ASSESSMENT OF THE EXTERNAL BUSINESS ENVIRONMENT OF VIRGIN ATLANTIC USING A PEST ANALYSIS

Assessment of the External Business Environment of Virgin Airlines using PEST Analysis

Table of Contents

Introduction2

Discussion & Analysis2

Company Overview2

PEST Analysis3

Political Analysis3

Economic Factors5

Sociological Factor6

Technological Factor7

Conclusion7

References8

PEST analysis of Virgin Atlantic

Introduction

PEST analysis is an audit of environmental influences of an organization with the rationale of implementing this information to lead strategic decision-making. Assessment of four sets of factors is involved in the PEST technique: Political/legal, Economic, Socio-cultural, and Technological. Identification of PEST influences is a helpful means of summarising the external environment wherein a business operates. Nevertheless, it must be followed up by consideration of how to these macroeconomic influences, a business should respond. This paper is intended to assess the external environment of Virgin Atlantic Airlines by using the PEST analysis. Virgin Atlantic is one of largest airlines of Britain and largest transatlantic airline of Europe.

Discussion & Analysis

Company Overview

Being one of the largest British long haul international airlines, Virgin Atlantic Airways (Virgin Atlantic) operates long haul services to more than 30 global destinations. 51% of Virgin Atlantic is owned by Virgin Group while Singapore Airlines owns 49% of it. A fleet of Airbus A340 and A330 aircraft and Boeing 747 and 777 is currently operated by it. At Gatwick and Heathrow airports of London and the Manchester airport, the airline has bases. More than five million passengers are transported by the Company annually. 30 routes are operated by Virgin Atlantic around the globe, encompassing 10 routes to the United States, 8 routes to the Caribbean, 6 to Asia Pacific, 4 routes to Africa, one route to Indian Ocean and Middle East. Three classes of travel are offered by Virgin Atlantic that include: upper class, premium economy, and economy all with in-flight entertainment.

PEST Analysis

Political Analysis

The airlines have to work with the Government operating regulations. For regulating Air traffic management in the European Union, the Single European Sky (SES) initiative was created to function as a regulator. A single market has been created by the European airline deregulation, eliminating limitations from member countries and producing competitiveness internationally. This would lessen national carriers' competitive advantage, for e.g., British Airways which is a positive aspect for Virgin Atlantic. Nonetheless, this entails the rise of low-cost airlines that has augmented competition for Virgin Atlantic and the other main airline companies. In addition, competition for Virgin Atlantic has also been increased by the recent EU-US “open skies” agreement, which opens up the transatlantic route permitting all European carriers to fly to US. This is because this route was exclusive to Virgin and 3 other Airlines.

Regulation (EC) No 261/2004 of the European Parliament and of the Council - Legislation that has been passed by the European Union that came into effect beginning early 2005, for indemnifying airline passengers who have been left without getting on board of a flight for which a valid ticket is held by them. Fixed levels of compensation are also imposed by the legislation to passengers for called off flights, excluding where it can be proven ...