Competition – Practice Question 3

BA is still the businessman’s favourite airline. Seats have video monitors fitted so that passengers can watch the latest film. BA recognises the importance of comfort. Passengers can sleep in special beds on their long-haul flights, Members of its Executive Club are able to check-in online. Customer-focused service means that passengers are able to request their favourite seat and request special meals. The company also flies to over 550 destinations at times which are convenient to passengers.

Cost cutting has become a key element of British Airways business strategy. BA has closed call centres in Glasgow and London with the loss of 400 jobs. The move was a response to the growing number of people booking tickets online. The number of calls to its call centres had fallen sharply.

Booking online has its advantages as well as its pitfalls. It can be quick and convenient, but there is a downside to the automated system. Just ask the budget airline passengers who arrived at Hanover airport on Christmas Eve to find that there flight had been cancelled and passengers had been transferred to a plane which had left five hours before. Notification had been sent by automated email but the passengers hadn’t received it.

Tasks

1. Explain how the use of the internet can increase airline profitability

2. Illustrate and briefly explain how the customers of major airlines such as BA may be less price sensitive than customers of budget airlines.

3. Assess the reasons why national and regional governments may wish to subsidise airlines

4. Examine the effect that barriers to entry may have had on the profit margins of European airlines`