International airline industry with a particular focus on British Airways - Essay Example

It can be seen that the European airline industry has evolved from being dominated by large, business class air carriers to one which is increasingly controlled by the proliferation of low cost airlines. The wide popularity and acceptance of budget air travel which has significantly increased air traffic and gave a boost to the tourism industry has began putting pressure on large airlines to create their own low profile brand in order to regain their market shares. The emergence of budget airlines is directly attributed to the transformation of the global business environment.

The major drivers which facilitated this trend are: the deregulation of the European air travel sector; the establishment of the European Union; the 9/11 tragedy; the rapid technological advancement; and change in customers' lifestyle and preferences. It is irrefutable that the deregulation of the European airline industry primarily contributed to the rise of low cost carriers. It can be recalled that deregulation has lowered the barrier to entry in the industry as well as enhanced the competitiveness of the players which are previously receiving subsidy from the government.

This, in turn, largely contributes to the cost efficiency of airline operators allowing them to charge lower prices to passengers. The establishment of the European Union affects the airline industry has the same effect like the deregulation of the sector. This has opened up markets and lowered operating costs, encouraging the proliferation of low cost carriers (Sorensen 2006). The 9/11 tragedy which left terror worldwide has also helped in lowering the cost of air travel in order to fill up empty seats in the airline.

This is coupled by the public's preference of budget airlines since they want to maximize the value of their money in response to the economic recession. Lastly, technological advancement has significantly enhanced company's efficiency. It can be recalled that the internet technology has lowered the airline's costs in terms of booking and servicing customers by eliminating travel agent costs. This has paved way for huge costs savings which cut down the cost of airline operations (Sorensen 2006). 2. Conduct a PEST-analysis of the airline industry - for both the present and medium term (5 years) future.

Once you complete Political, Economical, Societal and Technological analysis, chose one example from each heading and discuss how it will affect the industry in 5 years time. Political The operation of the European airline industry is strongly affected by the policies which are instituted by the government. The political issues which are affecting and are more likely to shape the sector are: European and international law on environmental laws and regulations (International Environment Law 2006); further integration with the European Union; harmonization of technical requirements and administrative procedures; and the tighter monetary policies which are currently adopted by each nation in order to maintain the amount of their currencies.

Recognizing the need for sustainable development, it is expected that policy makers will be focusing on creating policies which are more focused on the preservation of the environment. It should be noted that right now, the European Environmental Law is gaining more