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Principal risks and uncertainties

The operational complexities inherent in our business, together with the highly regulated and commercially competitive environment of the airline industry, leave us exposed to a number of risks. Many of these risks – for example changes in governmental regulation, acts of terrorism, pandemics and the availability of funding from the financial markets – can be mitigated to a certain degree but remain outside of our control.

The directors of the Group believe that the risks and uncertainties described below are the ones that could have the most significant impact on the long-term value of British Airways. The list (presented in alphabetical order) is not intended to be exhaustive.

The Group carries out detailed risk management reviews to ensure that the risks are mitigated where possible. A more detailed summary of risk management and internal control corporate governance processes are included in our corporate governance statement. Clear plans for mitigating many of our principal risks and uncertainties that we face are included in the section on ‘Our strategy and objectives’ and ‘The way we run our business’.

Brand reputation

Our brand is of significant commercial value. Erosion of the brand, through either a single event, or series of events, could adversely impact our leadership position with customers and ultimately affect our future revenue and profitability.

Competition

The markets in which we operate are highly competitive. We face direct competition from other airlines on our routes, as well as from indirect flights, charter services and from other modes of transport. Some competitors have cost structures that are lower than ours or have other competitive advantages such as being supported by government intervention.

Fare discounting by competitors has historically had a negative effect on our results because we are generally required to respond to competitors’ fares to maintain passenger traffic. A particular threat in the current economic environment is cash rich competitors growing market share and acting irrationally to force other airlines out of the market.

“The Group carries out detailed risk management reviews to ensure that the risks are mitigated where possible.”

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