British Airways

Conquering New Markets

British Airways is the largest airlines in the world. The London based Company carries more international passengers than any other airline in the world. British Airways serves 174 destinations in 83 countries. It owns 25% of Quantas and sold 24.6% of USAir in June 1997. British Airways owns 219 aircraft, leases 89, and has an order&option plan for 79 more planes. The revenue splits up into 84% from passengers and 16% from cargo. Competing Airlines are Delta Airlines, American Airlines, Virgin Atlantic, and USAir on the transatlantic routes and Lufthansa, Air France, and Iberia on the continental routes.

British Airways has been incorporated in 1983. Four years later the British Government sold 720.2 million stocks to the public to privatize the company. Today the company has 55296 employees.

British Airways has started to lunch an efficiency program. Through this program British Airways was able to reduce the unit cost by 4.8%. Savings are expected to exceed $1 billion. Also the cheap fuel prices are keeping British Airways second largest expense down.

But as well as many other airlines British Airways faces restrictions by many governments that keep it from reaching a higher market share. Another major component that keeps British Airways from increasing its market share is the appearance of many small competeors, that take passengers away with their low price policy. British Airways has been fighting both threats more or less successful. It was more successful in competing with low-price competeors. But it is less successful in overcoming the many restrictions set by the European Union and the U.S. government.

British Airways has made a continuous effort to improve its service over the last decade and thereby established itself as a quality airline. Also British Airways has not had a major crash in the last decade which helped establishing confidence by many passengers. The high quality of course has its price. But in comparison to its low price competeors such as Virgin Atlantic British Airways has always gotten the better ratings. Due to its long-term efforts to improve the quality British Airways has been able to establish itself as an airline that is worth the extra "pound".

But on another front British Airways did not fight as successful as they did against Virgin Atlantic. One major problem that virtually every airline is facing is that, the airline is able to carry passengers over the Atlantic. As soon as they land, however, they have to hand the passenger over to a domestic airline due to some complex laws and regulations in the U.S. and the EU. United Airlines and Lufthansa, Germanys largest provider of air-services, were able to go around most of those regulations by forming the "Global Alliance". British Airways was looking for a patner to do the same thing and has found it in American Airlines. Both airlines agreed to feed each other with passengers, where they otherwise would not get any passengers. The European Anti-Trust Commission, however, did not approve the plans British Airways had. Nor did the Clinton administration. The alliance between to two airlines would enable them to control about 65% of the market, as well as 100% of at least 13 major routes between North America and Europe.

In late 1998 however British Airways was able to form the alliance it had always dreamed of. Not only American but also Quantus, Cathy Pacific, and Canadian joined British Airways. Now British Airways is able to get more customers on all five continents. The system works very simple. If British Airways would fly to Sydney, Australia, it could not transport their passengers on to Melbourne. Another Airline would take BA’s passengers. But now Cathy Pacific gets those passengers. This does not increase the revenue for British Airways. But if Cathy Pacific flies from Melbourne to London, it could not carry on their passenger. But now instead of giving them to who pays the most for them British Airways gets them to fly them to their destination, which will increase the revenue of British Airways.