British Airways Pest Analysis

Economic

A crucial factor which has implications for British Airways is the state of the economic environment. The recession back in 2008 had a huge effect on all airlines and holiday operators due to its high-income elasticity. "The recession in 2008 and 2009 represented the first time that passenger numbers had fallen for two successive years, CAA figures showed" (News.bbc.co.uk, 2010).

One major economic factor is the value of the pound, as British Airways is one of the only airlines flying to destinations across all 6 continents, the value of money and the perceived financial benefits of customers flying to these different countries has an effect on British Airways. Since the Brexit vote, the value of the pound has fallen increasing prices

"In recent years the falling price in fuel has meant a rise in profits for airlines. International Airlines Group, the owner of British Airways, reported a 65 percent jump in annual profits after a bumper year of strong demand and low fuel costs" (Powley, T. (2016). This reduction in fuel price has benefited airlines profit margins because airline fares haven't been reduced, this has led to customers becoming disgruntled as they are still being charged a high price when it's costing the airline less to fly their planes. "The reality is airlines don't price their flights based on their cost. In the short term, they price it based on demand. Unless demand changes, just because they're paying less [for fuel], they're not going to pass those savings on unless they have to" (Carlson,

As British Airways have marketed itself from low price economy up to first class – higher priced tickets they have been able to reach a larger variety of people traveling with diverse needs. "The Economy pricing strategy is for people who want low priced tickets. The medium-value pricing strategy is for people who require some of the fringe benefits and the Premium pricing strategy is for people who like to travel with all the high-class benefits provided by the airlines" (Bhasin). By offering many different onboard classes, BA appeal to all different social classes and with hundreds of destinations on offer they aren't leaving anyone