The Travel and Tourism Business Toolkit

Unit: 04

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Contents
Introduction .................................................................................................................................... 3
PART 1: Individual Report ............................................................................................................... 4
Travel and Tourism Industry ....................................................................................................... 4
Definition of yield and revenue management ............................................................................ 5
A discussion of the rationale and principles of revenue management for British Airways ....... 6
Investigation of how the British Airways applies revenue management tools to precipitate
profit ........................................................................................................................................... 7
An analysis of the impact of differentiated pricing strategies on revenue management in
British Airways ............................................................................................................................ 9
PART 2: Presentation .................................................................................................................... 10
Talent acquisition and retention within the airline industry .................................................... 10
Different stages of the HR life cycle applied a specific job role of revenue manager.............. 10
Performance management plan for revenue manager ............................................................ 12
Evaluation of each stage of the HR life cycle and the importance HR plays ............................ 13
PART 3: Article of Publication ....................................................................................................... 15
“The Air law and its implication” .............................................................................................. 15
An exploration of the relationship between regulations, legislation and standards ............... 15
Explaining specific legislations that organisations in British Airways has to adhere to ........... 15
An illustration of how company, employment and contract law has a potential impact on
business decision-making in British Airways ............................................................................ 17
An examination of the potential implications of regulations, legislation and standards on
decision-making in British Airways ........................................................................................... 19
PART 4: Individual Report ............................................................................................................. 20
An exploration of the different types of financial statements and reporting mechanisms for
organisations within British Airways......................................................................................... 20
An explanation of the importance and value of budgets for controlling business performance
and identifying variances with reference to British Airways .................................................... 24
An interpretation of the financial statements and reports for International Airlines Group
businesses of British Airways and Iberia for the year ending 31st December 2018 ................ 26
Conclusion ..................................................................................................................................... 29
References .................................................................................................................................... 30

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Introduction
Travel and tourism industry becomes materialised industry for which up to date this
industry is erupting to rule the world. As a business, every entrepreneur wants to establish it so
that he can preside over the world. This industry is composed of travel agency, tour operator,
airline and transportation, resort and hotel, restaurant, car rental companies and many others.
This paper will be at the helm of airline industry, and it’s British Airways. The aim of this paper
is to provide the learners different opportunities to their business acumen that may cover
different business activities of travel and tourism industry. These are composed of
understanding the business environment with travel and tourism and key principles and
revenue management, recruitment and retention of the employees, effective communication
practices and how this airline deals with different legislations and regulations. All of them will
be separated among four learning outcomes with four segmentations.

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 PART 1: Individual Report

Travel and Tourism Industry

 Characteristics of travel and tourism industry

Because of globalisation people boast enough knowledge about the world for which
they are intimidated toward travelling and select tourism for their leisure, recreation and
business purpose.

Figure: Words tourists’ arrival and earnings

Source: (UNWTO, 2020)

Total international arrivals of tourists are increased by 5% last year because of changing
the scenario within globalisation, they are suborned within travel and tourism to boast the
recreation and acquire knowledge about the world. Now total tourists numbers are 1.4 billion
from whom the international organisations and countries earn profits reached 1.7 trillion last
year. It was also raised by 4% because the tourists spend more (UNWTO, 2020).

The travel and tourism industry has some characteristics from which it can be
segmented the conspicuous of this industry. For example, seasonal, perishable, vulnerable and
competition are the quintessential facets which intimidate to the pricing strategy of travel and
tourism. From August to October, the ticket sales of British Airways are raised because of
seasonality, in that time tourists are increased because summer season has just come to them

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and they boast enough time to spend. In this way, the ticket and service of BA cannot be stored
for further usages. This industry is vulnerable because control of consumption hangs down on
the tourists.

Figure: International tourism receipts and world GDP

Source: (UNWTO, 2020)

Based marginal cost principle and low profits margins, it can be glimpsed that the
income and earnings are much fluctuated from travel and tourism industry because of
challenges and obstacles. For example, Corona Virus has affected China people recently and so
the tourists have decreased even stayed tourists cancel their contacts as well as bookings are
cancelled. A massive loss from tourism industry will have to be faced by China, it must affect to
the world economy. Last year total GDP contribution from travel and tourism was affected and
annexed by 3.6% which modified the economy of world (UNWTO, 2020).

Definition of yield and revenue management

 Yield Management

Yield management is a mutable pricing strategy, based on influencing consumer behaviour,

anticipating and understanding in order to maximise profits or revenues from a fastened, time
limited resource (Crawford et al., 2019). For example, the seats of British Airways which rest on
the consumer behaviour management can be the yield management.

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  Revenue Management

Revenue management is the utilization of restrained investigation that anticipates customer

conduct at the smaller scale showcase levels and enhances item accessibility and cost to boost
revenue germination (Board and Skrzypacz, 2016).

A discussion of the rationale and principles of revenue management for

British Airways
 Rationale of revenue management for British Airways

Revenue management is extensively pertinent for travel and tourism industry like British
Airways. Last year British Airways earned £13,020 million revenues from which £1952 million
was the net income of this company (British Airways, 2020). This huge amount of revenues
must be controlled and managed through effective and efficient employees otherwise net
income will be plummeted. The employees will be dissatisfied and they will be switched, the
services will become poor that will not satisfy the customer and actualise the expectation of
them. For this reason, British Airways needs to ensure the eloquent revenue management
(Board and Skrzypacz, 2016).

 Principles of revenue management for British Airways

Actually revenue management was applied past days firstly in airline industry because it had
to face the obstacles to maximise revenues. And so this industry erupted to actualise the
revenue management, they were succeeded from it. Specifically as usual principles of other
things, there is no principles like accounting e.g. consistency (Board and Skrzypacz, 2016). Some
elements and components which work as principles for travel and tourism industry can be
superintended with British Airways. As a revenue manager of British Airways what should have
to be done in future, these elements are discussed below:

Market Segmentation: The customers may be classified within three ways e.g. business
class, economy class and luxury class, according to these three segments the seats are
fragmented. So revenues will be generated if three types of tickets are sold with equity. For

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example, the luxury seat takes £5000, business class £1000 and economy class is $500. Now if
the seats of luxury can be sold 5 it will generate 5*5000=£25000 revenues which will take more
than 50 seats for economy class and 25 seats for business class. So, British Airways prefers and
welcomes the luxury people because it turns the revenue (Crawford et al., 2019).

Figure: Elements of revenue management

Source: (Self-designed)

Besides historic demand and booking patterns, demand forecast and displacement
analysis, pricing and inventory management, overbooking and information system all are
composed of revenue management elements. All of them should have to be conducted
efficaciously otherwise the revenue will not be generated in large and managed perfectly.

Investigation of how the British Airways applies revenue management

tools to precipitate profit
To precipitate profits and revenues of British Airways, the revenue manager can apply
some strategies which will work as extensive strategies for this airline as revenue management.
Capacity utilisation (yield per available seat), discount allocation, duration control and late
booking strategies are these strategies of revenue management for engendering the profits and
revenues. These are given below:

 Capacity utilisation

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 For the revenue management in British Airways, it works for yield per available seats
because available seats in an aeroplane all are composed in revenues for this airline. This will
ensure the best capacity utilisation for BA that will generate possible revenues (Kimes and Ho,
2019). For example, if a flight has 200 seats and per seat cost is £1500 average total revenue
generation capacity will be £300,000.

 Discount allocation

The discount price of seats in British Airline alludes to lower price than rack rate of the
seats. As seat is perishable product for which it will be eclipsed to sell the seats with discount
price rather than to persist in being vacant. Besides, the seats selling will annex food sales in air
flying time (Kimes and Ho, 2019).

 Duration control

When a flight is being late or early, it must be entangled few issues e.g. the capacity of
airport will be overlooked and the availability of the gate pass will be annexed extra pressure.
It should use the icon of being late 10 which may be A0 and it will be A15 when it disclosed 15
minutes late. It will retain the motivation of the customers and the sales will remain same
(Viglia and Abrate, 2019).

 Late booking strategies

Last time booking and cancellation increase the pressure to British Airways because if the
last time the tickets of seats cannot be sold this will be vacant and it will reduce the revenues of
the airline (Viglia and Abrate, 2019). And sometime it can generate more profits and revenues
because the last time tickets and seats are sold with higher price that annex the revenues in
this airline. These strategies should be practiced in late booking period.

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An analysis of the impact of differentiated pricing strategies on revenue
management in British Airways
The differentiated pricing strategies incontrovertibility effect on revenue management
in British Airways because high price will annex or increase the revenues and profits
contrariwise the sales will be deduced because of high price. Sometime low price will de-
motivate the customers to purchase the tickets or products e.g. luxurious products, lavish
services and air flying service (Yu et al., 2018). Thus differentiated pricing strategies have to be
exerted in revenue management that will obviously impact on it for example; up-selling will
increase revenues because it invigorates the customers to spend more money for seats. It may
be switched seats e.g. from economy class to business class, it will increase unit price of seats. If
British Airways ensures this strategy in almost, the revenues must be increased. It has some
disadvantages e.g. it daunts the customers because of high price, de-motivation can be
increased. Besides, cross-selling, cancellation policy, length of stay, offer a package, price per
segment pricing strategies based on forecasting can be applied. Like up-selling, the customers
can be daunted because of high price.

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PART 2: Presentation

Talent acquisition and retention within the airline industry

 Talent Acquisition

Talent acquisition can be called human resource process because it interprets with finding and
obtaining skills and experienced human resources for the company’s necessities and to ensure
the employee’s requirements (Malhotra and Singh, 2019). For example for revenue manager
recruitment in British Airways, the experienced labour will be recruited through recruitment.

 Retention

Employee retention alludes to the aptness of British Airways to conserve its labours and
employees (Malhotra and Singh, 2019). Employee retention can be represented by a simple
statistic. However, many consider employee retention as relating to the efforts by which
employers attempt to retain the employees in their workforce.

Different stages of the HR life cycle applied a specific job role of revenue
manager
HRM practices their core activities e.g. selection, recruiting, training and development,
motivating, controlling, performance rewards many others. These activities can ensure the core
employees with high skills and experiences if the best HRM can be practiced within the
organisation (Eaton, 2017). Basically there are four stages in HR life cycle e.g. recruitment and
selection, on boarding and orientation, exit and transition. With each and every stage, British
Airways is introduced because they recruited in fellow years more than thousand employees
with skills. As a revenue manager plays various roles and responsibilities in BA, within a specific
job role (in charge of compiling and analyzing data to make decisions regarding pricing) how
these stages are applied that is reviewed below:

 Recruitment and selection

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 The HR life cycle erupts from selection and recruitment of the employees. To select and
recruit an employee, firstly HR manager needs to collect CVs and take examination on specific
roles (Bratton and Gold, 2017). The best alternative employee with high skills will be selected
and recruited. British Airways needs to consider some skills for revenue manager with specific
role (in charge of compiling and analyzing data to make decisions regarding pricing) that is
positive thinking as well as cognitive decision making with great psychology. It will help to take
decision to interpret and set the price of seats and packages for the customers considering
highest revenues and profits.

 On boarding and orientation

After selecting and recruiting the employees, they are appointed for operation in the
business. The board of directors divide the tasks among the employees. The British Airways
separates different roles of responsibilities of revenue managers as in charge of compiling and
analyzing data to make decisions regarding pricing, and they practice this task effectively.
Promotion, operation, controlling, training and development all are the activities of British
Airways within on boarding and orientation (Bratton and Gold, 2017).

 Exit and transition

At the rest, the on boarding and orientation will be completed and in the HR life cycle
the employees will be last stage of their professional life. For example, the retirement of the
employees, last promotion, transformation and upgrading the jobs the professional careers will
be finished (Eaton, 2017). British Airways ensure the rewards and pension of the employees
after finishing the job life of the employees. In this way, the exit and transition of the
employees in HR cycle is completed within British Airways.

 Importance of them in retaining and developing talent

The HR cycle interprets three stages of employee life which can fulfil the satisfaction of
them because they are regarded as the best service providers of the organisation. The best
motivation, on the job training, providing benefits and incentives, performance appraisal,
rewards and recognitions, promotion and other benefits are provided through British Airways
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to the employees (Bratton and Gold, 2017). These steps helps to the organisation to be retain
the employees mostly. Even through these stages, the development of the employees can be
ensured because the training and development programs are arranged by BA which provide
practical experience and knowledge. These practices actually can retain the employees and
develop talent within BA.

Performance management plan for revenue manager

Roles and skills Objectives Outcome expected Timeline

To increase revenues The revenues will be This will take 2 weeks to
and ensure growth increased by 10% rather be achieved through
profits with the than previous years the potential
Calculating revenue with efficiency in BA because of perfect employees.
mathematical ways calculation and
deducing the
demurrage and grazing
in revenues
To ensure the pricing The price will be static It will take 2 weeks to
Setting appropriate price strategy within BA of and reasonable for the be completed because
for seats seats and allocation of customers and BA will of researching in field.
revenues will be face lots of profits and
appropriate. revenues.
To develop the The decision will be It needs 1 week to be
thinking level and effective and default completed to achieve
Decision making and increase the decision that will be effective for the positive thinking
positive thinking making power within the organisation and and decision making.
BA for ensuring the the performance of the
best decision in employees will be high.
organisation.
To reduce the The positive attitude It takes 1 week to
Relationship with negative behaviour of and behaviour will be resolve the problems

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employees the employees within achieved and they will within BA
the organisation. perform positively.
To ensure the The employee retention It takes 3 weeks for
Employee engagement employee retention in will be increased by employees because it is
increment high level within the 70% because they will lengthy process for BA
organisation be engaged.

Above five portions and techniques which are taken by BA because of reducing the
negative behaviours and employee retention because these will increase the positive attitude
and engagement of the employees within British Airways. Within 90 days all negative
behaviours will be overcome and the retention rate will be 100% if these techniques can be
applied within British Airways.

Evaluation of each stage of the HR life cycle and the importance HR plays
The best alternative employee with high skills will be selected and recruited in
recruitment and selection stage and so British Airways needs to consider some skills for
revenue manager with in charge role that is compiling and analyzing data to make decisions
regarding pricing. This stage takes huge time and costs in recruiting and selection process. That
is disadvantage for this stage but the talent acquisition will be perfect and skilled employees
will be recruited which will be advantage for BA (Ahmed, 2017). The on boarding and
orientation ensure performance of the employees which help to mobilise the organisation
effectively that is advantage for BA. On the contrary, the on boarding and nursing the
employees BA may have to face some constraints and violence which interact with negative
practice in BA. Exit and transition is another disadvantage for BA because the potential with
high experience is going in vain. But sometime it works as advantage because the new
innovative and trendy talents are recruited after exiting and transition of them.

HR plays in supporting growing and retaining talent applied to revenue manager for in
charge in setting price of seats with cost and expense considering. This type of job is tough for
revenue manager because the cognitive decision making is required because it tough to

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manage efficiently. That’s why HR cycle with every stage is important for BA in managing the
employees and performance of them.

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PART 3: Article of Publication

“The Air law and its implication”

An exploration of the relationship between regulations, legislation and

standards
 Relationship between legislations, regulations and standards

Legislation is an injunctive proposed by a legislative body and regulation is a specific

requirement inside legislation while standards are made of components in producing the
products and systems to separate from others working as benchmark. The legislation is wider
and more extensive and regulations are specific with details as well as how legislation is
prosecuted while the standards are applied for ensuring the product quality and benchmark.
British Airways eludes all of regulations, legislations and standards which protect from illegal
action and damage (Cooper et al., 2017). The relationship between legislation, regulation and
standard are positive without legislation the regulation cannot be formed and standards cannot
be ensured through airline with services.

Explaining specific legislations that organisations in British Airways has

to adhere to
British Airways has to adhere to some legislation as it is the airline company it has to
exert environmental legislation, consumer and passenger rights, freedom of the air and
bilateral agreements. Because airline pollutes environment e.g. noise pollution, air pollution,
soil pollution, water pollution and many more. Route maintenance and consumer maintenance
should be ensured and so British Airways has to employ different legislations. Now these
legislations are explained below:

 Environmental legislations

The environmental legislation is the set of laws and regulations concerning to water and air
quality, endangered wildlife, the wilderness and other environment factors. The legislation

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ensures the best interaction between men and nature so that it can demolish the threats to
environment and encourage health consciousness (Percival et al., 2017). According to
environment protection act 1990 these are composed and so British Airways culpable or
accountable for maintaining the legislations of environment protection. It will decrease
environment pollution and global warming as a result the natural disasters will be demolished.
On the other hand, the costs and the time will be consumed mostly which are the
disadvantages for British Airways of application of this legislation.

 Consumer and passenger rights

Consumer and passenger of airline is the latent stakeholder and so the airline should ensure
their rights. According to specifically legislation (261/2004) the outbound and return flights are
always considered as two separate flights even if they were booked as part of one reservation.
In some cases the airline operating the flight (also known as the operating air carrier) may not
be the same as the one from which you bought your ticket (Fox et al., 2019). In case of any
difficulties only the airline which operates the flight can be held responsible. In cases where an
airline hires (under a wet lease) an aircraft including crew from another airline, the airline
which hires the aircraft has operational responsibility for the flight and is regarded as the
operating airline under EU rules. In this way British Airways ensure the practices of air
passenger rights for increasing the profits.

 Freedom of the air

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 Figure: Air freedoms

Source:

Hence nine freedoms and rights boast for the airline industry which must have to be
executed through every airline (Overvelde et al., 2016). Each right has individual characteristics
e.g. first freedom permits to British Airways to use the sky of another country like British Airline
can use Germany’s sky to land in Italy. Besides other eight freedoms stipulates vigorous
evidence of flying the flights in the sky.

 Bilateral agreements

A bilateral agreement stipulates to an agreement between states or parties that encourage

keeping trade deficits to a minimum range. Depending on the type of agreement, scope and
countries that will be involved in the agreement will be bilateral agreement (Lester et al., 2016).
For example, European airline like British Airways and New Zealand airline have been an
agreement so that they can demolish the deficits of seats in jet.

An illustration of how company, employment and contract law has a

potential impact on business decision-making in British Airways
Company, employment and contract law boast impacts on the business decision making
in British Airways. In different situation and using techniques, BA executes these laws. Now how
these laws impact on British Airways this is illustrated below:

 Company Law

The company law incorporates a set of regulations and acts which throw accountability to
the business to ensure all of them in operation. According to company act 1994, a company will
be formed with association of persons who have rights with their ownership part. Actually for
the airline industry the aviation law is the part of company law which stimulates different
segmentations of airline industry e.g. flight concerning, air travel and legal business concern
(Davies, 2020). For example, putting in an application for the company law British Airways has
to take decision about consumer satisfaction, sales and seats, distribution, target market and

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other business activities. Without ensuring this law application, BA cannot ensure legality
within the business. In this way, comp
company
any law influences on the business decision making.

Figure: Employment law

Source: (Barrow and Lyon, 2018)

 Employment Law

Between the employee and employer a relationship is regulated through the collection of
rules and laws is called employment law. After
fter hiring the employees by the employers, they can
provide the services otherwise it is not possible to become employed. This law touches on the
minimum wages and requirements for the working environment for the employees. Besides
based on pressure and a minimum salary has to be paid to the employees in the workplace.
Family time, overtime pay scale, safe working, collective bargaining and leave of absence will be
guaranteed through this employment law within British Airways (Barrow and Lyon, 2018).
Because,
se, the employee will be satisfied then the customers will be satisfied. So considering the
employment law, the decision about employees has to be taken by the manager in this
industry.

 Contract Law

Generally a contract is a written and expressed agreeme

agreement
nt between two parties to provide
services and products. It has six elements and so based on to become a contract it must be

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followed these six elements. Mainly, in British Airways contract law is applied for maintaining
the relationship and dealing with the consumer in selling seats of plane. Even the employees
and the BA have an agreement where six elements are included (Zhang, 2019). Even with
different travel agency and tour operator they have to create the agreement where contract
law is applied for example, permission to sell the tickets of airline of BA has been give to tour
operator with a written agreement. So considering this law BA has to take decision about
business growth. Contract law obviously influences to business decision directly when it wants
to create an agreement for dealing with different clients.

An examination of the potential implications of regulations, legislation

and standards on decision-making in British Airways
Legislation, regulation and standard have some potential implication on decision making
in British Airways. The legislation stipulates injunctive proposed by a legislative body which is
fixed business operation. For example, freedom of air is the legislative application in airline
industry. British Airways has to polish nine different freedoms or rights so that they can operate
the business all over the world. From nine freedoms the most complex is hub and spoke
because the permission for it is very complex. And from last 50 years these nine freedoms have
been practiced by BA because it is the legislative action for the company. If it considers the
regulation within BA it can overlook that employment law has to execute within the industry.
For example, the employee’s salaries, wages and other issues are in fluctuation which is being
changed within decades (Zhang, 2019). Thus, BA has to compose the regulation within the
business operation and according to the regulation the organisation has to take decision. The
service is perishable for which seats of air are also perishable for which it should be
standardised so that consumer can be satisfied. Actually considering consumer perception, BA
precipitates the standards of service and takes decision about changing it.

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PART 4: Individual Report

An exploration of the different types of financial statements and

reporting mechanisms for organisations within British Airways
 Financial Statements

In British Airways, the financial statement speaks on behalf of a ritual document of the
financial activities of this airline. These statements are written documents that can measure
financial strengths, liquidity and the performance of BA (Sinha and Rao, 2019). There are basic
four types of financial statements are reported which are regarded as reporting mechanisms for
British Airways e.g. statement of financial position, income statement, cash flow statement and
statement of changes in equity. Now these statements are explored below with the purpose of
these statements within British Airways.

 Statement of financial position

Figure: Sample of financial position statement

Source: (Sinha and Rao, 2019)

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 The statement of the financial position speaks on behalf of the financial position of the
organisation. This statement is regarded as balance sheet which forecasts the assets, liabilities
and equity of the organisation (Sinha and Rao, 2019). As a financial manager, this balance sheet
must have to be prepared within British Airways. Three components have to be executed
through this balance e.g. assets, liabilities and owners equity. In British Airways, the assets
incorporate cash, plant, patent, inventory, machinery and many others. Liabilities contain the
bank loans and creditors and equity consists of capital of the organisation. Planes, slots and
patent rights are the large assets of BA. The assets and liabilities will be same and it is
calculated through balance sheet want to ensure equilibrium point between liabilities and
equity that is ain purpose of this statement of financial position.

 Income statement

Figure: Income statement

Source: (Mulat, 2016)

Income statement represents the profits of the organisation as well as loss and so it is also
known as profit loss statement. This statement forecasts the financial performance in terms of
net profits and loss for a specific period. Mainly income statement contains two elements e.g.
incomes and expenses (Mulat, 2016). In British Airways, income consists of sales revenues of
seats, dividend income, ancillary income and many others which have earned since a specific

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period. And expense incorporates salaries, depreciation and rental charges which have to be
paid since a specific period. The net profits or loss is calculated through deducting expenses
from income. The purpose of this statement within British Airways is to know about profits and
losses besides, the gross profit margin, operating profit margin and net profit margin over the
period are calculated through this statement.

 Cash flow statement

Figure: Cash flow statement

Source: (British Airways, 2020)

The cash flow statement records the movement of cash and bank balance over a period.
This statement contains three segments which have been classified within an organisation.
Operating activities, investing activities and financing activities are three basic flows of cash and
bank balance. The primary activity of business conspicuously represents operational activities
like selling tickets, earning from commission, up-selling the tickets. Investing activities are

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executed through investment on other business like food and catering section of Airline for BA
(British Airways, 2020). Finally the financial activities represent the debt and interest, share
capital and many others of British Airways. Statement of cash flows provides important insights
about the liquidity and solvency of a company which are vital for survival and growth of any
organization for this reason, BA applies this statement.

 Statement of changes of equity

Figure: statement of changes of equity

Source: (Sinha and Rao, 2019)

The statement of changes of equity is regarded as the statement of retained earning which
calculates the movement of capital or owner’s equity over a period. The movement of equity
can be derived from some components e.g. the net profits or losses which come from income
statement (Sinha and Rao, 2019). The share capital issues or sold can generate capital or cash
and the dividend payment is also source owner’s equity. Statement of changes in equity helps
users of financial statement to identify the factors that cause a change in the owners' equity
over the accounting periods. For this reason, this equity statement is calculated within BA.

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An explanation of the importance and value of budgets for controlling
business performance and identifying variances with reference to
British Airways
 Budgets

A budget is the allocated money for a particular purpose and enlists of intended
expenditures along with manifestoes for how to meet them. It might incorporate a spending
excess, giving cash to use at a future time, or a shortfall where costs surpass salary (Wildavsky,
2017).

 Importance and values of budgets controlling business performance

Business performance relies on a potent and healthy budget and so British Airways needs to
prepare a potent budget. The budget is a successful action to business to control the lazy
amount in business operations. As this action espies the current available capital and forecasts
the probable expenditures from where the net income will be gained and obtained within
British Airways (Wildavsky, 2017). Principally, the budgets help to control and plan about
financial activities in an organization and so the importance and values are gigantic for British
Airways. Some values and importance of budgeting within British Airways are given below:

It controls the finances of British Airways which ensures that the business can endow its
contemporary commitments. The budget helps to enable and enforce the business to obtain
the objectives and dispense the financial confidence in making decision. It finally dispenses
money in business for the future project.

Budgeting reckons revenues, regulates all kind of spending and formulates different
expenditures which are not included to business plan.

Budgeting confirms the supply of money which will be apportioned those things that will
assist in achieving the strategic business objectives.

The priorities of the business will be introduced within British Airways if the effective
budget can be prepared by the financial manager.

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 The organizational vision will be introduced through the staffs that will be involved in
budgeting and so they will be motivated positively to practices their best performance
(Wildavsky, 2017).

Because of above benefits of budget the importance and values of budgeting are more.
British Airways has to ensure an effective preparation of budget otherwise they will not get
benefits from it.

 The budget variances

Those budget variances that are wild ordinarily begin in the commercial center, when
clients don't purchase the organization's items in the amounts or at the value focuses foreseen
in the financial limit. The outcome is real incomes that may shift significantly from desires.
British Airways practices budgeting for controlling the extra and bad debt. Sometimes, it varies
because of fluctuation of fuel costs (Wildavsky, 2017). They fix a flat rate but the price is
fluctuated badly will hamper to budget of BA. This will impact negatively just because of fuel
costs and its price.

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An interpretation of the financial statements and reports for
International Airlines Group businesses of British Airways and Iberia for
the year ending 31st December 2018
The financial statements are composed of income statements which represent the
profitability, and then financial position statements which represent the liquidity and efficiency,
the cash flow statements express financing and finally the owner equity changes statement that
forecasts investor ratio. As British Airways airline is the part of International Airline Group
Iberia, within 31st December 2018 the statements are given below within best interpretation
and calculation:

International Airlines Group

31st December 2018

Income Statement

Expenses Amount (Million) Income Amount (Million)

Cost of Goods Sold £1000 Passengers £2500
Selling general and expenses £100 Freight £150
Income before depreciation £150 Others £150
Interest Expense £120
Maintenance £80
Total costs £1400 £2800
Income before tax £1400
Dividend tax (£14000-£2500)
Net income £1150

Total £2800 Total £2800

This income statement of this airline group has been prepared hypothetically but it
expresses the profitability of the airline group. Here profit of this company or net income of this

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airline group is £11500 and that is positive for this company and obviously this is profitable
business operation. It has ability to generate profits from the business operation that is proved
by this statement for IAG of British Airways.

Cash flow statement expresses the liquidity of the airline because the amount which
will be hand of the company and that is large from outgoing of cash.

International Airlines Group

31st December 2018

Cash Flow statement

Following this cash flow statement it can be said that the liquidity is very strong within
the organization. The cash flow incoming is very positive rather than outgoing that’s why the
liquidity is strong. This shows that the investment is profitable and the financially this airline
faces the increment of assets and net income.

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 Above the financial position and change of equity statements are positioned which
forecast the assets and the capital investment which execute the best financial statement
management. If British Airways can manage above the statements effectively, the liquidity,
financial performance, efficiencies and other issues will be achieved through the business
operation.

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Conclusion
Travel and tourism industry is rising sector the trendy people within business
circumstances. This industry needs to manage revenues to contribute in national GDP of each
country. Within the HR cycle the effective talents have to be recruited which have been
interpreted within this paper based on British Airways. Even the legal and ethical considerations
have to be managed effectively which has been executed through the BA. The budget and its
importance have been discussed with explaining and evaluation in this paper which needs to be
ensured by BA to manage the budget and employee performance.

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