PESTLE analysis

As airline is one of the largest external economic activities, it is important to developing countries. From the BBC News on 8^th Nov, showing British airway (BA) owner IAG sees the profit rose nearly 8%.  

Thus I would like to know how the BA can earn profit in marco environment and how it affect BA, which using PESTLE analysis, the tool that I learnt this week, to find out what the challenges are BA facing and the what factors have to be considered when they plan for future. PESTLE stands for Political, Economic, Sociological, Technological, Legal and Environmental.

Political:

It talks about how the rule of government affects the organization.

Comply on certain regulations

BA flying both nationally and internationally airplanes, so they need to compliance on certain regulations and policies of government, which are heavy, they control where airlines can fly, also on their products, planning and pricing policies. Also, the EU regulation on carbon emission reduction.


Unstable political environment

In recent year the political environment in the UK was unstable because of coalition government and the major spending cuts which for making savings and reducing on the national debt. As BA planned expansion of Heathrow airport, the budget cuts may leads the increased number of flight cannot go head but the revenue will increase when they brought it.

Taxation

In January 2011, the tax – VAT increase at 20%, this will affect BA and its shareholders.

Security checking and insurance fees

Moreover, they have to pay more for security check and insurance. This is important to competitive advantage. 

My thought: I will consider all the past terrorist threats when I choosing the airline, if lots of accidents happened in that company, I will not choose it because I afraid and don’t have confident to this company, so the sufficient measures in needed, maintain consumer confidence is one of the main considered factors. 

But the costs of BA will increased due to the expense on security check and insurance. They have to follow the security legislation as well.

Economic

It is about the economic factors affect the business operations and decision making of the organization.

Recession

Recession is one of the effects on BA, as the number of travelers tends to decrease, since some of the customers in Europe may choose to take train rather than airplane.

My thought: if under recession, I would prefer to take train even it spends more time to get to the place.

Rising fuel price

Another risk is the cost of fuel, as the raise oil cost will turn to increase the production cost. Usually, they will increase the tickets prices so as to share burden with customers.

My experience: again, if the price tickets increase, I will choose another substitutes or not to travel, for example, the tickets to Japan increased on last year, so I delay my planning and want to wait until the tickets become cheaper. I think this will leads to less people use planes.

Poor exchange rate

As poor exchange rate will affect BA as well, such as weakening Pound would reduced the amount of business travel, people may just talk on phone or internet call, such as skype.

 

Socio-culture

 It is how the social environment of the market affect the organization. 

Aging population

Aging population is happening in the UK, it means there are more older generation, which they have more leisure time to go travel. This is a potential opportunity to BA. 
For example, my grandmother immigrated into Canada, although she is already 75 years old, but she always travel with her friends, such as they just went to Australia on last year.

Traveling trend

And there are more people like to travel because of different purpose.

 

This cultural trends could benefit BA.


From their corporate responsibility showed their social goals: 

Technology

The innovation of technology may affect the operation of the industry and market. 

As the technology advanced, BA invested lots of money on technology.

Online internet services

Online Internet service has been widely used, it helps BA to reduce costs and become competitive. For me, now I prefer to use Internet ticket booking system rather than book via telephone or go to their office, since this is more convenience, and to BA, they could manipulate their resources efficiently, like they can ask their staff to do others jobs but not only for ticket services and they can cut the cost of travel agents as well. Meanwhile, they need to aware the elderly may not know how to use E-tickets service, so even they invest a lot on technology but they cannot be too reliant.

Also, now passengers can check in online. 

My experience - I almost check in online every time, it saves time, more important is that when I do that, I will easily browse their site for cheap tickets, I think this could also be a way to attract customers.

Self-service check in

At Heathrow airports, there are self-service check-in machines, which mean passengers don’t have to queue up for check into the flight. This helps the process become faster. 

My experience - To me, as a passenger, I feel more satisfy to BA with this service, as it gave me a good image.

Others services

And they also used security check technologies, and offered wireless LAN system for customers.

Legal

The certain law will affect business environment in certain country as they need to maintain policies for themselves.

Safety regulation

The European union restricted the air carriers based on safety reasons. The power of union is strong so this can affect BA, they will voice the opinion of workers, take Cabin Crew strikes as example, it happened few years ago, the workers decided to make a three-day-strike, I think the staff is important to a company and good employee relations are needed if BA wants to avoid industrial action or any conflicts between employees.

Terrorist attacks

Moreover the terrorist attacks cased the implement of new security regulations from the Europe and US, which leads to fall in customer traveling confidance.

Environmental

It is how the surrounding environment affect the organization.

Green issues

As people are being more aware of the environmental impact, if BA fail to integrate environmental strategy, it could lead to a huge effect on the BA’s reputation and income.

Environment regulation

Flying a flight could affect a lot on environment, as there are many carbon emissions and waste, this would affect local air quality and cause noise pollution.

Environmental regulation may increase operational costs each year. However, BA has set goals for further reductions in their carbon emissions. For example, their 191 aircraft engines can help to reduce NOx and improve fuel efficiency.

They have reduced 10.9% in CO2 emission in the UK.

For noise pollution, their new aircrafts such as 12 Airbus A380 and 24 Boeing 787 aircraft are quieter, so as to reduce noise pollution.

Climate change

Climate change is the key thing that BA needed to concern, and they are trying to invest new technologies and low-carbon fuels, to reduce greenhouse gas emission. They has recycled 35% of waste across Heathrow and Gatwick airport. 

From their corporate responsibility showed their environmental goals: