The into the business’s current and future environment in

The
identification and evaluation of risks, posed by external forces, is key for
every modern business to be profitable and achieve maximum performance in the
global society. Businesses can then use that knowledge to develop an
understanding of arising changes in their relevant country or industry and assist
decision making when faced with challenges. The analytical PEST framework can
be used to gain an insight into the business’s current and future environment
in order to plan a strategic process to meet their objectives with minimum
fault (Worthington and Britton, 2015). Four of the key macro level factors,
political, economic, social, and technological, makeup PEST analysis. As a
provider of employment and travel to hundreds of thousands of people, the
airline industry in the UK greatly contributes to economic development. The
purpose of this essay is to critically discuss the key challenges that the UK airline
industry faces, within a global society, and to analyse the current state of
the airline industry using PEST analysis.

Political

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Political factors
refer to understanding the political systems and processes, in the relevant
country or industry, in order to acquire a better insight into business
decisions and the involvement of the business environment (Worthington and
Britton, 2015). Awareness of key political challenges is key for airlines with
the UK airline industry accounting for over 78,000 employees worldwide in 2015,
the industry’s role in UK and EU economies is central (Gov.uk, 2017).

One of the key
political challenges modern businesses currently face within a global society
is Brexit. For the Airline industry, Brexit is currently a main concern as
withdrawing from the EU implicates future uncertainties around the success and
operations of the industry. Involvement in the single European market meant
that airlines were able to provide cheap short-haul travel across the continent,
increasing the consumption, employment, and passengers in the UK, and
worldwide. The termination of the UK’s membership of the EU, due to take effect
in early 2019, will have huge implications on modern business including the
airline industry as the UK-based airlines will lose their Freedom of Air rights.
Short-haul travel from the UK is historically known for the wide choice of
routes and low fares. However, unless negotiations are made, regarding the UK
airlines ability to operate freely across the EU, then the prices may increase
for short-haul flights and availability may decrease. As a result of these
changes, flight prices will unquestionably increase, therefore discouraging
consumers.

According to
KPMG (2016), Ryanair and EasyJet are in the top 3 European Airlines by
Passengers and London Heathrow is the busiest airport in Europe. These
statistics will undoubtedly change due to Brexit for many reasons. When travelling
to the EU on holiday, British Citizens will need to pass through passport
control as they do now, however once the exit of the EU is complete, British
Citizens will fall under the category of ‘Non-EU Citizens’ meaning the wait
during border control will increase. This may discourage passengers.

 

The low-cost UK
airlines, such as EasyJet and Ryanair, whose main market is the uk will be most
obviously affected by changes due to Brexit. According to (Topham, 2017), when
their share prices were struck by the referendum, EasyJet’s dropped by a third,
wiping a total of £2 billion off their value in only four days. All challenges
posed by Brexit will not only affect the airline industry directly but will
also have knock on effects affecting the UK economy as airlines may no longer
want to place their business in the UK.

Another
political factor which may occur when the UK leaves the EU is the use of the
European Health Insurance Card (EHIC) which entitles UK citizens to reduced or
free healthcare in countries which are part of the EU (indirect, 2018). If
another agreement is not negotiated then the use of EHIC will be void.

The effects of 9/11
on the airline industry can be seen both positively and negatively. Consumers fear
for safety increased, subsequently reducing passenger demand to travel by air. This
had a negative influence on sales as “the number of people travelling to other countries
is decreased due to fear of their safety and security” (Iata.org, 2011). However,
due to these events, airport security worldwide have aimed to combat terrorism by
increasing safety measure and creating a more rigorous visa policy. Although this
creates a safer environment, encouraging travel by air, it also caused inconvenience
by creating longer queues and the inability of some consumers to be able to travel.