British Airways Management Analysis Essays

British Airways Management Analysis Essays British Airways Management Analysis Essay British Airways Management Analysis Essay This report will focus on the current economic crisis and the effect it has had upon British Airways. The passenger figures at London Heathrow, Gatwick, Standsted and other major airports have dropped by 7. 4 per cent last year compared to 2008. (Telegraph, 2009) Moreover, many different surveys have shown that people are now more reluctant to travel to foreign destinations for holiday. Moreover, the Civil Aviation Authority (CAA) announced that only 216. 8 million travelers were registered in 2009, the lowest figures since 2004, and the experts believe that the figures will continue to drop for the foreseeable future. BBC , 2010) These official figures paint a gloomy future for the aviation industry and most airlines. Indeed, the current economic crisis has taken no hostage, and British Airways (â€Å"BA†) is not an exception; in fact, they have faced more adversities than other airlines. This report will show what strategies BA has conjured up to survive the recession and co mpete against low cost airlines such as Easyjet and Ryan Air, who have actually somewhat benefitted from the recent economic crisis. 2. Methodology (-is that ok to use â€Å"we† instead of â€Å"I†? This paper will first be looking at how British Airways, Easyjet and Ryanair performed before the recession. This will highlight the impact the recession has had on these airlines. We will be looking at their history and financial performance before circa 2008, collecting data from articles published by the airline industry which are available from the internet. To bring to light the impact the recent economic crisis has had, we will look at their financial performance for the last two years. As we compare their performances, we will how much the British Airways suffered, in contrast to low budget airlines such as Easyjet and Ryanair, who have somewhat benefitted from the economic downturn. The strategies adopted by British Airways to survive the economic crisis and compete against low budget airlines will be looked at individually. We will assess why British Airways were prompted to use these methods. This paper will then consider strategies adopted by other airlines to survive the recent economic downturn. This will give us an indication of whether the strategies implemented by British Airways will succeed or help it to regain their position as the â€Å"world’s favourite airline†. In conclusion, this report will discuss the repercussions of the strategies and its financial outcome, and whether British Airways should maintain its existing business approach or adapt to the current crisis on a more permanent basis, perhaps similar to that of Easyjet and Ryanair. 3. Short History 3. 1 British Airways British Airways is the national airline of Britain. It is a premium airline, possessing over 340 aircrafts and travelling to over 160 destinations. The company’s main centres of operation are London Heathrow Airport and London Gatwick Airport. The company was founded in 1972, when the British Overseas Airways Corporation (BOAC) and British European Airways Corporation (BEA) managements were combined under the newly formed  British Airways Board, effectively making it the national airline for the United Kingdom (BA, 1) BA enjoyed great success during the 1980s and early 1990s, and as a result, became the worlds most profitable airline for the most part of the 1990s, representing itself under the slogan The Worlds Favourite Airline. BA, 1) 3. 2 Easyjet Easyjet is a popular low cost airline, which was established in 1995  . The company started extremely modestly, possessing a meager two aircrafts, and travelled only domestically. However, the company gained popularity in the years that followed, and on April 1996, and started travelling internationally, choosing Amsterdam as its first international destination. (Easyjet, 1) Despite its modest start, Easyjet still managed to grow into one of the most popular airlines in the world. Its current slogan reflects its status (â€Å"the webs favourite airline) and as its popularity grew, so did the number of aircrafts under its name, amounting to 174 operating aircrafts as of March 2010, with 54 more in order. (Gerry, 2009) 3. 3 Ryanair Ryanair, similar to Easyjet, started their business providing only domestic air travels. The company was founded in 1985, its primary objective being breaking the then duopoly of British Airways and Aer Lingus on London to Republic of Ireland flights. Its initial success allowed the company to expand its business by adding a second flight route; Dublin to Luton International Airport. Ryanair, 1) The company, however, did not enjoy any financial success until Michael O’Leary took over as the CEO in 1991. The new CEO strived to implement a quick turn-around times for aircraft, get rid of â€Å"business† class seat and unifying the models of all the aircrafts. This proved to be a success, leading the company to spend over $2bn for new aircrafts in 1998. (Thomas M. , Kent B, 2005) The company acted quickly to the increasing popularity of online booking, and launched its website in 2000, allowing passengers to buy and confirm their flights online. This method proved immensely popular as more than 75% of all bookings were all made online in 2001. (Ryanair, 1) 4. Prior to the recession 4. 1 British Airways British Airways enjoyed great financial success during the early and mid-1990s. Their profit figure was very impressive and they constantly expanded, making them one of the largest airlines in the world in terms of revenue, passenger numbers and number of aircrafts possessed. However, their short lived success was met with despair during the late 1990s and early 2000s, they faced financial difficulties and other obstacles to success. BA, 1) As the company started searching for other ways to expand during the early 1990s, they appointed Robert Ayling as the CEO of the company in 1993. The move seemed wise at the time considering the experience and achievement of the new CEO prior to the appointment. However, BA dropped profits of 84 % in 1999 compared to the previous year. The company had to replace the CEO and drastically alte r its management structure. The problem seemed solved until the company suffered financially once more due to the 9/11 attack in United States. In response to these events, on September 2005, a new CEO was appointed. Under the management of the new CEO, Will Walsh, BA underwent several changes and on January 2008, the company revealed OpenSkies, a new subsidiary. The primary objective of launching a new subsidiary despite its weak financial stability was to  take advantage of the liberalisation of transatlantic traffic rights, and flies non-stop between major European cities and the United States. These efforts, however, did not lift BA from its financial difficulties (BA, 1) Further succession of unfortunate events plagued BA, including the current recession, forcing it to resort to desperate measures, including sell its stake in Qantas on 8 September 2008. 4. 2 Easyjet Since its establishment, Easyjet grew exponentially, enjoying great financial success along the way. As a result, it became floated on the London Stock Exchange in November 2000. (BBC 2006) The main ingredients of its success included expanding its base to locations in continental Europe, and taking advantage of the growing demand for low cost airlines from passengers. Table 1 below shows its financial performance for the past 9 years. TABLE 1. EASYJET FINANCIAL PERFORMANCE |Year |Total revenue(? m) |Profit before |Passengers (millions) |Return on equity (%) |Cash flow from | | | |tax-underlying(? m) | | |operations (? m) | |2008 |2,363 |123 |43. 7 |6. 8 |292 | |2007 |1,787 |191 |37. |14. 3% |261 | |2006 |1,620 |129 |33. 0 |10. 1% |222 | |2005 |1,341 |83 |29. 6 |7. 1% |221 | |2004 |1,091. 0 |62. 2 |24. 3 |5. 3 |160. 5 | |2003 |931. 8 |51. 5 |20. |4. 4 |77. 2 | |2002 |551. 8 |71. 6 |11. 4 |9. 4 |84. 2 | |2001 |356. 9 |40. 1 |7. 1 |22. 1 |83. 4 | (Source: Easyjet. 2 Reports and Accounts) Its continuing financial success led to the purchase of GB Airways on October 2007, helping Easyet yet once again, expand its operations and establish a base at Manchester. Easyjet 3) 4. 3 Ryanair After launching its website, Ryanair enjoyed a great financial success, leading to the following events 1. Making an order of 100 new  Boeing 737-800  series aircraft ( 2003) 2. Acquiring a once rival low cost airline  Buzz  from  KLM. (2003) 3. Increasing the number of its bases to from 2 to 11 in less than 10 years. (2004) 4. Making an order of 70 new  Boeing 737-800  series aircraft to meet the demands of its passengers (2005) During 2004, most low cost airlines suffered financially including Ryanair, and it reported a loss for the second quarter of 2004. However, unlike most other low cost airlines, it managed to recover rather quickly and post an impressive profit in the next financial year. Indeed, Ryanairs passenger numbers constantly grew by up to 25% a year for most of 2000s. To demonstrate what this means in terms of numbers, Ryanair initially only carried just under 700,000 passengers annually, however, the passenger figures in 2003 showed an astonishing figure of 21. 4 million. The company owed its success to its constant addition of new routes and new bases around Europe. By the end of mid 2000, Ryanair was one of the largest airlines in terms of number of carriers specializing in European flights, carrying more passengers than the once â€Å"World’s Favourite Airline† British Airways for European flights. (Ryanair 1) 5. Recession and Airline Industry 5. 1 Impact of recession on the airline industry The current economic crisis has had an impact on virtually all types of businesses, including the airline industry. In fact, it has affected the airline industry more so than most other industries due to it being a very competitive market. (William B n. d) From 2008 to the beginning of the current year, 9 airlines, including Japan Airlines the once sixth largest airline by passenger numbers in the world, have filed for bankruptcy, mostly due to the current recession. Considering that only 12 airlines filed for bankruptcy from 1989 to 2007, the number of bankrupt airlines is alarming and reflects that fact that the recent times is definitely unfavourable for the airline industry. (Chris I, 2008) Table 1. 2 shows the airlines reaction to the current recession. Table 1. 2 IATA’s revised forecasts for global air transport volumes [pic] (IATA forecasts 2008 – 2013) 5. Impact of recession on British Airways 5. 2. 1. Financial Performance The most obvious effect the recession has made on British Airways is the decline in the company’s net profit figure. Table 1. 3 shows how badly the company has been effect during recent times. Table 1. 3 British Airways Financial Performance 1996-2009 |Year Ended 31 March |Total revenue( ? m) |Profit before |Profit and loss after tax (? |Passengers (millions) | | | |tax-underlying(? m) |m) | | |2009 8,992 |(401) |(358) |33,117,000 | |2008 |8,758 |922 |726 |33,161,000 | |2007 |8,492 |611 |438 |33,068,000 | |2006 |8,212 |616 |464 |32,432,000 | |2005 |7,770 |513 |392 |35,717,000 | |2004 |7,560 |230 |130 |36,103,000 | |2003 |7,688 |135 |72 |38,019,000 | |2002 |8,340 |(200) |(142) |40,004,000 | |2001 |9,278 |160 |114 |36,221,000 | |2000 |8,940 |5 |(21) |36,346,000 | (Source : British Airways â€Å"Annual Report and Accounts†) Table 1. 3 shows how British airways was enjoying a constant growth in their profit for 6 years straight from 2003, however, there was a steep decline in its profitability during 2009, roughly when the current economic crisis began to severely impact the industry. 5. 2. 2. Other impacts 5. 2. 2. 1 Work-for-nothing proposal The financial strain caused by the current recession had put on the company led to other disastrous events. In June 2009, BA asked its employees to work without pay for a minimum of 4 weeks amongst other favours. (BBC 2009) Colleagues are being urged to help the airlines cash-saving drive by signing up for unpaid leave or unpaid work. From tomorrow, people will be able to opt for blocks of unpaid leave or unpaid work, with salary deductions spread over three to six months, wherever possible. – extract from BAs in-house magazine under the headline Action Time The work-for-nothing offer was presented by and at the same, accepted by Willie Walsh, the CEO of British Airways and Keith Williams, the chief financial officer, who promised to work for nothing for the month of July 2009. In spite of this, Unite refused to accept the not-so-enticing offer, They believed that the CEO, who received a salary of ? 35,000 a year, which is astronomically more than other employees, could afford to work for nothing for a month, but your average BA cabin crew, who only receives an annual salary of ? 29,900, accor ding to the Civil Aviation Authority, cannot afford to do so (BBC 2009) Willie Walsh can afford to work for nothing, our members cant, – Unite Spokesman However, the events that followed the announcement of the work-for-nothing plea shocked the airline industry even more. Contrary to the expectation of many critics, numerous BA workers volunteered to accept the offer, and started to work for free for a month. (BBC 2009) 5. 2. 2. 2 Impact on tariff growth Table 1. shows the changes in tariff growth for First Class/Business and Economy passengers between January 2007 and January 2009. It presents a sharp decrease in both traffic, from January 2008 to January 2009. A striking point is that the recession affected the activities of premium business travellers and non-premium such as holiday makers. Table 1. 4 Tariff growth by ticket type [pic] (Source: IATA iata. org). Furthermore, BA initiated an extra ‘rich tax’ for its premium class passengers (First, Club World, World Traveller Plus and Club Europe class passengers) to combat the soaring fuel price, adding an extra ? 48 to a return long haul flight. However, Analysts warned that the rich tax might backfire to their customers, even though it has absolutely no effect on economy class passengers. (Mail Online, 2008) 5. 2. 2. 3 Troubles with its employees The current recession has not helped British Airways develop a good relationship with its employees; in fact, it has made it worse than ever. Furthermore, the recession has caused tension between the cabin crew and pilots of British Airways. Two trade unions are mainly used by the workers, including pilots, of British Airways. These are BALPA, UK’s largest trade union for pilots, and Unite, the trade union used by cabin crews and other employees who are not pilots. The tension between British Airways continuously escalated due to irreconcilable differences and demands from both sides. The escalation reached its peak on March 2010, when the employees who were members of the trade union, Unite, organised a walkout. British Airways considered this unacceptable and as a result, stripped the workers involved in the walkout with their travel benefits. With both sides taking hits, they came to the conclusion that a deal must be made. However, in response to the stripping of the travel perks, the members of Unite demanded that before a deal is agreed, BA must reinstate the travel perks back to the striking employees. Unsurprisingly, this was refused and Unite officials have declared further strikes after 14 April 2010. There are currently no peaces scheduled, and various prominent figures have tried to intervene to find a solution agreeable by both sides, including the current prime minister, Gordon Brown (Guardian 2010) The members of Unite picketed outside of London Heathrow Airport and again planned other 3 days strike after negotiations did not work but strikers seemed not happy for a second walkout. The Unite insisted to negotiate with BA again, the CEO of BA, Willie Walsh said that the company has made a loss of ? 7m a day. The estimated cost of strike action by cabin crew last month is between ? 40m and ? 45m (Mail Online 2010) However, BA was not unprepared for the walkout. Their contingency plans allowed more than 65 percents passengers to reach to their destinations with 1,157 staff working. Only few flights were cancelled and BA was confident that they could handle the passengers at weekends of March. But the Unite Union made a contrasting announcement, stating that only a few of BA normal flights take off and a half of plans grounded (Chloe B,2010) By the recent strike in 2010, BA has had their brand image damaged and Willie Walsh, chief executive, apologising to their passengers for the situation. Indeed, the financial aspects of British Airways were not the only victim of the current recession. 5. 3. The Impacts of recession on Ryanair and Easyjet As mentioned before, the recession had a somewhat favourable effect on low cost airlines such as Easyjet and Ryanair. It has increased its number of passengers and had a positive or insignificant impact on its financial statements. I shall discuss each section separately below. 5. 3. 1 The Passenger Number Growths Table 1. 5 provides information regarding the growth in number of customers for British Airways, Ryanair and Easy Jet. Unsurprisingly, British Airways has experienced a negative growth whilst Easyjet and Ryanair have enjoyed a positive one, albeit being a smaller figure than before the recession. Table 1. Growth in passenger numbers [pic] (Source: CAPA, 2009, www. centreforaviation. com) The figures in the chart suggest that whilst all three airlines have experienced a negative impact from the recession, the biggest victim is British Airways. Moreover, even the growth rate is declined overall for Ryanair and Easyjet, the fact that they are still experiencing a positive growth suggests that more and more people are still switching to low cost airlines. 5. 3. 3 Financial Impact Table 1. 5 describes the new traffic number of Ryanair and Easyjet in August 2009. Table 1. 6 Traffic number for Ryanair and Easyjet [pic] [pic] (Source: CAPA, 2009, www. entreforaviation. com) Table 1. 5 illustrates that both airlines have increased the number of passengers carried during August 2009. This good news prompted Michael O’Leary, the CEO of Ryanair, to predict that only four European airlines would survive from the recession: British airways, Air France, Lufthansa and Ryan Air. Added to that, he expected that this downturn could help the Ryanair improve its market position and shares by meeting the needs of passengers with its low price strategy. (Telegraph, 2009) However, it must be noted that the current recession has had no negative impact on the financial performance of both Easyjet and Ryanair. The increased fuel price has forced Ryanair, who refuses to increases its price to its customers, resorted to other earnings: they planned to purchases 50 cheap aircrafts from declining airways and start flying to the new routes which will be the cities of the United State from London Stansted airport and Island Dublin airport. Michael O’Leary stated that We’ll just have to keep flying more aircraft, opening up more routes and offering people more cheap flights, (Jack, 2008) 6. The Strategies implemented by British Airways 6. 1 Strategies implemented to compete against Easyjet and Ryanair As mentioned above, British Airways have suffered financially and passenger number wise due to the current recession. On the other hand, it seems obvious that low cost airlines have suffered far less, and gained some positive aspects during the recent economic crisis. As a result, British Airways have implemented several tactics to combat against these airlines, in an attempt to keep its market share and survive the economic crisis they are facing currently. 6. 1. 1 Merger with Iberia Although British Airways is one of the largest airlines in the world, it still maintained that it could expand further. As a result, BA proposed a merger with Iberia, an ailing Spanish Airline, which is needs to be approved by the European Commission. A preliminary agreement was made before the end of 2009 between Iberia and British Airways. It was believed at the time that if the merger between the two carriers, indeed does go ahead, it will create one of the largest airlines in terms of revenue. (BBC, 2009) On 8 April 2010, an agreement to merge between British Airways and Iberia was announced and it was decided that the newly merged company will be known as  International Airlines Group, although both airlines will continue to operate under their current brands. (BBC, 2010) The merger was met with enthusiasm by both parties, with Willie Walsh announcing that the merger will create a strong European airline well able to compete in the 21st Century,† adding that both airlines will retain their brands and heritage while achieving significant synergies as a combined force. (Willie Walsh, 2010) After the merger, the combined operation would possess 419 aircraft operating to more than 200 separate destinations, and would save the two partners 400m Euros ($594m; ? 358m) in costs a year, according to their preliminary calculation and expectation. (BBC, 2010) The main aim of the merger was to increase its dominance and increase its market share. Although only time would tell, reaction from competitors regarding the news reflected how the merger would affect other airlines. For example, Virgin Airlines announced that the merger will increase BAs dominance at Heathrow with 44% of take-off and landing slots this winter. (BBC, 2010) 6. 1. 2 Ending Business Class on Short-Haul flights Due to the declining popularity of BA’s business class, Willie Walsh has practically put a stop on European business-class travel, saying that the service is proving to be too costly, and that it may harm their chance of surviving the recession. With other companies looking to cut their budgets in order to survive the current economic crisis, BA has decided that the added expense of flying rich businessmen in a slightly larger seats for one or two-hour journeys has become unsustainable and not profitable. (David R, 2010) As seen in Table 1. 5, There has seen a sharp drop in business-class passengers, most of them occurring in short-haul flights. These travelers have either traded down to the economy cabin or moved to budget carriers instead, for example Ryanair. BA is understood to be reviewing its European operations, and as a result, premium seats could be removed from planes operating out of Gatwick and regional airports such as Manchester. In a statement to deal with the issue, â€Å"short-haul premium will never recover. That part of the business has changed for ever and we have to address it†. However, BA has plans to continue providing premium class in short-haul flights operating from Heathrow, to take advantage of business-class transfer traffic. (Martin R, 2010) Although on the face of it, this strategic move seems like a way to combat he rising costs, however, its real intent is to combat low cost airlines, who, although provides business class seats, accentuates the benefits of their economy class seats. 6. 1. 3 Barclaycard promotion British Airways understood that most of their customers booked their flig hts with credit cards. As a result, they saw Barclaycard, UK’s largest credit card provider, as a viable business partner. As a result, British Airways implemented a promotion with the Barclaycard; customers booking their flights via Barclaycard would allow them to earn air miles, which could be used to purchase British airways products or receive free flights. (BA, 2) 6. 1. 4 Voluntary redundancy scheme British Airways announced a voluntary redundancy scheme during the early part of the current recession, stating that almost 300 staff would leave the airline by the end of May 2009. The announcement was expectedly met with hostility with its workers. The scheme was designed to meet some demand for redundancy in some parts of the business and where it was possible to release people and not replace them. The departures, largely in administration and support roles, are the latest cost-cutting measure by the airline, which is facing increasingly weaker demand for flights, particularly for its more lucrative business and first-class seats, and is in addition to about 450 managers that left the company in December 2008. A spokeswoman for BA said the airline was pleased with the take-up of the scheme, with staff numbers in line with expectations. Workers will get about three weeks pay for every year they have been with the airline. The redundancies followed BA’s announcement to sell 11 of its 15 Boeing 757 aircraft, to be replaced by Airbus A320s, in order to cut costs and be more environmentally friendly. (Times Online, 2010) 6. 1. 5 Service Oriented Architecture (SOA) During the latter part of 2009, British Airways announced that it will use Progress Software as part of its program to transform passenger and airport systems. BA expressed its intention to use SOA solutions as a key part of its travel program to upgrade its IT systems. This is expected to last until the end of 2014 and change the way BA provides service by integrating over 600 different electronic systems and processes involved in getting the passengers to their destinations. Gordon Penfold, the CTO of Progress Software, the American company who invented the SOA program, explained that â€Å"with 300 locations around the globe, 25,000 users and more than 250 key applications, BAs goal is to transform the travel experience. The flexibility of the Progress SOA portfolio allows BA to extend the features of its e-commerce site right through to its airports, by allowing greater self-service functionality and plug and play capability. † The result, according to Penfold, is to drive an agile business where rollout is easier, and cost and time are reduced. British Airways believed that providing just low cost seats to its passengers will not help them beat low cost airlines, but reducing the travelling time will make them the natural choice for air travelling. (Angelica M, 2009) 6. 1. 6 Seat Selection On September 2009, British Airways have started charging their passengers if they wish to choose their seats when they reserve. The new charges will affect people who want to ensure they sit together on a flight and anyone with a preference for window, aisle or emergency exit seats Currently, British Airways allows passengers to select their preferred seats free of charge within the 24 hours prior to departure. However from October 7 2009, passengers would have to reach into their pockets if they wish to secure their preferred spot in the cabin when they make a booking. A spokesperson announced that this would give customers more control over their seating options. For an economy class trip within Europe, passengers will pay an extra ? 10 per person to choose a seat. On long-haul economy or short flights in business class the charge will be ? 20, and ? 60 in business class on long-haul voyages. The plan followed the airlines decision to cut luggage allowances and abolish free meals on short flights. However, the plan was met with some ridicule. Some argued that the move will undoubtedly tarnish BA’s brand image. However, the airline has defended the move and said it was giving customers peace of mind they could sit where they want while opening up new revenue streams. Also, they saw that low cost airlines, EasyJet, and Ryanair, had hidden charges which were written in small prints. These extra charges showed how much passengers had to pay for extras such as using a debit card and checking-in. According to their calculation, the â€Å"hidden charges† showed maximum extra charges of ? 375 and ? 79. 85 for Ryanair and Easyjet respectively. (James Q, 2009) 7. Recommendations As mentioned before, most airlines are suffering due to the recent economic downturn. Hence, they, too, have rethought about their current business situation and developed alternative methods. After much research, it seems as though British Airways, who has suffered more due to the current economic climate, has adopted more strategies than others. They have implemented cost-cutting, redundancy and cutting luxury on flight. However, one area where they may improve is focusing on auxiliary income. Focusing on Auxiliary Income The aviation industry companies have opportunities to earn auxiliary income: For example, they could charge for checked baggage, seat assignment, catering and even blankets and so on. Whilst for some airlines this additional income may be insignificant, however, other airlines have seen a dramatic increase in their auxiliary income. During the recent years, US airlines have collected more than US$ 670 million in baggage fees in the second quarter of this year, up some 276 percent from the year-earlier period (I-Net Bridge, 2009) In fact, speaking at the at the World Low Cost Airline aviation conference in Barcelona, Spain, Mango CEO Nico Bezuidenhout stated that; There are compelling reasons for airlines to take ancillary revenue opportunities very seriously, said Bezuidenhout, and airlines have an advantage: a base pre-qualified as having disposable income, an audience which has already illustrated a level of trust in the airlines own brand and, thirdly, knowledge of the consumers travel trends. Not only do airlines have substantial insight into who they carry, but air travel typically represents the first purchase activity in the overall travel procurement cycle, followed by destination content, hotels and cars bookings all of this serving to provide airlines with the ideal contextualised sales opportunity. † Recently, most airlines, not just low-cost airways, have started to focus on increasing their auxiliary income more than ever. British Airways is also adopting this method by charging fee for seat selection. However, perhaps they should consider increasing their additional income through other means as well. 8. Conclusion British Airways has undoubtedly suffered due to the current economic crisis. However, what makes the situation more painful is that low-cost airlines, such as Ryanair and Easyjet are surviving the economic downturn with relative ease, and have gained more passengers due to passengers preferring to travel cheaper than before, as seen above. Perhaps it would not be wise for British Airways to change their business way in order to combat the current recession. Many experts believe that the recession is coming to an end and that people will soon become more willing to spend more on luxuries such as air travelling. On the other hand, there are economists who believe that the recession will last longer than anyone is expecting, and that is businesses do not adapt to the new environment, they will inevitably cease to trade. The wisest strategic movement British Airways could implement would be to shift their attitude towards low cost airlines, taking in what is working for them and utilising it to their benefit, whilst at the same time, constantly improving their strengths such as providing excellent service to their customers. Arguably, low cost airlines have increased their attraction level to consumers in recent years, and British Airways must take this into account. A detailed Porter’s Five Forces analysis, complimented with a SWOT analysis could direct British Airways to the correct way forward. With all industries, it is always vital to constantly monitor their business environment and adapt to it. By carefully analysing their environment, they can decide which strategy will benefit them. They should recognise the opportunities and threats present and wisely use their strengths and weaknesses to their advantage. British Airways must do the same. Based on the strategies currently adopted or announced by British Airways, it appears as though they are horizontally expanding. Perhaps this is the correct way to go, especially since the strategy allows economies of scales. However, constant evolution of the company’s management and business style must be approved if British Airways expects to survive not only the current recession, but against large number of competitors.