To what extent is competition the main threat to British Airways’ future profitability? (20)

Competition is a significant threat to British Airways’ future profitability as BA have taken the differentiation leadership approach. This means BA have tried to differentiate themselves from competition by appealing to a brand loyalty and creating the perception that they provide a more premium service than the lower budget airlines. Their strategy has included offering higher quality meals included in the price of the flight, a slightly higher baggage allowance and routes to destinations further afield than those offered by other airlines. At a time where the pound is weak against other currencies such as the dollar and the euro, BA is at a significant disadvantage as travellers are tending to opt for more affordable airlines in order to save since converting pounds into other currencies for spending money is proving to be considerably expensive. Therefore, more affordable airlines are gaining market share at the expense of premium airlines. This could therefore be said to be the main threat to British Airways’ future profitability as in order to compete, BA will have to sacrifice their features that differentiate themselves, namely the inclusion of meals in the price and the allowance for carry-on baggage. Consequently, this damages the justification for the premium price and further increases the competitive edge of lower budget airlines resulting in lower profits for BA as flyers will find new airlines they like and continue to travel with them in the future and therefore threaten the future profitability of BA.