British Airways Valuation

8265 Words May 2nd, 2005 34 Pages
Global Economic

There is increasing confidence that the world economy is enjoying a classic cyclical recovery. Global economy is on a recovery path aided largely by the quick end to the Iraqi war, which generated positive outlook among markets and built up business and consumer confidence.

GDP growth rate was 0.2% in the first quarter of 2003 in UK, growth rate for the second and third quarter went up to 0.6%, pointing to a growth rate of 2.0% end 2003. Unemployment rate has been decreasing to a rate at 4.7% according to the National Statistics with Inflation falls (September: CPI now 1.1%, RPI 3.1%) in 2004. UK government increases the interest rate to avoid inflation during past years. HM-Treasury in November 2003 forecasted the
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The company 's other activities include its range of aircraft maintenance, package holiday and airlines service offerings.
1.2 Competitors

Porters ‘five forces ' competition model

New Entrants

Threat of new entrants

Industry competitors

Suppliers Buyers

Bargaining power Intensity of rivalry Bargaining power of suppliers of buyers

Substitutes Threat of substitutes

Source: Porter (1985)

British Airways PLC (BAY-LN) focuses on international and domestic scheduled and charter air services for the carriage of passengers, freight and mail. The Group 's is globally allied and holds code share arrangements agreed with Finnair, Iberia and Cathay Pacific. In an attempt to compete backwards in order to better control competition.

Analysis of the Airline Industry

In order for a company to be able to compare itself with its rivals in terms of competition intensity and profitability, the five forces model can be used. This model is consisted of three ‘horizontal ' sources of competition these are the threat of substitutes, the threat of new entries and the competition among rivals. The other two ‘vertical ' sources of competition are the power of suppliers

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