Foolish Special

[ May 23, 2000 ]

Who Are We?

By Bruce Jackson (TMF Googly)

Who are we? We have a recognisable brand name, particularly in the London area. We operate largely in the travel industry. We have a very large register of private investors, many of whom were customers and who bought shares at the flotation. Sales are increasing but we are losing money. Here's a few more clues...

PR Disasters

In recent times, the company has been plagued by public relations disasters. Most of its competitors have been publicly lambasting the company. The stock market woes have been well documented. Technology problems have beset the company, delaying important projects. It seems every way they turn, a public relations catastrophe is just around the corner.

Management Problems

These are well documented, starting at the very top of the company. There's been reports of wars in the boardroom. People have questioned their technology, and more importantly their strategic direction. Management are backing themselves to get it right, but there's plenty of doubters. And rightly so.

Competition

Competitors are everywhere. In fact, travel is one of the most competitive industries on earth. The choices for consumers are enormous. Brand name counts for little when the customer simply makes a choice based on price. The company has little or no competitive advantage.

Just because they operate online is no guarantee of success. After all, the Internet is simply a new way of doing business. The competitive barriers to entry are very low. Any old Joe Blow can set up a competing site and service.

Losses

Sales are increasing, but they are loss-making. They continue to spend heavily on marketing, attempting to build their brand name. Their ads have been plastered all over billboards all over the country.

There are more questions than answers. Will they be profitable? In an intensely competitive industry, there's no guarantee of success. Operating expenses grew almost 10 times as fast as sales. Is this any way to run a business?

But a business this size needs massive amounts of investment. Cash is being burnt at a fast and furious rate, and one must question how long it will be before they take their begging bowl back to the market. You simply have to be profitable in order to be a successful company.

Conclusion

This is clearly a company with potential. Sales are growing, but so are costs. They may be profitable, but there's no guarantee, especially as they operate in one of the most competitive sectors on Earth. At the moment the stock market is treating them harshly, and rightly so.

One day they may once again become the market darlings, but the market is very unforgiving, and has a very long memory. The market is now looking for profits, but with technology shares completely out of favour, the future appears rather grim.

Who are we?

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We are...




British Airways (LSE: BAY).

Please feel free to post feedback and thoughts to the British Airways discussion board or the Fool's Eye View discussion board.

Related Links

• British Airways quote & summary page
• London Eye