline industry, substitute product can be divided into two sides, which are direct substitutes (land transport, sea transport) and indirect substitutes (cruise ships, teleconferencing).
There are several ways to go to Europe from Britain, expect for taking a flight, using coach, and car, Euro star or European ferry crossings are alternative more comfortable and much cheaper channels. Force 4: The threat of new entrants to the industry BA has developed over years, particular at long haul level. So, it is hard to entry and expands the network for the new entrants to be a BA’s rival. Besides this, setting up a new airline company needs many millions of pounds to lease or buy aircraft and maintenance it.
Furthermore, by technological development, new entrants can get access to distribution with a low investment. Force: Intensity of rivalry between existing competitors After deregulation, there are no barriers to enter into airline industry, so there are more and more airlines with different strategy in this industry. If competitors offer the better value than BA, perhaps the customer would change their propensity to a new one. Ryanair, is a low fares and no-frills Irish airline, improving the quality of service is important in order to retain customers.