University of Greenwich

ASSIGNMENT SUBMISSION COVER SHEET

SUBJECT CODE

: FINA 1035

SUBJECT TITLE

: Strategic Finance Management

PROGRAMME

: BA (Hons) Accounting and Finance

SEGi ID

: sc-kl-00039486

UOG ID

: 000820157

LECTURERS NAME

: Mr. Vicknesh Thevendran

LEARNING CENTRE

: SEGi COLLEGE KUALA LUMPUR

SUBMISSION DATE

: 18 MARCH 2016

Table of Contents

Content

Page

Introduction

Financial Ratio
4-6
Marketing Analysis
7-9
HRM Analysis
10
Operation Analysis
11-12
Strength And Weakness
13-15
Appendix

16

References

17

Introduction
International Airlines Group (IAG) together with its subsidiaries that are British
Airways (BA), Iberia, and Vueling, give traveller and cargo transportation service in
the European market. IAG belong aviation industry. IAG is the world's sixth biggest
gatherings in light of income and is the third biggest in Europe 1. The principle
advantage from merging of BA and Iberia is to facilitate the weight on carriers'
incomes. Most as of late, the Irish government has concurred an offer of its 25% stake
1 IAG, 2015, introduction http://centreforaviation.com/analysis/british-airways-and-iberiamerger-completed-planning-to-add-more-airlines-to-the-group-44282

in the flag transporter Aer Lingus to IAG. With Aer Lingus joining IAG's international
network, this could present an opportunity for the airline to venture into Asian
destination. This will additionally require investment to equipped aircraft into long
haul2.

SBU
Pricing of seats3

British Airways- First class & Business

Cargo Service

class seats.
Iberia Business & Economic class seats
Vueling three basis fare at low cost
Contribute 5% of revenue

Diagram 1

Financial Ratio

2 IAG,2015, Introduction http://europa.eu/rapid/press-release_IP-15-5371_en.htm

3 IAG annual report ,2015

Profitability
Income development has recovered to pre-recession level and IAG is keeping up profitability
from 2013 onwards. Then again, while the business has turned out to be better at overseeing
limit and producing subordinate income, it faces increasing expense for fuel, labour and
maintenance. Over past decades, high expenses of fuel lead to expand operating costs 4. IAG
have attempted to moderate this increment through supporting systems and the utilization of
more up to date, more productive aircraft with enhanced operating procedure. Lower fuel
burn reduces all out utilization and adds to their benefits.BA holiday is key source which
generating revenue and demand for IAG. It helps them to earn more profit for their growth.
Additionally, IAG is capital intensive and has abnormal state of fixed cost. This key
component to generate and maximum return on investment. Hence, an ascent in investment
through presenting new airplane is a marker of expected development in future requests. On
the other hand, additional capacity may hurt margins as it prompts lower yield and use rates 5.
Because of an increment in the aircraft size, development in available seat mile is higher and
the load factor element will high.
In 2012, Iberia made a radical move to cut staff in the organization and return into
profitability6. This Cost effectiveness methodology was useful for IAG to spare more cash
from paying salary and avoiding high tax. Overall, it was long- term plan to turn the business
around and develop. As a transient result, this lead to lower profitability for the year and high
worker tax assessment as the industry needed to pay huge amount of compensation. This
expended more money, which prompt loss of influence in liquidity element.
4 IAG, annual report, 2011-2015

5 Source: http://www.thesba.com/2011/03/22/six-ways-to-improve-profitability/

6 IAG, 2012,HRM analysis

4

IAG is tested by high costs, particularly fuel costs, however they're finding a way to bolster
benefits in the close term, Over the more extended term, they anticipate that industry will
profit by conveyances of new, more fuel-productive aeroplanes, diminishing both support and
fuel costs. Operational enhancements converge of carriers and subordinate incomes will
likewise bolster incomes, looking good for the business standpoint.

Liquidity
Moderate moving inventory and long term borrowing to repay short- term debt is a reason for
IAG to perform underneath the business normal7. Moreover, high borrowings will prompt an
increment in the finance cost. This would positively prompt raise interest rate. Besides,
having expanded its obligation, IAG raises its credit danger creating an increment in the
interest rate charged by their agent. To expand profitability and to guarantee that IAG has
adequate money to meet short- term commitments, it must minimize the investment or loans.
In addition, decreasing record receivable by expanding gathering will enhance income.8

7 IAG,2015, ANNUAL REPORT

8Source: http://www.accountingformanagement.org/current-ratio/

Investor Ratio
IAG is earning per share sees an important and develop enhance year by year 9. It implies as
the share price keeps on expanding, they would create more returns for investor and will be at
lessened danger. This would also promote share repurchases, which would decrease the
quantity of shares outstanding, expanding in gaining per share and elevating the business
sector benefit of remaining shares.
From the calculation, IAG had low price earning below than its competitors 10. It demonstrates
an absence of trust in investor about the poor present and future execution of the IAG. Lower
P/E ratio reflect poorer future open doors or possibly, a deal if the business sector is overpessimistic or if one trusts, the business sector is not considering potential rebuilding or a
takeover that would enhance future prospects.
In short, even though the company is using lot cash to pay tax, compensation, and having
problem to pay their debt in current but the company have lot fixed asset, which help
generating sales revenue to the company. By referring to the companys sales revenue, it can
see clearly that the companys performance has been increasing since the year 2013.

9 IAG,2013 ANNUAL REPORT

10 IAG, 2011-2015 ANNUAL REPORT
6

Marketing analysis

IBERIA
VUELING

BRITISH
AIRWAYS
Diagram 2 (BCG Matrix)

CARGO

Product
Vueling is a star product. They are third largest low cost carrier which generating large
amount of cash to IAG by charging low price to its customer. Having high share and growth
in a short period indicate they had stabilised position in this service industry. They are
attractive and hold a solid focused position in European market. Vueling privileged as best
low- cost airline at air transport award and had operation safety audit(IOSA) certification by
IATA supports that they having most astounding standard in both quality and security11.
Iberia is a problem child. Incurred operating loses which influence their market share to be
low and had high growth in market.

11Source: http://www.vueling.com/en/we-are-vueling/press-room/pressreleases/corporate/budgies-awards

Cargo knows as dog. They show low growth and low share because drop in revenue12. This is
not easy to IAG to divest cargo even though it not profitable to them. Therefore,
disinvestment is best strategy.
British airways cash cow product. They are key source of cash and regularly centre to the
business. They show low growth however high shares. BA has named the winning consumer
Superbrand of 2014 and best international first class by OAG 13. It shows that BA had solid
aggressive position yet in business sector. They create more money, therefore giving
investment resources to other well-intentioned items. Its ranked 20th in Skytrax world airline
award 201514.

Diagram 3
PRICE
British aviation route offer premium class seats with high calibre in conjunction with high
costs. This specific system is a design for focusing on the business class keeping in mind the
end goal to substantiate them superior to their different contentions like Lufthansa 15. BA
12 IAG,2014 ANNUAL REPORT
13Source:https://www.britishairways.com/engb/bamediacentre/newsarticles?
articleID=20140108065620#.VlXh6b8XbnU

14Source: http://www.airlinequality.com/airline-reviews/british-airways/

15 Source:http://writepass.com/journal/2012/12/analysis-of-pricing-and-distributionstrategy-at-british-airways/

holiday one the example for bundle price where they provide accommodation, food and meal
as package16. Different type of pricing using by airlines to attract different group of customer
hence increase their revenue level.

PLACE
BA follow Intensive distribution strategy concentrates on making the product available
everywhere; at any time. Besides, ticket available in website like Expedia, makemytrip.com
and can buy from travel agencies too17. These strategies give item consciousness, expanded
deals and profit, showcasing productivity and client acknowledgment.
PROMOTION
Advertising thru social network like YouTube, Tweet and BBC news help them to promote
their brand to the world

18

. BA offers flights via oneworld alliance under code sharing

agreement, which help to promote and sell seats. 19In additionally, Avios sold to business
accomplices to use in special program.BA also sponsor British academy of film and
television arts and to Olympic 2012. 20 Promote effectively of the item get extraordinary
reputation among the client in light of successful publicizing and it likewise assist this
industry with getting better returns.

16 Source: http://www.britishairways.com/en-gb/destinations/holiday-types/all-inclusiveholidays

17 Source:http://www.makemytrip.com/international-flights/british-airways-ba.html

18Source: http://www.bbc.com/news/business-19147393

19Source: https://www.onetravel.com/airlines/british-airways-ba

20 Source:http://www.britishairways.com/en-gb/information/about-ba/sponsorship

Human Resource Management

Cost effectiveness
In order to make IAG as a cost saving industry, Iberia going through workforce reduction
process.21 It might not effective for now but in future period; it may give potential to grow
revenue. Employees becomes less trusting on management and more apt on look for
somewhere for work.
Competency
A number of development programmes and training for staff runs by BA 22. The lower average
hour of that training is 37.3 hours. Besides, mixed fleet is a combination of long and short
haul destination fly by BA cabin crew23. By taking a little rest, cabin crew have to work in
21Source: http://www.theguardian.com/business/2012/nov/09/international-airlinesgroup-battle-staf

22SOURCE: http://www.ftejerez.com/british-airways-future-pilot-programme

23Source: http://www.britishairways.com/careers/mixedfleet/mixed_fleet.shtml

10

both haul and they rewarded for their performance if it is good enough. It is to avoid them
from giving improper service to the customer and demotivated. Thus, staff competency level
and productivity will decrease.
Commitment
Due to unpaid claim, refusal employees had strike. Moreover, the staff not happy with the
schedules and the salary paid by them24. They pay 12000 euro that is lower than it is
counterparts.25 Dissatisfaction of payment by staff might lead to drop commitment level. It
might influence IAGs reputation and fall in brand image because staffs not engaged.

Infrastructure

Human

-financial planning and accounting-management organisational structure

resource recruitment

-Employee

-compensation

management

development/

wages

Information

-online

promotion
-digital bag tags

-know me app

-internet

technology

(web/app)

- BA APP

flight

Procurement
INBOUND

-sollena fuel
OPERATION

- expansion of airport by BA
OUTBOUND
MARKETING & SERVICES

LOGISTICS

-maintenance

LOGISTICS

SALES

-strike

service

-reservation

24Source: http://www.theguardian.com/business/2014/jun/22/british-airways-strikeaction-threat-pay-claim-ba

25 IAG,2015 Annual report

11

in

of aircraft

-baggage handling

-promotion

-poor response

-fuel distribution

-on-board

-flight connection

-advertising

time

-food & beverages

service

-code sharing with -travel agents

-lost

other airlines

services

-Flight & crew schedule-cargo

management

-sales channel

baggage

-premium lounge

Operation Analysis
Reduction of staff and strikes are the major problem facing by human resources management
in IAG26. Unmotivated staff will influenced operation and outbound logistic by delaying onboard services and baggage handling services. It will give bad image to passenger about
industry. Since there is less people in maintenance of aircraft, cargo management, inflight
food and beverage department, the company could not maximise the productivity .Other than
that, it also resulted in poor customer service. Staff could not respond to customer on time
due to overcrowding customers.
IAG is not in cash control and they made a lot investment by buying new airbuses, which
has drain the company liquid assets 27. This has shown that the company is not properly
handling their financial planning. It effect infrastructure and operation. Lack of liquid assets
has caused the company to go through a series of problem.

For technology and development, IAG has introduced digital bag tag and improvese their
websites. It has benefit to operation to become more efficient with less direct involvement of
staff. Besides, innovation in mobile app such as knows me and BA app have help them to
promote and advertise in effective way with less cost28. It also adds value to marketing and
sales by providing convenient service and reaches their customer in easier way.

26 HRM ANALYSIS
27 FINANCIAL ANALYSIS
28Source: http://www.britishairways.com/en-gb/information/ba-on-your-mobile

12

Furthermore for procurement, by joining partnership with Solena and buying new airbus has
add value to the operation and infrastructure29. This has increased the fuel efficiency of
airbuses due to decision to reduce carbon and make as cost saving industry. In 2013, BA
keeps on advancing the development of air terminal to make additional ability to lessen
deferral empowering Heathrow to contend all the more adequately against the significant
European centre points.30

Strength and Weakness

Strength

29 financial analysis
30 British Airways , 2013,Annual report
13

Apart from the characteristic positions in their home markets, British Airways'
qualities lie especially in North America and Iberia in Latin America. Joining deals

exercises in either district is relied upon to create improved business sector access.
British Airways remains the main premium aircraft brand in the UK, has a brand with
more grounded client administration recognition and a notoriety for offering more

premium component31.
Prosperous and fortifying associations with United Airlines alongside the arrangement

of Oneworld carrier turn into the third biggest on the market32.

British aviation routes had solid vicinity at London Heathrow worldwide air terminal.

Weakness

Poor worker relations history that were clear in various cabin team strikes and issues

that have not been managed precisely.

Many complain about baggage handling service
Inefficient cash control stops them from meeting their short- term obligation.33

(word count 2063)

APPENDIX

31 IAG,2015, INTRODUCTION

32 Source:http://www.britishairways.com/en-gb/information/partners-andalliances/oneworld

33 FINANCIAL ANAYSIS
14

15

Appendix 2

16

Appendix 3 Lufthansa
Averag
Profitability ratio
Operating Profit
ROCE

2011
3.22
5.05

2012
5.06
8.17

2013
3.51
5.81

2014
1.98
3.05

e
3.44
5.52

Liquidity ratio
Current Ratio

2011
0.97

2012
1

2013
0.88

2014
0.75

Average
0.9

Investor ratio
EPS
P/E ratio

2011
-0.03

2012
2.16

2013
0.68

2014
0.12

Average
0.73

17

References

http://www.iairgroup.com/phoenix.zhtml?c=240949&p=irol-reportsannual

2014).
http://www.theguardian.com/business/2012/nov/09/international-airlines-group-battle-

staff ( Gwyn Topham,2012 November)

http://media.corporateir.net/media_files/irol/24/240949/AnnualBA/BA_AR_2008_09.

pdf ( British Airways, 2009)

http://centreforaviation.com/analysis/british-airways-and-iberia-merger-completed-

planning-to-add-more-airlines-to-the-group-44282 (IAG, 2015 November)

http://media.corporate-ir.net/media_files/irol/24/240949/mergerplan.pdf (IAG,2012)
http://centreforaviation.com/profiles/airline-groups/international-airlines-group-iag
http://ec.europa.eu/transport/modes/air/doc/abm_report_2008.pdf ( Dr. Johannes

Reichmuth, 2008 December)

http://www.vueling.com/en/we-are-vueling/press-room/press-

releases/corporate/budgies-awards
https://www.google.com/#q=british+airways+2013+annual+report (British Airways,

(IAG,

2013)

Table of Contents

18

Content

Page

PESTEL Analysis

19-21

Poters 5 Force Analysis

22-25
Critical Success Factor
26
O&T
27
Swot Analysis
28
8 Possible Strategy
29-30
SFA Test

31-33

Full Description of recommended strategy 34

Risk assessment

35

Reference

36

Appendix

37-39

7.0 PESTEL Analysis

Economic
Because of worldwide economy downturn, the worldwide exchange moderate down and
decrease 12.5 % customer is spending on travelling. 34 The high versatility popular in the
business strengths BA to be delicate in evaluating and share cost of BA have been lessening.

34 http://news.bbc.co.uk/2/hi/business/8566998.stml
19

Focusing to the oil spike in 2008, when the cost came to $147 barrel and many airline
industries became bankrupt.35 It leads to lessen in ticket request that implies lower deal for
BA. Furthermore, shareholders are influenced adversely by not getting returns not
surprisingly, on the grounds that speculation done amid retreat prompted misfortune.
In term of financial component, the ability of European business sector to surpasses request,
coming from the rate wars and clashes that liken to lower yields for commercial enterprises.
As per monetary element, the alliances can result to a greater control and move in term of
limit, which brings about the decrease of rivalry and improves incomes. The code sharing
carrier businesses will have the opportunity to part the costs well as entering the business
sectors and give benefit yet this can prompt having the less flying machine at airplane
terminals, henceforth less space is required. It is said that in term of current monetary
circumstance, the budgetary emergency additionally impacts yield and income of BA.
Political & Legal
Governments have controlled where airplanes can fly, and parts of their item arranging and
estimating approaches. As of late, significant administrative change has occurred, giving
airlines more open door and expanding the business sector rivalry. Deregulated organizations
like BA require frameworks that empower choices to be made immediately Open skies are a
contract, which changes the administrative scenes fundamentally.36
In addition, legal component influencing Airlines is the force of unions. Union it is a greatest
power for employee for battle back to get their necessities in the event that they not fulfil
with the administration. British Airlines has seriously endured numerous modern activities
particularly in the previous years and knows about the suggestions that the exchange unions
can bring about. Take for instance Cabin Crew strikes. Great worker relations are key if
British Airlines needs to keep away from modern activity and interfered with operations.
Then again BA has some favourable lawful issues like they can exchange the airplane in the
middle of EU and US unreservedly.37

35 http://oilprice.com/Energy/Oil-Prices/Why-Recession-Always-Follows-Oil-PriceIncreases.html
36 https://www.google.com/#q=british+airways+2014+annual+report
20

Air control and security have seen increment in wellbeing and anti-terrorism activities as a
consequence of the September 11 air commandeering in the United States and the London
bombings of July 2005.38 Because of assault BA ceased flights to specific nations, for
example, the centre east .This make them to lost a great deal of cash in light of the stoppage
of flights to certain destination, decrease in flight request furthermore required from firms
more saves on security approaches to re-build up certainty of buyers. Its permit BA to spend
more cost and its benefit went down.
Technology
Web and cell telephones are devices that travellers use in checking-in. Keeping up a corporate
site which additionally handles client inquiries and reservations is likewise turning into
another prerequisite for airlines. Mechanical advances that intend to lessen natural harm
brought on via carrier operations are expanding and developments that plan to enhance
administration and traveller experience.
Online deals are respected profoundly critical by BA and they are setting impressive
confidence in its site presence to help online-deals which will diminish client movement
through BA's call focuses.39
E-Tickets are currently the standard ticket position utilized by BA, making flight ticketing
more clear, adaptable and secure. BA can have joint endeavours when its desire innovation, in
light of the fact that its costly and quick moving.
Environment
A portion of the natural issues that the airline business appearances are noise, air
contamination, land take, water contamination and waste management. Flying machine
commotion can possibly influence the personal satisfaction of at any rate a large portion of a
million individuals living near UK air terminals.

37 https://employeerelations.wordpress.com/employee-relations-at-britishairways/
38 http://www.theguardian.com/world/2009/dec/27/history-uk-us-airline-terrorism
39 http://www.britishairways.com/en-gb/information/checking-in
21

The worldwide environment turns out to be more aware of building a superior future and
environment for the purpose of the general population. In this manner, British aviation routes
are doing things to ensure that cutting edge will have cleaner and greener environment. In
such manner, the organization additionally sticks to their corporate social obligation by
considering foundations and occasions for the advantages of environment. 40 The
administration additionally joins ecological security battle by supporting occasions and
different developments.
BA turns into the principal aircraft to win government endorsement for its carbon balance
plan in March 2009. Travellers are getting to be increment mindful about their carbon foot
shaped impression, in this manner by BA including this wilful carbon balance plan. 41
Individuals can positively affect groups as we as adjusting the emission from their flight.
Further, another key issue for the British Airways to address is noise contamination. To
shorten the issue, the organization created in calmer aeroplane and adjusts the way of their
flights to diminish the standard commotion per flight by 15% in 2015. 42 People living close to
Heathrow airplane terminal are the most influenced by the sound, however the organization
decreased roughly 30% of the commotion connecting 2008 and 2009.

Social
Aging population is occurring in the UK, it implies there are more elderly people, which they
have more recreation time to go travel. 43 This is a potential chance to BA with the more
elderly people regularly extending, British Airways can take encouraging points in the way

40 https://responsibleflying.ba.com/environment/
41 http://www.businessgreen.com/bg/news/2447344/british-airways-owner-setsemissions-target-and-calls-for-global-aviation-climate-deal#
42 https://responsibleflying.ba.com/environment/noise-and-air-quality/
43 http://www.kingsfund.org.uk/time-to-thinkdiferently/trends/demography/ageing-population
22

that the more seasoned era involve for the most part resigned people who are all the more
ready to make travel arrangements and long get-a ways.
The UK has a maturing populace, which is unfortunate. In the meantime, the worldwide
monetary emergency has likewise prompt basic levels of unemployment that has never been
found in the United Kingdom for quite a long time. 44 BA ought to gauge the developing
unemployment since unemployment influences the airplane business a considerable measure.
The expansion in preparing and advancement for staff by BA will prompt designate more
staff with expert skill. This will offer United Kingdom government by decreasing
unemployment some assistance with rating and key accomplishment for BA to attract more
clients by better service.

8.0 Porters Five Forces Analysis

Bargaining
suppliers

power

of High bargaining power of oil companies

The cost of flying fuel is subjected to the vacillations in the
worldwide business sector for oil, which can spin fiercely as a
result of geopolitical and different components.45 Since BA are
subjected to the same variance in oil costs as customary buyers.
There is not a great deal of control over the costs. This implies
supplier has a great deal of haggling force. Without aeronautics
fuel, British Airlines won't make a benefit. Through buying
more current, more fuel-productive aircraft, BA can diminish
the utilization of fuel on their flight at a negligible level.
Only a few suppliers such as boeing and airbus
The airline business needs aircraft either on an altogether deal or
on wet lease premise that implies that the aircrafts need to rely

44 http://www.bbc.com/news/business-35359689
45 http://marketrealist.com/2014/12/impact-travel-tourism-industry-economy/
23

on upon the two biggies, Airbus, and Boeing for their flying
machine needs.46 It implies that this industry is exceedingly
thought. This gives the aircraft a failure to arrange with plane
maker adequately, making BA as value takers.
Advanced technology
In addition, Airbus is utilizing advance innovation as a part of
planning aircraft, accordingly, the force of supplier is high
because of BA must rely on upon the Airbus specialists to do
support of the flying machine and look for guidance.
Threat of new entrant

Product differentiation
Item contrast matters, for new participants it is hard to surpass.
Travellers might have a moderately high inclination on BA
brand base on security and accommodation concerns.47 A current
vast organization with a decent status is constantly dependable;
it has more flights with the adaptable time calendar, and, in this
way, is more alluring to shoppers contrast with a rising
organization.
Start-up Cost is high
This is go about as a boundary to section for the rival as there
are high in capital prerequisite, for example, set up of central
station, procurement or hiring airplane, and training for staff. As
BA, being in the business sector too long it is favourable
position to them.48
Excess Capacity
There is abundance limit in the aircraft business. That is confirm
by the way that BA representatives can discover clear seats with
a specific end goal to fly free (an advantage gave to aircraft

46 http://www.reuters.com/article/us-boeing-suppliers-idUSKCN0VQ2KG
47 http://www.ukessays.com/essays/management/market-strategy-of-britishairways-and-ryanair-marketing-essay.php
48 http://www.telegraph.co.uk/finance/newsbysector/transport/10454522/Lowcost-airlines-have-come-a-long-way.-But-who-will-win-the-battle.html
24

workers). This demonstrates there is the thing that is by all

accounts additional room on practically every flight. These
demonstrate that BA could without much of a stretch build the
quantity of travellers they book on every flight keeping in mind
the end goal to keep new entrants from getting to be set up.
Bargaining
customer

power

of Bargaining power of customer

The aircraft business is exceptionally value touchy and
numerous clients are excited to discover tickets with the most
minimal cost for their adventure. Purchasers' energy has
expanded slightly because of "web booking locales that permit
buyers to thoroughly analyse tickets as indicated by value, flight
times and various stops in transit and travel specialists who help
clients in finding the best arrangement". In light of purchasers
having the capacity to change starting with one aircraft then
onto the next easily, they are putting forth faithfulness plans, for
example, BA's executive Club to their buyers.49
Low switching costs.
The bargaining power of purchasers is solid when the
exchanging expense of aircrafts is low. This is on the grounds
that in the business sector there are others rivals which the cost
offered contrast is very little thus the client will pick the carriers
which are ease and best timetable suited for them. BA give
convenient n best schedule for customers to overcome tis
problem.

Threat
product

of

substitute The danger is high because of the financial circumstance as

clients are extremely value delicate. Clients are changing to
circuitous substitutes, for example, train, automobile and
shipping due to the terrorist attack.50 The organization confronts
solid rivalry from the low cost carrier (LCC), which offer solid
discount. Specifically, Ryanair for instance, and its developing

49 http://www.britishairways.com/en-gb/executive-club
25

piece of the overall industry might drive British Airlines out of

the short-haul recreation market. The accessibility of substitute
makes the interest for aviation routes situate more versatile.
With proceeded enhancement in video-conferencing innovation,
organizations might have the capacity to consider less go to be
vital to their own particular operations, decreasing corporate
spending on business carriers. This is especially hazardous on
the grounds that on numerous flights, business class monetarily
supports coach class by paying higher passages for an
administration that does not cost the carrier altogether more to
convey. BA will confront misfortunes in business class which
lead drop in deals and request.

Competitive rivalry

The aircraft business in the Europe is to a great degree of

competition on account of various reasons, which incorporate
section of minimal effort bearers, the tight regulation of the
business. BA is managing both domestic and global aircrafts
administrations. In the worldwide carrier they have loads of
separation in the middle of BA and their rivals. In parcel of
separations

some

administrations.

are

Then

similar
again,

to
in

costs
local

and
or

offered

short-haul

administrations business sector is so divided with heaps of

residential aircrafts nowadays. Finally it is characterized that the
on by contenders expanded rivalry at high rate. Besides, BA
gives purchaser steadfastness to diminished rivalry and access to
extra courses with less capital cost.
In the aircraft business the oversupply of flights, makes it
difficult to contend with the competitors. Along these lines,
because of the oversupply, organizations go for enormous value
50 https://www.justlanded.com/english/United-Kingdom/Articles/TravelLeisure/Public-Transport
26

slices so as to take care of their expenses by the huge volume of

offers. Yet, the trade-off for carrier is the overcapacity that
dependably needs to manage by avoiding from happening.
Since, if over limit happens organizations might endure to make
back the initial investment, and is normally the case for the
aircraft business. English Airways is continually altering its
value scope of flights, trying to overcome overcapacity issues
that have as of now been demonstrated a boundary for earning
back the original investment for the organization.
Besides, BA providing consumer loyalty which reduce
competition and access to additional routes with less capital
outlay.

9.0 Critical success factor

Being leading in London
London is British aviation routes home city, and it is the worlds greatest and most focused
global air market. Guaranteeing Heathrow stays excellent centre point is indispensable to
give them a solid London base to serve the biggest universal whole deal markets. Taking a
gander at impact government approach choices and work with the air terminal proprietors on
the proceeded with improvement of the foundation will lead BA to proceed in driving
position.
Expansion in asia pacific
BA point is to give the best worldwide availability to clients. It is a win component for them
to create opportunities for new courses. British aviation routes construct their vicinity at the
top-level worldwide urban areas, either specifically or through their growing system of
carrier organizations. Whilst the set up worldwide urban communities, for example, London
and New York stay basic, BA puts a unique accentuation on adding to the position in the
worldwide urban communities in future.
27

Deliver good quality service for customers

Airline staff are facing customers have been long passionate on providing good customer
service. British Airways gives training to staffs to develop their skills and reward@BA to
staffs so that all the staffs will be motivated to gives the best services to customers on all
routes as the customer could enjoy a premium experience. BA with a good customer service
will tend to be in stabilised position, which helps to compete with its competitor in customer
service wise.

10.0 Opportunity

Expansion into emerging market such as China and India.

Commercial association opportunities - British Airways i360 is one of the UK's most
energizing new sponsorship opportunities offering immense brand go after planned

accomplices.
Heathrow is BA operational home and perceived as one of the world's busiest air

terminal.
The battle in the worldwide economy and high rivalry in the business has prompted a
portion of the aircraft shutting their business that expands the business sector interest

for the BA.

British Airways ascend in the Skytrax quality framework is an essential advertising

range that the organization can use to brag universal picture.

Advanced technology aircraft

Threat
Unexpected occasion-The aircraft business stays powerless against eccentric outer
elements, for example, political precariousness and terrorist assaults.

28

The ascent in fuel cost fuel cost increments would speak to a huge danger to BA,

especially in the exceedingly cost focused states of its centre markets.

Open skies assertion by consenting to the arrangement, the little carrier industry has

exploited the ease air administration where they posturing risk in rivalry with BA.
Flop in currency fluctuations during recession in 2008.
High intensive competition among competitor.

11.0 Swot analysis

With the brand picture that British Airways can brag of and the Skytrax Star
arrangement of value rating that can offer enormous acknowledgment in the
International level; it would be perfect for British Airways to endeavour for business
sector division centre. 51 Utilizing the solid picture and brilliant notoriety officially
settled to venture into developing market, for example, China, Indonesia, Malaysia,
and India. Likewise, open skies assertion will upgrade the stoppage in business sector
development, however, British Airways can utilize its solid image picture in an offer
to catch market share.52 Defeating the concentrated business to misuse the late one
world organization together consent to target new clients who will locate the new
course alluring. In addition, BA will utilize the brand picture of being a sheltered
aircraft to expand efforts to establish safety through business sector entrance to
anticipate terrorists risk. Moreover, British aviation routes will diminish the quantity
of flight cancelations by making new mechanical advances through item improvement
permit the planes to fly in every single climate condition. BA tries to accomplish
worldwide extension through business sector improvement to new Asian destination
since it is on one of the world's fasters developing carrier. At last, with most
contenders still not achieving the characteristic of having the capacity to give solid
51 http://www.airlinequality.com/ratings/british-airways-star-rating/
52 http://centreforaviation.com/analysis/british-airways-india-routes-aircraftgauges-changed--partners-considered-as-third-party-hubs-loom-201854
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administration, it is critical that British Airways can convey upgrades to its correlative
administrations that will have the capacity to characterize the carriers.

12.0 8 POSSIBLE STRATEGY

British airways
Product development
BA is expanding into Asia country such as India and China. This helps them by
attracting new and existing customer. Besides, it provide more choices to travel in
Asia Pacific
Total quality management
BA aim on practising TQM. Being a part of the premium airlines BA invests in their
staff, fleet and other facilities in order to provide quality customer service to draw
customer.
Differentiation
To differentiate from other competition BA improve it customer service complaint
like handling baggage and provide promotion package. It lead to reduce in customer
complain and boost sales.
Diversification
BA does promotion more promotion to increase premium sale and also upgrade its
online service and introduce e-commerce. Its make their customers life easier avoid
queuing.
International Airlines Group
Cost leadership
IAG doing downsizing so they have to pay more compensation and it might be
difficult in short- term because they will face liquidation and union problem.
However, for long-term it will better decision to save cash by reducing training and
development and less paying salary amount.

Diversity

30

The appointment of Maria Fernanda Mejia as non- executive director represents the
significant step in improving gender diversity. Existence of this kind of diversity on
the board always aligned.
Focus on Vueling
Vueling know as start product with high operating profit. In short- haul them facing
quite a lot competition. By introduce new off-peak leisure destination replacing
weaker business routes where this improve profitability.
Do nothing
IAG already had done a lot of investment and promotion activity to attract more
customers. It will boost their profitability and overcome their liquidation problem.

13.0 SFA TEST

Recommendation
Partnerships into

Feasibility
As an expansion and

Suitability
Opportunities are

Acceptability
Customer are happy

Asia/China/India

investment

plenty as it is an

because of choice for

market as these are

consideration

emerging market

travelling are high

emerging markets.

Increase in revenue

Shareholder satisfy

will increase profits

`with new
opportunities and they
will get more
dividend
31

HR training,

Train flight attendants

Able to retain clients

Improve customer

development and

to provide extra

and enhance

satisfaction

continuous Learning

services.

reputation

Staff are well- trained

for the staff

Recruit new staff to

become professional

manage new services

in their skill and they

have more confident
on management

Focus on vueling

Short haul flights to

Threats of high

Due to terrorist attack

be outsourced to

competition

customer scared to

subsidiary airlines

use planes so their go

Demand for short-

for

haul flights which will

Alternatives for short

be more frequent will

haul flights such as

increase cost of

road, rail and water

operations

transportation.

Continuous

Hassel free, trusted

Preferred choice by

One stop center for

innovation

and reliable

customers

passengers

of online booking,

Advanced technology

online check in, travel

reduce employees

insurance, car rental,

workload which lead

booking of hotel

to downsizing

Improved Operations

Better quality control

Dependable for the

Retain customers

by

of operations

services delivered.

Shareholder may be

reducing delays in

not feel good idea to

flights, proper

spend more money on

maintenance of

maintenance

aircrafts, efficient
handling of baggage

32

Reduce in customer

Better quality will

Customer always go

complain and

help to provide good

for good quality

Total quality

increase sales

brand product for

service

management (TQM)

Research and

customer

Training for employee

development fail due

to deliver unique

to insufficient

service for customer

manpower

Gender diversity on

Need recruit more

The committee

Training and

board

workforce

believes that the

development for

Spend more on

combination of

recruit staff

research and

different background,

Shareholder may feel

development

personalities and skill

unnecessary expenses

enrich board
performance

Do nothing

Available of seat

Qatar airways not

Shareholder get more

increase

only oneworld

dividend

Operating and sales

alliance partner but

Code sharing

increase

also a significant

agreement help to

Focus on short-haul

shareholder in IAG

reach more partner

rise

Adding a new airline

and develop more

brand to the business,

joint venture business

namely air Lingus

33

14.0 FULL DESCRIPTION OF RECOMMENDED STRATEGY

British Airways is one of the world's biggest universal carriers, and a standout amongst the
broadest global booked aircraft course arranges flies to more than 300 destinations around the
world. Moreover, one of the world's longest settled aircraft is surely understood as an
industry pioneer. Subsequently, the growing in new markets like China and India is vital to
them. BA are filling their planes, as well as they are offering British business some assistance
with exporting their merchandise and administrations; they are giving the British economy a
support. The significance of the growing in Asia business sector is that BA can't just depend
on clients in its own nation additionally to draw in new clients over the world. Much all the
more vitally, British Airways, through this can grow more connections, and find more about
various societies, dialects, markets, and items. The development is essential to them since it
can urge BA to work and advance in a seriously focused worldwide economy. BA
arrangements to dispatch administrations to more Asian urban areas as the premium bearer

34

pursues development in one of the world's quickest developing avionics markets, made
conceivable with the entry of new whole deal flying machine to its armada.
Based on market predictions, winning strategy for IAG would be The Do Nothing strategy.
Given that the airline has already made several investments and it has a strong marketing
campaign, no predictable short-term outcome can be foreseen now. Instead of spending
further on other initiatives that may not bring immediate results, so the management to
reserve its funds and resources, monitor its progress in the interim and action when there are
further developments. IAG made many promotion packages to their loyal customer. Already
well-known brand so reduces spending more advertise help to cut cost more to them. The
money gaining from cut cost process help to pay their debt can give more training for staff to
overcome customer service problem. To overcome environmental issue IAG acquire quite a
lot advanced technology aircraft to reduce noise pollution and they provide sponsorship to
give a good overview of them.

IAG also acquire fuel-efficient aircraft to reduce fuel

consumption. As mention, earlier this is long- term beneficial factor so IAG need reduce
acquiring more and its corporate social responsibility to decrease expenses. Moreover,
Partnership with Oneworld airline and code sharing to expand new routes help for IAG to
stabilised in the foreign market and its reduce start-up cost for them which make more
capital available so greater borrowing capacity. By reducing unnecessary expenses, IAG can
give expected dividend for its shareholders.
15.0 RISK ASSESMENT
BA might confront solidly focused from all around resourced and situated state-claimed
carrier. For instance, Air India is well- known brand in India and it will be the main decision
for their nation client. At that point, climate extremes over the nations are one of the dangers.
Currency conversion scale and tax rate will be a danger for BA as well. In the event that the
both rate high BA, need to pay more money. In addition, Asia nations are pretty much ready
to rival lower cost financial on the grounds that they are creative and mechanically propelled
so BA might confront hard to compete its rival. By growing into Asia market, BA will face
rise in inequality, environmental stress, large infrastructure gap and regions growing number
in middle-income countries.
IAG only get the benefits in long- term so it will create problem to solve short- term
obligations. For example, IAG cannot pay its debt on time; struggle to pay expenses like tax
and oil. Besides, the customer always compares price and service between airlines. Therefore,
35

IAG cannot stop spending more on advertising, which lead to rising in expenses. There is a
possibility IAG market share to be drop and will get a break even in profit. By getting break
even profit IAG unable to pay salary for its employee, which make the employee
unmotivated. It will create poor customer service and create strike

(Word 2453)

REFERENCE
http://ec.europa.eu/transport/modes/air/doc/abm_report_2008.pdf ( Dr. Johannes
Reichmuth, 2008 December)

http://news.bbc.co.uk/2/hi/business/8566998.stml

http://oilprice.com/Energy/Oil-Prices/Why-Recession-Always-Follows-Oil-PriceIncreases.html
36

https://www.google.com/#q=british+airways+2013+annual+report

https://employeerelations.wordpress.com/employee-relations-at-british-airways/

http://www.theguardian.com/world/2009/dec/27/history-uk-us-airline-terrorism
https://www.google.com/#q=british+airways+2014+annual+report (british airways ,
2014)

https://www.google.com/#q=british+airways+2013+annual+report (british
airways,2013)

APPENDIX

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38

PRESENTATION SLIDE

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40