How Private Enterprise Works

Old hands on the stock market must remember Margaret Thatcher with gratitude when they think of British Airways! This is one of the first companies outside the United States, which carries the name of a nation, but none of the emotional baggage that can affect decision-making in the anachronism of government-owned enterprise.

You do not need U.K. citizenship to own a slice of this airline, and therein reside its core strength as a profit-making enterprise. British Airways is a great case study of the public benefits of private enterprise and professional management.

Few stock market members have faced the grinding adversity which British Airways has weathered with aplomb. Militant labor, the fuel price issue, and badgering by a flamboyant competitor, the airline management has taken every missile in its stride! 10 Downing Street must take some of the credit because temptations to interfere must have been severe and frequent! The stock market has been a thankful winner in the process, with the airline coming through every spell of turbulence with flying colors. The British Airways example can also be used by third world countries, emerging in to the world of economic reforms.

It would be naïve to think that British Airways is now in the clear, or that it can look forward to a smooth flight from now on. Cheap-fare competitors have tasted more success in Great Britain than in other parts of the world, so stock market observers must assume that British Airways must lose shares in short haul and vacation markets. The fuel price threat will never go away, so all hedging through forward buying will continue to carry risks, no matter which way purchasers in the company throw the dice.

Stock market observers agree that British Airways has some key intangible assets which over-ride the risks which it shares with its competitors. It is an influential and rock-solid global brand, with strengths in prime markets such as the trans-Atlantic route, as well as in emerging markets such as the metropolitan centers of India, and in Hong Kong. The company has an accumulated experience in logistics which is invaluable in this business. Consider the speed with which the airline has recovered from security threats at Heathrow!

British Airways is strongly focused on the business traveler. It would do well to work on cargo market segments, because the profit potentials for its network strengths are very high from a stock market perspective. Similarly, the strengths of hubs in and around London could become a drawback as other centers begin to emerge in the travel business. However, these should be entirely manageable issues for a management team which has shown admirable grit and organization until now.

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