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Business analysis (British Airways) - Case Study Example

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Business analysis (British Airways)

It is one of the largest airlines in the world, in fact till recently, it called itself the World's favorite airline , until Lufthansa supplanted it as the largest passenger carrier. The size of British Airways is big. British Airways is engaged in the operation of international and domestic scheduled air services for the carriage of passengers, freight and mail, and the provision of ancillary services. The company operates international route network comprising around 147 destinations in 75 countries across America, Europe, Far East Asia, Australia, Africa, Middle East, and the Indian sub-continent. The company maintains a fleet of 242 aircraft. During the fiscal year 2007, the company carried about 33 million passengers and 762,000 tons of cargo the Business plan 2006-2008 unveiled by Mr. Walsh. The Key financial elements in there were:
The investment and the cost savings targets have clearly been met. There are obvious external pressures from fuel prices so how is the goal on operating margins going. An operating profit of GBP602 million for the 12 months ended 31-Mar-07 (2006: GBP694 million) was reached. The operating margin was 7.1%, down from 8.5% in 2006 and British Airways' operating margin for the year ending March 31, 2009, will be about 7 percent, from a target this year of 10 percent. It does look very bad. But let us look at in a proper context. That compares favorably with 6% operating margins at Air France-KLM and just 4.2% for American Airlines parent AMR .Willie Walsh had said on the business Plan 2008 "This plan will make us fit for the future. By resolving our pension deficit, reducing cost and delivering world-class customer service, we can make a 10 per cent operating margin a sustainable reality. So what had gone wrong, well it was mainly the fuel price increases. So now what does the future hold . Analysts are predicting an operating margin of about 7.2 percent for the next fiscal year. Sales will advance 4 percent to 4.5 percent in the next fiscal year to more than 9.1 billion pounds ($18 billion), the airline said today. Fuel costs will increase by about 450 million pounds to 2.5 billion pounds and non-fuel costs will gain as much as 3.5 percent. British Airways is a business in transition according to Walsh. The airline needs to determine how it can grow in London, its biggest market, where flight growth is constrained by government regulations The carrier also must create opportunities outside the U.K. capital and various new markets like India and China
Conclusion:
The mark of 10% operating margin will not be reached this fiscal and most likely not be reachable in the near future , but does this mean that the British Airways has floundered under Walsh over the last two years. Not at all, in fact it has outperformed the Industry. While it's financial results show a mixed bag, it has ...Show more

Summary

This is another good set of results despite soaring fuel costs and difficulties in the market. Revenue up some one per cent and a strong cost performance has led to an operating profit up 28.5 per cent. While fuel costs in the first six months were down 36 million, they have soared 72 million in the third quarter." Analyze the performance of British Airways, in 2006 and 2007, in view of the comments of the Chief Executive.
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Business analysis (British Airways) essay example
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