BRITISH AIRPORTS AUTHORITY: PART (A) Harvard Case Solution & Analysis

BRITISH AIRPORTS AUTHORITY: PART (a)

1.      INTRODUCTION

Heathrow Airport Holdings Limited was formerly known as, British Airports Authority (BAA), which was established in 1965 and initially controlled three airports in the regions of London and the South East England. After the Airports Act of 1986 was passed, in order to increase the stock market funds, the government decided to privatize the governance; Hence, it moved a step ahead from the corporatization model. Heathrow Airport Holdings was taken by a Spanish Firm namely, Ferrovial that is in a private consortium, which specializes in designing, construction, financing, operation and maintenance of transport along with urban services infrastructure (Boschat, 1999).

Heathrow Airport Holdings’ head office is located in the Compass Center, London Heathrow Airport’s ground in the Borough of Hilling don, London. The company makes money through accumulation of landing fees charges from the airlines and is expanding to generate revenues from the ancillary operations carried out on those airports such as retail and property. With three airports owned and operated under the BAA name, the rest of the United Kingdom’s airports are owned either by the local authorities or are held by other corporations (Elliott, 2004).

The stakeholders in case of aviation strategy include airport operators, airlines, the community and their leaders, workers at the front line, political parties, and Airports Commission itself, who will be last amongst all to give the final verdict. With so many options in hand, the evaluation of the best amongst all need to be done in a strategic manner by applying the strategic management concepts to the aviation industry (Schroeder, 2002).

2.      PROBLEM STATEMENT

A future development strategy needs to be devised for the British Airport Authority in order to help the company to seize the opportunity of predicted strong demand for airports in the following 25 years time. For this, the suggested runway construction sites are one at Stansted and the other at Heathrow, whereas other political parties suggested the construction at the estuary of the Thames River. However, the Airport Commission established in 2012 suggested postponing construction at the three sides and recommended a new runway at Gatwick (Heathrow, 2013).

3.      EVALUATION OF THE STRATEGIC ALTERNATIVES

a.      Option 1: Construct a new Runway at Gatwick

As the new suggested runway according to the Airports commission is Gatwick; therefore, the final decision can be left to the government for its construction and delay runways at Heathrow, Thames River or Stansted.

b.      Option 2: Construct a Third Runway at Heathrow

The British Airport Authority can capitalize on its strengths of accumulating the highest traffic at its airports for the desperate need of constructing the new highway at the Heathrow.

4.      RECOMMENDED STRATEGY

The recommended strategy for British Airport Authority is to pursue the first and the second option of constructing the new airport at Gatwick and the third highway at Heathrow respectively. As the company has sold the Gatwick Airport in 2009; hence, the Gatwick runway construction would not be in the favor of the company. This option would help the British Airport Authority in increasing its flights per year and in fulfilling its dream of utilizing its full capacity. Heathrow,  is assumed to be generating a significant traffic in the European passenger market on a regional basis, which has added to its potential of being a viable option for the expansion strategy. The growth in the Heathrow region is the depiction of the BMI routes managed by the British Airways that comes under the British Airport Authority’s control. By pursuing this option, British Airport Authority can also compete at the international level and provide capacity for future growth prospects (Gregory, 2006).

However, Heathrow is already a congested airport, and the monopoly providers are also accused of not giving compensation to homes next to Heathrow who suffer a lot in terms of noise. Nevertheless, a second runway is suggested to be constructed at Gatwick, which will help in enabling more people to fly more destinations at a time (Jonne, 1991). The third runway at Heathrow will further cause noise pollution but a new one at Gatwick will generate more passengers annually. It will generate more competition nationally and internationally and will allow passengers to avail low fares. The Gatwick expansion will also be one, which will incur low costs and comparatively lower time to build than the Heathrow airport. As there is a twenty five years time horizon, hene, the Heathrow and the Gatwick both can be expanded in given the available budget and infrastructure. However, as Gatwick has will incur low cost of construction and takes less time; hence, it should be pursued at first (Kay, 1993).

Hence, airports commission has a clear choice of giving preference to Gatwick rather than the Heathrow runway, which will generate more competition and passengers with low fares and ....................

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