STRATEGIC MANAGEMENT

Strategic Management

Strategic Management

Introduction

British Airways has been characterized by rapid expansion, a result of the deregulation of the air industry in Europe in 1997. Over the years, it has evolved into one of the world's most profitable airlines, running at remarkable margins by passing its costs directly to its customers. British Airways is the largest airline in Europe in terms of passenger numbers. (Green, 2003)

British Airways' objective is to establish itself as Europe's leading low-fares scheduled passenger airline through continued improvements and expanding offerings of its low-fares service. British Airways aims to offer low fares that generate increased passenger traffic. A continuous focus on crucial success factors like innovation, extremely simple, strong pricing strategy and operating efficiencies are a vital factors of the British Airways success. British Airways' no frills strategy does not only mean a cut in cabin crew, but also allows for a faster pre-flight preparation; thereby reducing the time grounded as well maintaining low fare. British Airways offers slightly different prices between the weekend and weekdays, this leads to unit revenue largely higher than the basic price.

British Airways is an Irish airline headquartered in Dublin, Ireland. It is established itself as Europe's largest low-cost carrier and dynamic as well as the number one in customer service. Also it is one of the world's largest and most successful low cost airlines. This is evidence in the fact that it has consistently achieved a compound annual growth of 20% since 1991 with a current market capitalization of 5bn, ahead of British Airways (4.3bn), Lufthansa (4.7bn) and Air France/KLM (3.5bn), and with high statistics in customer satisfaction. (Green, 2003)

British Airways operates on 460+ routes to 25 countries with project annual passenger growth rate as 25%. In the current year potentially British Airways plans to carry 52m passengers on 499 low fare routes across 26 European countries, with 20 European bases and by the end of March 2008 British Airways plans to operate a fleet of 163 new Boeing 737-800 aircraft with firm orders for a further 99 new aircraft, which will be delivered over the next 5 years. British Airways currently employs a team of 4,500 people, comprising over 25 different nationalities. (Hall, 2006)

British Airways has been successful and able to maintain their competitive position in the low-cost airline market space, due to following key successful factors: (Hearne, 2003)

• No Frills, Low Cost Approach

• Low Ticket Prices

• Point-to-point Short Haul Flights

• Operational in Regional and Secondary Airports

• Production costs lower than competitors.

• Powerful communication and strong marketing strategy.

• Ability to influence the policy and behavior of the competitors.

Industry/Market Analysis

The European airline industry was one of the most heavily regulated and protected sectors. For the most part, carriers were state-owned and enjoyed a legal monopoly over domestic traffic. Governments used to control entry to foreign companies by means of restrictive bilateral Air Service Agreements (ASA). And only the carriers registered in each signatory state were allowed to operate commercial services. But in general, the countries allowed only its state-owned flag ...