MBA Part time

1
MBA Part time 3 May 2006

Angela Kane Pushpinder Sidhu John Kelly
Caryn Topping Denise McStravog
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Contents

• Airline Industry Push
• British Airways
• Performance Denise Caryn
• Market Positioning Angela
• Strategy John
• Conclusion Questions

3
The Global Airline Industry

• Was worth 293.2 billion in 2004
• Forecast to reach a value of 368.2 billion in
  2009
• An increase of 25.6from 2004
• Market volume of 2.3 billion passengers in 2004
• Will reach 3 billion passengers in 2009
• Increase of 32.7 from 2004

Source Datamonitor.com, October 2005
4
Macro Economic Climate
5
Industry Trends
6
Legacy Model versus Low Cost US Example
Source www.bcg.com Feb 2006
7
Fuel Prices
Source BA.com
8
British Airways History

• 1919 Aircraft Transport and Travel launched
  worlds 1st daily international scheduled
  flight from London to Paris
• 1924 ATT merged with 3 others to form
  Imperial Airways
• 1939 Imperial Airways merged with British
  Airways to form British Overseas Airways
  Corporation
• 1950s 1st airline to fly passenger jets
• 1974 merged with British European Airways
• 1976 1st airline to fly supersonic
  jets(Concorde) with Air France
• 1988 Privatised and floated
• 1988 Takeover of British Caledonian

Source Wikipedia, Yahoo Finance
9
British Airways Today

• 2006 Worlds 2nd largest airline in market
  capitalisation (6.7 billion)
• 5th largest in total revenue (14.6 billion)
• 3rd largest in Europe overall
• Currently operates 235 aeroplanes with a mean age
  of 9.7 years

10
Review of last Year

• Revenue up 8.4
• Strong volumes especially in premium
• Promotional activity required to drive seat
  factors
• Surcharges sticking
• Costs under pressure
• Fuel price at record high
• Employee costs up driven by pensions and wages
• Unit costs flat
• New initiatives announced to re-energise cost
  efforts

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Financial Performance
Source www.ba.com Investor Relations
12
Share Performance
Source www.ba.com Investor Relations
13
Debt Reduction
Source www.ba.com Investor Relations
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BA Passenger Statistics

• Number of Passenger Km 661m km
• Passenger Km per employee 13 356

All data relates to 2005 Source BA Annual
Report 2005 www.ba.com
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Traffic Statistics Passenger Load Factors
Whilst BAs load factor has been steadily
increasing over the past 4 years, so has the
competitions!
Source www.ba.com Investor Relations
www.airfranceklm-finance.com
16
People Productivity

• Profit per employee has improved significantly
  over the last 4 years it was negative in
  2001-2!
• Traffic per employee is also steadily improving.
• The number of employees has decreased from 61460
  in 2001-02 to 49490 in 2004-05. Further cuts are
  planned.

17
People Productivity Comparisons

• Easyjet is much more productive than BA
• However Easyjets productivity is decreasing
  whilst BAs is increasing

18
Asset Productivity Comparisons

• Easyjet makes better use of its fixed assets and
  productivity is improving yoy at a much faster
  rate than BA.

19
BA Market Positioning
Product
Market
20
BA Competitors per Segment
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Sales Market Share vs Competitor
Market Growth Rate PS
RMS
Sales of rival
1 Competitor
Sales M
Product
1.8
4
1470
Virgin
2716
Long Haul
4027
Air France
5097
European
1.3
3
1.6
1.1
3700
BMI
3992
UK Ireland
5
970
Easy Jet
Budget
New Service from Feb2006
Sources 2005 Annual Reports relevant Airlines
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SWOT Analysis
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Structured Approach to Strategy
Threat of Entrants
Power of Buyers
Power of Suppliers
Rivalry
Key Strategic Issues
Threat of Substitutes
Source www.strategycompass.com
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Product Market Portfolio Alignment
Strategy by Market
5
Star
Problem Child
Long Haul
European
Budget
Market Growth Rate
2.5
Cash Cow
Dog
UK Ireland
0
Follower
Leader
0.1
1.0
5.0
Marketing Positioning
25
BA Strategic Direction

• We will change the mix by
• redefining our offering
• for each channel.
• Mark Pavilides, BA
• Market segment and Channel Specific Strategy
  Adopted
• More complex approach
• Single channel limits potential
• No one channel meets all needs
• Each has specific appeal / dedicated audience /
  loyalty

Source m-travel.com Feb 15, 2006
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Strategic Mix by Channel
BA.com
BA Connect
Price Promotion Innovation Service Quality
Club World/ Europe
World Traveller Plus
Source www.strategycompass.com
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Re-defining the offering

• using price to enter new channels BA Connect
• Feb - March 2006
• Restricted and non-changeable tickets disappear
• Major sales marketing campaign
• Livery changes to planes fuselage

Source ba.com/customerhelp 10/01/06
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Re-defining the offering

• Service and Quality to adapt established channels
  
• BA World Traveller Plus
• Premier economy
• Research suggests - greater comfort and quality
  at an affordable price
• Two markets
• Cost conscious business traveller
• Discerning leisure traveller

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Re-defining the offering

• ..using innovation in channel strategy ba.com
• E-ticket usage is increasing
• Today 76 of all journeys on BA are via e-ticket
• up from 40 in 2003
• Checking in on-line with seat booking options
• Consumers comment ba.com was good to excellent
• Spring 2002 - 57
• Spring 2005 - 70

Source ba.com/customerhelp 29/12/05
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Business Strategy - Service that matters

• 1. Consistently deliver customer promise
• 2. World class customer service
• 3. Leading edge ba.com
• 4. Leadership in longhaul premium
• 5. Profitable shorthaul
• 6. Re-define airport experience

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Concluding Thoughts

• Market will be increasingly competitive
• New entrants / substitutes
• Fuel Price Increase / Open Skies policy
• Improving Financial Position
• Lower debt position
• Turnover Improving
• Recognition of inefficiencies to date
• Opportunities / Reasons to be confident
• Terminal 5 from 2008
• Specific strategy per segment