Advantages for British airways
- The benefit for being a public limited company for British Airways is that it has limited liability which means that owners are not personally legally responsible for all debt. There losses are limited to the amount they invest in the business. Another advantage is that Public limited companies are more likely to be able to employ specialists, and to use specialist machinery and equipment. Shares increase in value, if company is successful, it means that the company is making profit they can also make a larger profit by operating large scale that can lower costs per unit. Furthermore they also raise large amount of capital (money) from members of the public,
- A PLC has far more capital available, which it has raised through selling its shares to the public on the Stock Market. This means it can develop and expand the business more easily than a private limited company, which doesn't have the financial resources. It can also benefit from economies of scale, because it is a large-size organisation. This means that it will be able to buy in bulk, borrow more cheaply, and specialise. All of this should reduce costs and improve efficiency. Another advantage is Public limited companies can also produce goods at lower unit cost.
Disadvantages for British airways
- The drawback for being a public limited company is that there are many regulations to complete before opening a public limited company. Accounts (and problems) are public knowledge meaning that the public gets to know about the gain and loses in profit. Shareholders may sell shares if payment is poor, they don’t have to ask permission from the boss. Original owner may lose overall control of the company because the shares are sold to anyone and the company could possibly be taken over by them. There are also many conflicts between shareholders and the board directors. Public limited companies can also become too large resulting in poor labour relations.
- The disadvantages are it is Costly and complicated to set up as a plc – you need to employee specialist bankers and lawyers to help organise British Airways converting to the plc. Also certain financial information must be made available for everyone, competitors and customers included. Furthermore Shareholders in public companies expect a steady flow of income from payments, which might mean that the business has to concentrate on short term objectives of creating a profit, whereas it might be better to work on longer term objectives, such as growth and investment.
- Threat of takeover, because another company can buy up a large number of shares because they are traded publicly (can be sold to anyone). If they buy enough, they can then persuade other shareholders to join with them to vote in a new management team.
- Public limited companies are limited which means that they are incorporated; they can sue or own property in their own right. Their owners are not personally liable for the firm's debts (limited liability).
This is the source where I got my information about the advantages and disadvantages of British Airways being a public limited company.