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Important micro influences of the commercial airline industry
The PESTLE analysis tool is relevant for presenting influences for the airline industry. Political factors have had a major role in influencing growth. For example, many countries have considered a national commercial airline as part of the national pride, and this has translated to the government’s willingness to support such airlines to show a country’s competitiveness. Economic factors have also played a role in ensuring there is a growing business for the airline.
More than 3 billion people who fly annually do so because their incomes or their companies’ incomes support air travel choices. On the other hand, growth in capital availability through the development of markets around the world has allowed investors and investment groups to participate in the building of the commercial airline industry. This has happened through the sale of private airlines to the public, allowing more companies to tap into the freely available capital from people’s savings (Basignani 2011).
The third factor is the social, where people have come to change mindsets about flying. In the past, flying was a privileged activity for the well-endowed people in society. The division of commercial flying into different classes like the economy, business, and first class ensures that even the most cost-sensitive customer can afford a flight in most cases. Low-cost budget airlines have also eased the pressure of flying, and they have transformed it into a means of travel as ordinary as bus transport.
Technological factors have also created a micro influence in the industry. For example, internet booking has made airlines friendlier and responsive to customer needs, which has promoted customer loyalty. Another technological trend is the use of social media for marketing, which has helped the management of commercial airlines to collect customer intelligence inexpensively for improvement of service delivery (Basignani 2011).
Legal factors that have an influence on airlines’ operations include the bilateral agreements between countries, the immigration laws on the movement of labor, and the protection of business interests in different countries to allow commercial airlines to have more than one operation base for serving their customers. The developments are not very significant; they influence the opportunities and risks of the airline industry based on a collective scale (Basignani 2011).
Lastly, environmental factors have also had a role in shaping the current industry. As consumers continue to increase their awareness of clean travel and the impact of waste on their quality of life, they are cutting back on unnecessary travel using unclean means. The number of conscious consumers making such choices remains low, but the trend is notable and will be a considerable opinion maker for leading industry heads (Basignani 2011).
Three factors of most interest to BA CEO daily
According to a report by IATA, passengers remain the core thinking of the airline business, and the BA CEO will have to think of this often (Basignani 2011). Within the passenger segment, the CEO will be considering the business segment that is the most profitable for airlines. The CEO will be looking at the cost of business travel overall and seek to position the airline to match the trends in travel. Business travelers are affected by the overall cost of doing business in a particular region and prefer to fly business class for its convenience.
Airlines have to work in partnership with hotels and tour/travel companies to facilitate smooth transfers of business travels when checking in and checking out of a particular destination. Thus, the cost of the auxiliary service providers that collaborate with the airline will end up affecting the competitiveness of the airline’s business package. The CEO, in this case, will be interested in ongoing partnerships at providing value added services to passengers.
For destinations with a glut of business hotel rooms, airlines have an opportunity for earning high rates of profitability as the overall cost of business travel reduce for their partnership deals as is the case in the Asia-Pacific region (Baker 2015).
The second factor of most interest to the CEO of BA would be the strengths and weaknesses of the company about its market conditions. In the airline industry, the main actors are customers, suppliers, potential entrants and airline rivals. The use of the Porter’s five force analysis can help to reveal the exposure of BA’s business to market threats (Why airlines make such 2014).
These threats are then featured on the strength and weakness analysis to expose the choices that the CEO has to sustain the business. BA is part of the International Airlines Group (IAG). The airline’s strengths are in its operation of the modern Airbus A380 plane in its lucrative business traveler routes. A modern fleet allows customers to enjoy comfort and has been a significant determinant of the ‘SuperBrands’ award for British Airways (British Airways Plc. 2015).
The major weakness for BA has been the cost of its services to passengers. The company faces threats of substitution from low-cost airlines that offer budget travel solutions across Europe. It faces the same threats on its Atlantic route where legacy airlines are increasing their focus on the route, which increases threats of existing rivalry. At the same time, there is a threat of new entrants into the routes that BA dominates, especially in Africa and Asia.
These market forces are affecting the realization of the full benefits of BA’s strength factors, which are its customer care service, its modern fleet, and safety record (British Airways Plc. 2015). Nevertheless, BA is seeking to challenge all parts of the cost base to ensure that it remain competitive and profitable at all levels and can use its strengths to minimize weaknesses and withstand market threats (Wright 2015).
The third factor worth daily considerations of the CEO is the staff welfare and turnover interests at BA. Over the last five years, the company has faced strikes and strike threats from sections of its workforce. The biggest claims for striking have been paying claims that do not go well with a turbulent airline industry reports and forecasts. The company faces a challenge of keeping costs down, and it must satisfy employee demands to ensure high-quality service delivery to its customers.
The biggest challenge and weakness for the company have been the use of inferior terms of employment for recently employed staffs over the existing staff in the cabin-crew section (Topham 2014). Therefore, the CEO will have to look consistently at ways of cutting overall staff costs without leading to glaring differences in employee pay that lead to employee disappointment and poor demonstration of organizational loyalty.
In summing up, the CEO will duly consider passenger numbers concerning their profitability, the strengths and weakness of the company and the way they unfold against competitive market forces. Lastly, the CEO will consider staff welfare as a market for service quality and overall airline competitiveness.
Reference List
‘Why airlines make such meagre profits’, 2014, The Economist. Web.
Baker, M. B. 2015, 2015 corporate travel index: As Asia/Pacific demand falls short of supply, business travel costs drop. Web.
Basignani, G. 2011, ‘IATA vision 2050’, Report, International Air Transport Association, Singapore.
British Airways Plc. 2015, Annual reports and accounts year ended 31 December 2014. Web.
Topham, G. 2014, British Airways cabin crew ready to strike over pay claim. Web.
Wright, R. 2015, Airline margins widest since mid-1960s but rivalry casts shadow. Web.
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