Strategic Analysis of the UK Aviation Industry
Introduction to British Airways
British Airways is owned by the International Airlines Group (IAG) and is UK based. It operates a fleet of slightly more than 300 aircraft with destinations in over 7o countries in the world. It is a big player in the UK aviation industry. The estimated carriage in total is 40 million passengers per annum (Pratap, 2020). Over the years, the trends in the aviation industry have changed, and the company has invested all it can to make sure that it thrives even in the harshest conditions. In the year 2019 British Airways celebrated 100 years in the industry. However, the year was full of challenges due to the requirements posed by Brexit and later in the year, the noble Coronavirus pandemic.
The Aviation industry in the entire world was greatly affected by Coronavirus, and many of the companies have been struggling since then. The company has, however, sought strategic and operational moves in the industry in a bid to control the movement and flow of the various resources at their disposal. Among the significant steps, the company has taken in the recent past is an attempt to decrease the number of employees in the face of the pandemic. This move has, however, received a lot of mixed reactions, with the MPs standing against it (Topham, 2020).
SWOT Analysis of the Company
| Strengths I. The company enjoys the privileges of being an established brand. II. The company has also invested in and achieved high levels of technology mobilities. III. Despite being the core of the United Kingdom, the company enjoys many other international routes. IV. The company has invested in increasing the sustainability of its operations. V. The company owns a vast fleet that is fuel-efficient. VI. The company has engaged in several meaningful partnerships that have helped in improving its international routes. | Weaknesses I. Issues with Human Resources. II. The company relies too much upon the domestic market. III. The use of Rolls Royce engine, which has caused a lot of inconveniences in the recent past. IV. |
| Opportunities I. A wide range of opportunities for expansion in the international markets. II. Technological advances and innovation are not yet exhausted. More can be done. III. The company can leverage on increasing the services portfolio to expand its coverage. | Threats I. There is increased competition from international and local companies. II. A complex web of regulations limiting the company. III. A new set of challenges resulting from Brexit IV. The noble Coronavirus has caused a global challenge to aviation in the entire globe. |
Overview of the UK Aviation Industry
The United Kingdom is among the leading in the aviation industry in both the quality and the spread of services they deliver to their clients from all over the world. With the increase in population, the industry has predicted a potential rise in the traffic and the numbers of new clients expected to fly by the year 2050. The United Kingdom enjoys a vast connection in the entire globe. It has over 370 direct links in 100 countries in the world. As a result, the aviation industry contributes almost 22 billion sterling pounds in the United Kingdom’s economy each year. This distribution is done between the air transport industry, which provides 14 billion and the aerospace industry that contributes 8 billion sterling pounds.
It is estimated to provide about 230,000 employment opportunities in the population of the country, and this emphasizes the importance of the industry in the entire economy. Any challenge or opportunity that could present itself in the industry is foreseen to cause a significant impact on the economy of the nation. Many sectors, like the manufacturing sector, the business sector and the tourism sector, rely on the transportation offered by the aviation industry. With international travels and local tourism, contributing to almost 68 billion sterling pounds to the economy, air transport accounts for nearly 80% of the expenditure.
Challenges facing the industry
The first and very eminent challenge to the UK aviation industry is the change in global trends and a shift in the markets. There is a considerable shift in the global economies, with countries like Brazil, Mexico, Indonesia and India starting a trend that could overtake many of the countries that are currently leading in the sector. China is also in a surged upward trend, seeing an increased development that could see to a shift in position, overtaking the US aviation industry.
A second challenge is increased competition. Countries and emerging economies like China and India are making considerable investments in the aviation industry. These countries are seeking to cause an imbalance in the global markets and the entire aviation industry. This means that the government needs to invest a great deal in the aviation industry to make the most from it. Another challenge that is facing the industry is protectionist policies from the international markets. Many companies have placed sanctions in several economic sectors. These sanctions have a significant impact on the Aviation industry as it relies very much on foreign travels.
The noble Coronavirus pandemic is another significant challenge facing the aviation industry. The biggest problem comes from the fact that the country depends much on international travels. Increased ban on international flights means that the country is going to experience even more robust economic times. Many companies are seeking to reduce the number of employees at the face of the many challenges that have come as a result of the Coronavirus and the policies that have been tailored towards the control of its spread.
There is a more significant challenge in European airlines, with their labour relations. The existence of multiple labour unions poses a considerable challenge to companies. This is because of the divergence in the labour laws and the terms of the different labour organizations in the countries it serves. Unlike the United States companies, there are multiple organizations in the country that pose a significant challenge for the company executives from across the spread. The increase in labour unions could also increase the opportunity for the companies to tap into the low charging unions as the source of their labour.
Plausible Scenarios in the Industry
| 1. Increasing Demand
| 2. Changing Passenger Expectations |
| 3. Leveraging in technology | 4. Shifting trends and markets
|
Increasing Demand
Looking at the global statistics, around 4 billion passengers flew in the year 2017. The demand for air travel services is increasing globally. There was a 7.6 % increase in 2016 in the air passenger numbers. The numbers are credited to the increased need for travel in the entire globe. The business class is rapidly growing, tourism increasing and many other services gaining popularity in the industry (Melander, 2018). This calls for increased services in the aviation industry. Between 2007 and 2017, there was a total increase in the number of travels by 65%. This can be credited to increased improvements in the global economic conditions and a general reduction in the airfares (Ellis, 2020).
With the expected population rise by the year 2050, there is a projected increase in the demand for air services. This is coupled with an increase in the need for cheaper and efficient services. The travels are also expected to be more affordable. This demand is going to drive the entire change in the aviation industry.
Changing Passenger Expectations
The projected increase in the numbers of people expecting services from the various airlines is likely to come with increased expectations. Among these expectations is the need for improved speed of services and better services. These services are meant to suit the needs of all the classes of clients in the industry. The best solution to the challenges facing the industry, is, therefore, an adjustment in the strategy of the industry, to improve the services rendered to the clients.
With an increased population prediction, this comes with more responsibilities. Millennials have rediscovered the need for travel and the need for fun activities. As such, most of their actions will be tailored towards an increased exploration of the world outside. Another significant change that is expected in the industry is the increase in the number of aged and disabled travellers in the recent future (Rhoades, 2016). This can be traced to the increased life expectancy in the nation. As a result of this, the number of travellers expected onboard will consist of several aged and disabled patients who call for some special treatment. These expectations must be met if the industry must retain or increase the levels off profitability over the years. The most significant of the moves the industry can make is customizing their services and improving their mobility to increase the coverage.
Leveraging on technology
There is a massive opportunity in technology that can be exploited for the good of any company. Each industry in modern society needs to reinvest and reconsider the opportunities available to it to increase its relevance in the future. If any company in the aviation company seeks to remain in the market, there is a dire need for the incorporation of technology onboard (Abayratin, 2017). This is meant to increase the experience of the different customers while at the same time increasing the quality of its services.
Leveraging in technology means increased gains on the side of the industries, from the benefits of technology. Among the top gains is increased fuel efficiency in the aircraft, increased sales and increased traffic. The companies in the aviation industry, both aerospace and air transport need this move. Most of them are already maximizing on the use of technology to increase the savings in the sector.
Shifting trends and Markets
The rise of developing nations and their power in the global economy is irresistible. There is, therefore, a need for precautionary measures to the industry in an attempt to increase the relevancy of the already established brands and countries. The developing nations like China and India have increased their budgetary allocations to the aviation sector. With this, there is an expected increase in the number of crafts manufactured by the countries and an increase in the number of flights. The coverage is also likely to increase with the increase in the number of airlines and the number of airports too. This is a move that needs a lot of caution from the established market leaders. They need a move to retain their relevance and still increase the number of passengers with the increase in demand and population.
Discussion of Increased demand as the most Plausible Scenario
PESTEL Analysis
- Political Environment
There are stringent policies in the various countries governing the conduct of the aviation industry. Many of the policies are meant to regulate and safeguard the safety of the passengers more than the safety of the industry (Shaw, 2018). The countries, therefore seek the services of the well-governed countries. This is supposed to be an advantage to the UK aviation industry since the policies governing the services and safety of the passengers are among the best. This means that the passenger will choose the services from the various companies that deliver quality services. This interprets to an increase in the demand for products and services.
- Economic Factors
There has been an economic recession in the entire globe as a result of the impacts of COVID-19. As economies try to recover from the depression that shall be left behind, There is going to be a dire need of the services from this industry. This means that the various players in the aviation industry need to be alert to respond to any increases in demand for the various services and packages. This does not leave out the need for courier services.
- Social Factors
There is an increased demand for services from companies that have a high degree of social responsibility. As a result, passengers are seeking the services of companies that offer both efficient and cheap services. Almost all the players in the UK aviation industry are in the bid to increase the quality of services while reducing the overall costs and prices of the services. The result of this is an increased demand for services from these companies from all corners of the world.
- Technological Changes
Passengers have shifted the demand for physical services to services that are within reach of their hand-held devices. As a result of this, the different people in the industry are doing all they can to improve the technological standards. The UK aviation industry is in the frontline in support of technology. This is yet another factor that is projected to increase the demand for its products and services.
- Legal Factors
There are lots of factors and policies fashioned by the various government authorities to control the aviation sector in the country. The systems fashioned by the various governments have a significant impact on the determination of the demand for the various products and services (Rhoades, 2016). The UK aviation sector has made terms and conditions quite easy for all the people to increase the earnings from the aviation industry. The best control of these policies is under the guidance of international standards. With these policies and legal frameworks, there is going to be an increase in the demand for the products and services.
Conclusion
The Aviation sector in the United Kingdom has been experiencing a decline as a result of the many challenges that have faced the industry globally. Among the problems is the rise of the COVID-19 pandemic that has paralyzed many economic factors in the globe. Being an industry that significantly relies on the international market, the impact of the pandemic has been widespread in the country. Some companies like British Airways have sought to reduce the number of employees in a bid to cut on costs. However, with the invention of proper responsive measures in the sector, there is a possibility of increased demand for the services in the short term and in the long run. The various players in the industry shall make all the possible efforts to ensure the industry recovers completely. However, many factors favour the odds of increased demand for the services.
References
Abayratine, R (2017). Megatrends and Air Transport. Legal, Ethical and Economical Issues. Springer printing press. DOI 10.1007/978-3-319-61124-2
Ellis, D. (2020). Internal versus external European air market realities: the competitive divide. Eur. Transp. Res. Rev. 12, 18. https://doi.org/10.1186/s12544-020-00410-0
Melander, L. (2018). Scenario development in transport studies: Methodological considerations and reflections on Delphi studies. Futures, 96, 68–78. https://doi.org/10.1016/j.futures.2017.11.007. Reuters (2019). China and the European Union sign landmark aviation deals. Reuters. Retrieved from https://uk.reuters.com/article/us-china-eu-aviation/china-and-european-union-sign-landmark-aviation-deals-idUKKCN1SQ1GL
Pratap, A (2020) British Airways SWOT Analysis. Notesmatic.com
Rhoades, D. L. (2016). Evolution of international aviation: Phoenix rising (3rd ed.). London: Routledge – Taylor & Francis Group.
Shaw, AA (2018). PESTLE Analysis of the Airline Industry. Marketing tutor.net
Topham, G (2020) MPs call British Airways a national disgrace for attempt to cut staff conditions. The Guardian.