Many public limited companies are functioning in the United Kingdom. These public limited companies are not only functioning in the United Kingdom they are expanding their activities by setting up various branches in several foreign countries. They are not only concentrating on setting p of branches but are also acquiring many firms both at the national and the international level. One such public limited company is the BAA PLC. This company is the owner and the operator of the six British airports. This company is the one of the largest companies in the world. The term BAA stands for British airport authority. The transport industry in the current world is paying a crucial role. The globalization factor has made the improving of the transport industry at a very higher level. The air ways is the most preferred transport form by the international passengers. From time to time there have been many innovations in the air industry. The baa plc deals with the airport operations and the services. The revenue of the company is 2,567 million. The head quarters of this company are located in London. This public limited company was established as a result of the passing of the airport authority act 1966.
The following is the list of the airports that are Owned and operated by BAA PLC
London Heathrow Airport
London Stansted Airport
Aberdeen Airport
Edinburgh Airport
Glasgow International Airport
Southampton Airport
The company pays a lots of importance to the stakeholders. The stake holders are those individuals or the organizations who are affected by the or who can affect a company’s business activities. Thus the company should give utmost importance to its stakeholders. The stakeholders of the British airport authority public limited company are as follows:
Aviation industry
The aviation industry includes many such companies or the organizations such as the airports, airline, aircraft or the engine manufacturers.
Customers
The customers are also the stakeholders of the company as they are the purpose of the business. If there are no customers then there is no business. Here the customers are the passengers, airlines and the other retailers.
Employees
The employees play an important role as it is only with their help that the set objectives are achieved.
Government
The government is also one of the stakeholders. The government plays a crucial role in shaping of the business and setting of the various policies and the procedures.
Local communities
The local communities are those which represent the various communities that are affected by the operations of the airport authority.
Suppliers
The suppliers are those companies who supply the materials that are required to run the business. These suppliers play an important role as they contribute for the cost cutting concept.
As the British airport authority public limited company mainly deals with the infrastructure they should take utmost care while serving the customers. Even a single complaint may hamper their revenue.
CAPITALL STRUCTURE AND THE COST OF CAPITAL
The revenue is the amount that is earned by investing the capital. The revenue that is earned should be equal to the capital invested or more than the capital. But it should not be less. As a public limited company has a responsibility to pay interest to the shareholders or the investors who have invested in the company. The company should earn revenue that is higher than the capital amount. The minimum rate of return that is expected by the company’s investors is the cost of capital. The basic aspects of cost of capital are rate of return. The cost of capital is such as it is the rate of return that a firm requires to earn from its investment projects. The next aspect is the minimum rate of return. The cost of capital is that minimum rate that cost of capital of any firm is that minimum rate of return that will at least maintain the market value of the shares. The next is the cost of capital itself. The cost of capital comprises of three components such as the expected normal rate of return at zero risk level. The next is the business risk premium and the last is the premium for the financial risk on account of pattern of capital structure or the financial risk premium.
The various sources of funds that contribute to the capital formation are the equity share capital, the preference share capital, debt capital and the retained earnings. Even to choose either of these sources the company should calculate the cost of equity, cost of preference and the cost of debentures. Based on this the company can opt for either of these sources. But the company should also evaluate the risk factors of these sources. The company can also apply for a bank loan. Based on the size of the business or the capital that is required the company can opt for short term loan or long term loan. The capital structure of company may be formed in either of the ways. The first is the by the equity shares only, the second is by the equity and the preference shares, the third is by the equity shares and the debentures and the last is by the combination of the equity shares, the preference shares and the debentures.
The British airport authority requires capital for mostly improvement of the existing airports or it may require capital for the setting up of the new airports. Thus the capital that is required by them is very huge. Thus they can issue the shares and also apply for the bank loan. Due to the globalization concept many foreign banks are also ready to finance the business of the domestic companies. Here when the company accepts the loan that is advanced by these banks then there are chances that it may face the interest rate risk and the currency risk. This is because the percentage of interest that is payable is decided at the time of advancing the loan. There are chances that the interest rates may be increased and then the company ends up paying increased amount of interest. Thus, the company should carefully evaluate all the sources before selecting them for the purpose of the capital formation.
