Last updated: August 18, 2019
Topic: AutomotiveCars
Sample donated:

Introduction:

BMI is a British low-cost airline and a subsidiary of British Midland PLC. The airline was established in the month of January 2002 and started its operations later the same year with its inaugural flight between East Midlands and Malaga. To date it flies to many destinations in Europe from its bases in Cardiff, East Midlands, Manchester, and Birmingham international. BMI’s strong points in the marketplace are its advertising, low fares, customer service and its website. The site allows passengers to make or change their booking online, view previous bookings and to allocate their seats before checking in, albeit at an extra charge.

In the autumn 2006, the airline announced a significant expansion programmed at Birmingham International airport increasing the number of Boeing 737 aircraft based at the airport from 5 to 8 and the introduction of 8 new routes. In February 2007 the airline announced further growth plans at Birmingham International airport with an additional Boeing 737 aircraft based at the airport, taking the total to 9 and the total amount of routes served to 21, making it the airline’s biggest base.

The airline‘s fleet consists of the following aircraft: 16 Boeing 737-300 with a capacity of 148 seats each, and 6 Boeing 737-500 with a sitting capacity of 131 seats. Indeed, the airline’s ambitious acquisition plans include 3 B737-300 to be delivered later this year to start to replace the B737-500s, 2 of these will come from AirOne and 1 from Varig. In the meantime, the airline has taken delivery of a single Boeing 737-300(G-TOYK) from Varig. The airline is also considering replacing its 6 Boeing 737-500s in order to buy 8 Boeing 737-300s. This year’s summer schedules require 20 aircraft in daily use, the other two being spare for maintenance etc. The aircraft are based at Birmingham (9), East Midlands (5), Manchester (4) and Cardiff (3).

PEST analysis For BMI Airlines:

A PEST analysis is a business measurement tool. PEST is an acronym for Political, Economic, Social and Technological factors, which are used to assess the market for a business or organizational unit. It is a useful tool for understanding market growth or decline, and as such the position, potential and direction for a business. A PEST analysis is a business measurement tool. The following factors are likely to have an influence on the airline industry and should therefore be taken into account when formulating a Marketing Plan for BMI Baby [businessballs.com].

Politico-legal factors

·                    Threat of war in the Middle East.

·                    The Air Miles scheme is not considered as a taxable perk by the government in the way that company cars are taxed which may change to allow BMI Baby to compete on more equal grounds with the likes of BA [bestessays.com].

·                    An EU east-enlargement may provide access to viable, new markets.

Economic factors

·                    Likelihood of increasing fuel costs, congestion and other environmental restrictions, as well as the prospect of higher security and insurance costs to reflect the risk of terrorism.

·                    As the weakening of the US dollar is likely to last for some more time, business travelers will keep an eye on their travel expenses [bestessays.com].

·                    Globalization should continue to boost traffic in the long-term.

·                    The introduction of the single currency in Europe is likely to bring more business to BMI Baby as Europe becomes more integrated [bestessays.com].

Socio-cultural factors

·                    To win over the French and German publics might cause problems as there appears still to be a general reluctance to use credit cards over the phone and Internet [bestessays.com].

·                    The public are general quite friendly to the prospect of cheap flights. However they may feel begrudged where they see promotions found in newspapers where flight are for £10 only to find that the actual cost is much higher for the particular time or day they wish to fly on [bestessays.com].

Technological factors

·                    A key issue will be the extent to which technological advancements – such as the use of the Internet on distribution and cost synergies from industry consolidation – can offset upward pressures on prices and costs.

·                    BMI Baby has to keep track of technological developments in the field of e-commerce and aircraft manufacture in order to gain a competitive advantage [bestessays.com].

SWOT analysis For BMI Airlines:

The SWOT analysis is an extremely useful tool for understanding and decision-making for all sorts of situations in business and organizations. SWOT is an acronym for Strengths, Weaknesses, Opportunities, and Threats. The major difference between the PEST analysis and the SWOT analysis is that A SWOT analysis measures a business unit, a proposition or idea; a PEST analysis measures a market. A SWOT analysis is a subjective assessment of data which is organized by the SWOT format into a logical order that helps understanding, presentation, discussion and decision-making. Hence, in the case for BMI Baby, the analysis will be as follows [businessballs.com]:

Strengths

·         Strategic Alliances

·         Value Added Services

Weaknesses

·         Rising Pension Fund Liability

Opportunities

·         Expanding UK airline industry

·         Increasing price sensitivity of customers

Threats

·         Intense competition

·         Rising fuel costs [researchandmarkets.com]

According to information derived from BMI website, the company claims to be the second largest airline in the UK. This information could be instrumental in assessing the company’s external Analysis, which adopts, Porter’s Five Forces;

Threat of New Entrants

Limited, but has happened recently:

·                     Ryan air

·                     MyTravelLite.com

·                     Monarch.com

·                     FlyBe.com

Compete on Limited Routes

Capital Intensive

Industry Competitors

Increased Competition:

·                     50 Budget Airlines

Flag Carriers:

·                     Low Cost Affiliates

·                     Alliances

·                     Air France / KLM Merger

Threat of Substitute Products

United Kingdom:

·                     None

The Rest of Europe

·                     Driving holidays

·                     High speed trains

In conclusion­, since BMI operates nearly 2,000 flights a week over a network of 36 airports in Europe, Asia, Middle East and transatlantic to the US and Caribbean, including the fact that it also operates a low-fare carrier called Bmi baby, flying to 18 destinations in 7 countries, the company’s strategy should be to consolidate its position in the market. This can be done through the operational efficiency/savings strategy it has derived from owning young aircraft fleet with average age of five years. Already, dividends are paying off since the FY05 revenues of BMI amounted to US$1.6 billion and its net income to US$17.8 million, furthermore, BMI has been a profit-making entity over the last five years.

The Size of UK Airlines by Available and Used Capacity (Seat-km) statistics shed more light as to the current and future growth of the airline, should it continue with the strategies proposed:

November 2004 – October 2005 (a)

Airline Name
Output in

available seat –

kilometers

(000 000)
Percentage

of all

available

seat

kilometers
Seat

kilometers

used (000

000)
Percentage

of all seat

kilometers

used
BRITISH AIRWAYS PLC
141067
38.7
107359
37.1
VIRGIN ATLANTIC AIRWAYS LTD
42038
11.6
31648
10.9
EASYJET AIRLINE COMPANY LTD
30240
8.3
24685
8.5
THOMSONFLY LTD
26152
7.2
23045
8.0
FIRST CHOICE AIRWAYS LTD
17584
4.8
15809
5.5
THOMAS COOK AIRLINES LTD
16300
4.5
14503
5.0
MONARCH AIRLINES
16250
4.5
13550
4.7
MY TRAVEL AIRWAYS UK
15515
4.3
14227
4.9
BMI GROUP
13089
3.6
9213
3.2
EXCEL AIRWAYS LTD
9057
2.5
7732
2.7
AIR ATLANTA EUROPE LTD
6267
1.7
5265
1.8
Source: [auc.org.uk]

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Reference:

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PEST analysis method and examples, with free PEST template
http://www.businessballs.com/pestanalysisfreetemplate.htm

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SWOT analysis method and examples, with free SWOT template
http://www.businessballs.com/swotanalysisfreetemplate.htm

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UK Airlines Monthly Operating and Traffic Statistics [Oct 2005]

http://64.233.183.104/search?q=cache:mQZWkZWwxq4J:https://www.auc.org.uk/docs/33/OCTOBER_2005_AIRLINE_STATISTICS.PDF+BMI+Baby+Statistics+*+UK;hl=en;ct=clnk;cd=6;gl=ke;client=firefox-a

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Yan Mei – Guihang Guo, Barnard, R [5 May 2005] Ryan air Case Study

http://64.233.183.104/search?q=cache:4PBiZKwfULIJ:online.glos.ac.uk/colin_clarkehill/MB471Web%252004/Ryanair_presentation_group1.ppt+PEST+analysis+*BMI+Baby;hl=en;ct=clnk;cd=7;gl=ke;client=firefox-a

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MARKETING CASE STUDY

http://64.233.183.104/search?q=cache:MJaueUdO4V0J:www.bestessays.com/Essays/Marketing_Essay.doc+PEST+analysis+*BMI+Baby;hl=en;ct=clnk;cd=6;gl=ke;client=firefox-a

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British Midland International: Company Analysis

http://www.researchandmarkets.com/reports/354858/british_midland_international_company_analysis.htm

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Latest News

http://www.bmibaby.com/bmibaby/en/index.aspx?p=9=deals1=167

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BMI Airlines. A Review: A Breath of fresh Airline

travel.ciao.co.uk/BMI_Baby_Airlines__Review_5337454 – 59k

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BA Withdraws from Cardiff

news.bbc.co.uk/1/hi/wales/2582763.stm – 43k

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BMI Baby to overtake rivalBritish Airways

www.luchtzak.be/article5712.html – 25k

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