COMMENT: British Airways transatlantic gamble

LONDON CITY and GATWICK

At a time when CEO Willie Walsh is calling for staff to work for free British Airways is gambling on a new transatlantic route that at best could be marginally profitable, and will, without question, dilute revenues at Heathrow.  BA is expected to announce imminently fare and schedule details on its innovative twice daily London City – Kennedy New York service, westbound via Shannon.  The route will be flown by 32-seat Airbus A318 aircraft, kitted out in the latest version of the airline’s successful Club World business class featuring a flat bed.

Why do we describe it as a gamble?

Let us start by quickly telling the history of London City Airport (LCY).

When LCY was originally opened by the Queen in November 1987 its principal protagonist, Brymon Airways, was 40% owned by BA, by then privatised.  The airline turned down any deeper involvement but did allow the Plymouth-based carrier to seek a partnership with Air France.  AF remains at the airport to this day acquiring KLM, VLM and CityJet along the way and now accounts for 50% of the airport’s traffic. 

AF has in the past claimed that LCY is very profitable.

In any event, with the upgrading of the airport for full jet operations in 1993 Brymon pulled out, BA itself returning ten years later and has steadily expanded its operation.  The arrival later this year of the exciting Embraer ’e’ series aircraft in BA colours ought to be icing on the cake.  BA now has 25% of the airport traffic, Lufthansa /SWISS taking most of the balance. 

BA did not pursue an interest in purchasing KLM, was rumoured to have been outbid by AF over VLM and clearly, and quite righty, sees LCY as a flagship operation.  AF is of the same ilk regarding the airport and with the A318 already in service was whispered to be putting together a London City – New York operation, although sceptical over costs.  Trial flights in October 2006 proved the concept of the aircraft’s operation and a much needed expansion of the airport’s apron provided urgently needed extra aircraft parking space.

BA jumped in very quickly with the announcement of a New York route and the acquisition of what is a new aircraft designation for the carrier, two Airbus A318s, much to the chagrin of AF.  Now, having burnt its figures with an abortive Heathrow – Los Angeles service, Air France's thinking has probably changed.

For London City Airport a Kennedy route is only a matter of prestige, the numbers very small, the loss of the Manchester service, 50 passengers per rotation and at one time eight flights per day, much more serious.  Yes the airport will sell a little more Duty Free.

The operational scenario

Eastbound the case for London City is easy.  With prevailing winds the A318 can fly non-stop.  Whilst the aircraft is slower than the Boeing 777 the chances of it being put in the holding pattern at LCY are much less than Heathrow and passengers, even with hold luggage, should be on their way within ten minutes of the aircraft actually touching down.  New York to The City could not be quicker.

Only time will tell but westbound, even with the Shannon stopover, it is likely that a passenger originating say in Whitehall would make Wall Street faster via LCY than LHR.  Heathrow T5 is twice as far by road as London City (20 miles v 10 miles).  With strong nerves, and a fully flexible ticket, it is possible to allow less than three hours from your scheduled departure time from Westminster.  By the same token one hour is possible to LCY.  The east London airport offers a 15-minute check-in as against 35 at T5.  But if you miss the aircraft, that’s it.  The alternative is back to Heathrow.

The Shannon fuel stop remains the biggest hindrance to the whole operation.  The airport authorities say that passengers will have to deplane, a completely unnecessary exercise which BA needs to lobby against at the highest US level.  With all the data regarding those on board already to hand it should not take a pair of US immigration officials more than ten minutes to quickly walk through the aircraft and appreciate that the customers are as per the manifest.  Even the seat numbers will be shown.  BA has also failed in its choice of airports at New York.  La Guardia would have made for a far better destination, minutes from Manhattan and already the recipient of cleared flights from Canada.

The commercial case

Who is the biggest competitor for BA at LCY?  And who is the biggest loser?  For both answers it is BA at Heathrow.  The BA fares out of London City need to be very carefully assessed against the full Club World level and could be 20% more.  However prices have dropped dramatically and even BA sells a next day return ticket for UKP2,565.  Even at that level BA at London City will not attract C Class travellers from competing airlines who are charging less than half that price.  The service might interest BA First Class passengers, the loser, again BA.  Without doubt there is a call from Canary Wharf types for the service regardless of the cost.  But how many will that be and once the novelty wears off will they stay committed?  When BA originally did its sums the fares were substantially higher.  Readers might note that Virgin Atlantic is still quoting UKP5,211 for its competing Upper Class and whilst it published a debatable profit for last year the airline has confirmed it will make a loss in the current 12 months.

According to OAG, BA currently has 38% of 6,700 daily seats between London and New York and 57% if you include its oneworld partner American Airlines.  Whatever happens at LCY will make little difference to these figures.

So where now?

The question is does a one class high quality airline work?  Attempts in the US coast to coast have failed and even before the current credit crunch Maxjet (December 2007), Eos (April 2008) and Silverjet (May 2009) have gone to the great hangar in the sky.  It can be argued that L’Avion (now Open Skies) in France was saved by “guess who”, British Airways.  Lufthansa has experimented with various business class only operations in recent years but all that remains is Munich to New York and Frankfurt to Dubai and to Pune (India).

KLM still flies a daily service (every evening – except Wednesday) between Amsterdam and Houston using a chartered Boeing 737 (Privatair) but even here the aircraft offers 44 seats.  SWISS, part of Lufthansa, has a similar operation from Zurich to Newark New York.

It has been proven time and time again that small jet aircraft are not viable, certainly when flown as part of a large mainstream operation.  Lose a group of four in a fully booked 32-seat aircraft and you are talking big money.  Lose the same group with 28 passengers confirmed and you are in serious trouble.  There will be no standby passengers ready to jump on board.  Would you go to London City without a firm seat?  At Heathrow you can miss a flight and very quickly find a substitute service.

BA had a choice.  Let Air France steal a few passengers, win some prestige, and lose money.  Or dive in and attempt to achieve something.  At the time our opinion was that it took the wrong decision and the financial woes of the last six months have not helped matters.

The marketing effort and management time that has gone into the London City operation could have been used far better promoting one of the new Boeing 777 routes, with far more income and much more chance of profitability.  In these difficult times BA needs to be proactive in every sphere.  The airline has quietly dropped its Gatwick – Kennedy flight for the winter leaving that airport bereft of any New York services.

In the latest edition of British Airways News Willie Walsh writes that its (similar) Open Skies operation is not profitable “Whilst Open Skies losses are said to be small we expect that its negative margins are probably not small at all and we would be surprised to see this operation endure as its strategic relevance will evaporate if BA gains anti-immunity trust with American Airlines.”  Last weekend he was busy ‘flying the flag’ talking to his customers at an open London event.  It’s also good to be seen for staff moral.

At the end of the day London City is hardly a speck on the British Airways horizon and the success will make little difference to the bottom line.  Failure will be expensive and not only in financial terms.  Writing in the Sunday Times last week, Irwin Stelzer, the newspaper’s American-based business correspondent paraphrased Gordon Bethune, responsible for the highly successful turnaround at Continental Airlines in the 1990s.  “Take too much cheese off the pizza and you won’t have any customers left.”  BA is working very hard in many areas to ensure its survival.  Gordon Bethune was right. 

Malcolm Ginsberg
Editor in Chief

PS: One remedy.  Throw out the expensive flat seats and go for 80 superior premium economy, Atlantic Special Class.  More flexibility and more income, no heavy passenger tax/duty.  The high yield travellers can still use the Heathrow red eye.  Outbound it does not matter and on the way back it is only a six-hour flight.  Or take the bold decision and delay the service due to the unique economic conditions.  The seats can be used elsewhere and an arrangement come to with Airbus regarding two aircraft which do not fit into BA’s fleet flexibility.

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Barcelona move for Star Alliance

STAR ALLIANCE Barcelona operators, all 14 of them, have moved to the new Terminal 1 at ‘El Prat’ Airport:  Adria Airways, Austrian, Blue1, Croatia Airlines, Egyptair, LOT Polish Airlines, Lufthansa, SAS, Singapore Airlines, Spanair, SWISS, TAP, Turkish Airlines and US Airways made the change last week becoming the first carriers to use the facility.  Future member airlines Aegean Airlines and Brussels Airlines have also made the change.  Provisions have been put in hand to accommodate Continental Airlines in the same area at a later stage.  Until September First and Business Class passengers as well as Star Alliance Gold Card holders will enjoy quality and comfort at the VIP lounge operated by AENA (Spanish National Airports Company).  Then Spanair will open the doors of their new 800 square metre VIP lounge, the largest at Barcelona Airport, providing eligible passengers with a wide range of superior services and facilities.  A presentation on the facilities at Barcelona is available from www.staralliance.com

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Corporate travel is downgraded

ACTE (Association of Corporate Travel Executives) chose last week’s introductory Business Travel Market to publish a survey confirming the obvious regarding cutbacks but putting clear markers down.  According to the organisation, which serves more than 6,000 executives in over 80 countries, 79.2% of executives are making greater use of conference call and various electronic communications; 67.9% of the buyers have cut back in the number of approved trips; 66% reported that they now book further in advance for lower cost options and 49.1% said class of travel had been downgraded.  Only 7.5% reported a total travel ban, although 26.4% reported a travel ban for non-revenue generating trips.  Other cutbacks mentioned included holding same day meetings to avoid overnight stays, shorter stays, multiple meetings in the same trip, greater use of low cost airlines and public transport and a reduction in the use of limos and taxis. www.acte.org

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Iraqi Airways to London?

IRAQI AIRWAYS, which claims to be the oldest airline in the Middle East, has posted on its website a brief note that it intends shortly to introduce flights to London.  It has reportedly struck a deal with the aviation authorities in Britain over the resumption of direct flights between Baghdad and the United Kingdom.  The national carrier's fleet was grounded during the first Gulf War in 1990, but it was able to resume flights to Arab countries after the fall of Saddam Hussein.  A new fleet of Boeing aircraft has been ordered and currently the carrier operates a mixed collection of various Boeing 737 aircraft.  The airline has offices in London’s Piccadilly. www.iraqiairways.co.uk

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Leeds offers Gatwick

FLYBE passengers on the airline’s new daily Leeds Bradford (LBA) to Gatwick (LGW) service (which starts on Monday 29 June) are in for a nice surprise.  As a gesture to the airline all travellers during the balance of June, plus July and August will be able to take advantage of the airport’s Fast Track service.  In these summer months LBA is particularly popular with low cost travel whose passengers tend to clutter up the security lanes.  As Gatwick is a mixture of business and leisure traffic this move should be well appreciated, with pressure for it to be extended ad infinitum. www.flybe.co.uk

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Melbourne gets another UK link

QATAR AIRWAYS is to introduce its first long expected ‘down under’ destination on Sunday 6 December, a date clearly targeted to make the most of what will be the forthcoming holiday season.  The capital of Victoria is very popular from the UK with BA and Qantas well established, Etihad on the route, Emirates adding a third daily flight in February and Air Asia X also linking through.  Virgin is rumoured to be adding the city to its existing Sydney operation.  From its three UK departure points (Gatwick, Heathrow and Manchester) Qatar is emphasizing the quick one hour stop-over in Doha (Perhaps a bit too quick.  The airline has the only dedicated Premier Class terminal in the Middle East – Editor).  Initially three times per week the service will be flown from Doha by a Boeing 777 in a two-class configuration, the airline keen to emphasise the quality of its economy class, 3+3+3 and a 34inch seat pitch.  Asked about the possibility of a premium economy product Paul Johannes, Senior Manager Europe, said: “We think our basic product is better than our competitors’ upgraded service.  We don’t have the need!” www.qatarairways.com

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Ryanair shuts website

RYANAIR, the airline which essentially only sells its services to people who have access to the internet, is to close this vital function for a ten-hour period from 19:00 Wednesday 24 June 2009 until 05:00 Thursday 25 June due to an essential upgrade maintenance.  The airline says that in order to avoid any inconvenience, web check-in passengers travelling on Thursday 25 must ensure that they have done the necessary online before 18:00 Wednesday 24 June.  The website will not be available for any passenger bookings or other services due to these upgrade works. www.ryanair.com

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JIM FRENCH CBE

Jim French, the ever chirpy Chairman and Chief Executive of Flybe, has become a CBE in the Queen’s Birthday Honours list.  Jim comes from Duns, Scotland (home of Jim Clark, probably Britain’s finest motor racing champion), and can be descried as a “total aviation person” having initially joined British Caledonian back in 1970, moving to Air UK ten years later and joining the then Jersey European Airways in 1990.  Today Flybe is without doubt Europe’s largest and most successful regional airline, employs 3,000 staff and operates a fleet of 70+ aircraft on 170 routes through 55 airports.

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CRUISING: A six-star ship

In July 1990 a cruise line was introduced that set completely new standards concerning water-borne holidays.  Up until that time if you wanted the ultimate in luxury on a sea going trip you either booked a suite on a multi-class liner such as the now taken out of service QE II, or went for a small exclusive vessel that lacked the facilities of a big ship.

Crystal Cruises was the new kid on the block and has been winning awards ever since.  Like a fine wine it has matured over the years.  It is different and continues that way.  Crystal Cruises is part of NYK, Japanese, and one of the world’s largest shipping companies.  However it is run as an entirely American operation, based in Los Angeles and only offers two ships, Crystal Symphony and Crystal Serenity. 

Symphony and Serenity are big liners by any stretch of the imagination, 50,000 tons (plus) each, around 1,000 passengers and 650 crew.  Even those in the cheapest cabins live the life of six-star extravagance with virtually every possible luxury available.  The nightly shows in the theatre are at least the equal of London’s West End with regular appearances by international stars in that venue and also in the equally comfortable nightclub.  The cuisine in one of four restaurants is superb and nothing seems too much for the willing staff to accommodate.  In August Symphony visits Dover prior to circumnavigating the UK calling at Edinburgh, Belfast, Liverpool, Dublin, Waterford and Guernsey.  Have a word with your travel agent.  He may well be able to arrange a short visit.  Crystal Serenity is based in the Mediterranean this summer prior to a southern transatlantic transit to the Caribbean in November.

Serenity is the slightly larger of the two.  It has recently undertaken a multi-million dollar re-modelling including a redesigned atrium area in the centre of the ship and a revised casino.

While most cruise lines have been increasing the size of their cruise ships, Crystal has actually decreased Serenity’s guest capacity by converting 12 deluxe staterooms with verandas to eight Penthouse staterooms.  Crystal Serenity’s 72 richly appointed 403sq ft penthouses boast a personal butler service, large private veranda, sizeable living area, bar stocked with complimentary wine and choice of spirits, Jacuzzi® bath and separate shower, walk-in closet, flat screen television, DVD and CD player, Riedel glassware, and complimentary clothes pressing service.

There are 32 even larger penthouse suites and four extremely lavish 1,345sq ft master suites.  All standard cabins have a bath and offer 226sq ft of luxury accommodation.

What do you get on a cruise with Crystal?  Firstly no big unexpected bills to settle at the end of the cruise, all those niggling little items that some companies now add, copying perhaps Ryanair, well known for its hidden extras.  Even the bus ride from the ship to town at each port is charged by some.  True you have to pay for wines and spirits but soft drinks come courtesy of Crystal to all passengers, as does ice cream and a proper 24-hour room service.  There is a champagne reception at the start and finish of every cruise.  Yes you are billed for services in the magnificent spa but the computer, bridge, golf, electric organ and other courses on sea days are for the most part gratis and included in the package.  The lecture courses are most compelling and the purpose-built cinema offers the latest releases.  The gym is one of the best at sea on any size of ship.

Both ships feature a sliding roof over one of the two swimming pools which in practice stays shut the whole time.  This means that the ship offers an air conditioned aquatic area for lunchtime poolside buffets which in the evening becomes available for al fresco dining.  Or you can go outside!

Even the two specialist eateries (one Italian and one Far Eastern) only add a very nominal USD7 per person gratuity for some of the finest meals possible at sea (or land).  Crystal is not cheap, and refuses going for a policy of major discounts for the less than popular voyages.  It is more discrete.  This means that the ships are never crowded and the very high standards can be maintained.

Towards the year’s end Symphony visits amongst many unique places in South America The Amazon, Rio de Janeiro, Buenos Aires, Port Stanley and Ushuaia.  Prior to that it will be based in New York taking in Bar Harbor, St Johns, Quebec and Montreal.  At the same time Serenity will make several passages of the Panama Canal, fascinating in itself, passengers joining in either Miami or Costa Rica.

Crystal, at least in Europe and the Caribbean, tries to aim for one day at sea and one day in port.  That way you benefit from restful days on the ocean and an opportunity to visit out of the way places which might not have normally been on your agenda.  The land packages are reasonably priced.  There is no service charge for UK originating passengers. www.crystalcruises.com

Cruising is a complicated business.  For an introduction visit www.aerbt/crusing intro


CRUISE NEWS JUNE 2009

CHINESE FOOD addicts, those with reasonable pockets, might like to join Crystal Serenity in Venice from 28 July where for 12 days Master Chef Nobuyuki ‘Nobu’ Matsuhisa will be creating a series of unique menus.  The famed restaurateur is demonstrating his culinary techniques and providing a glimpse into the genius and warmth behind his dishes.  The 12-night voyage starts with an overnight in Venice on 28 July and visits Ravenna, Corfu, Rhodes, Bodrum, Mykonos and Istanbul (overnight) before finishing in Athens on 9 August.  Prices start from UKP4,285 per person including return scheduled flights, transfers, and UKD1,000 per person shipboard credit. www.crystalcruises.com

MEIN SCHIFF (My Ship), the first ship in the new TUI Cruises fleet, has been named in Hamburg in a celebration that marked a significant step for the joint venture between Royal Caribbean Cruises Ltd and TUI AG.  The new brand is designed to serve the German cruise market, where some 906,000 Germans took cruises in 2008, and where that number is forecast to increase by 11% in 2009.  The 1,914-guest Mein Schiff was formerly Celebrity Cruises’ Celebrity Galaxy. www.tuicruises.com

STAR CLIPPERS has added 40 maiden calls to its 2010 and 2011 sailing itineraries, including some of the world’s most remote islands, an ecologically preserved archipelago and lesser known ports and islands in Europe and Central America.  The new sailing itineraries are on board the four-mast Star Clipper, its twin ship Star Flyer and on Royal Clipper, the tallest full sail ship in the world.  New Star Clippers destinations include the Marquesas Islands in the open Pacific, (the furthest islands from any land mass in the world), the ecologically preserved islands of the Mergui Archipelago (Burma) and a number of lesser known European ports, including Sanary-sur-Mer (Provence, France). www.starclippers.co.uk

VIKING has completed a major remodelling of Kirov, one of the four ships used on its St Petersburg to Moscow programme.  Reputed to cost USD6m the work was handled by a Russian shipyard unlike the previous year when sister ship Surkov was upgraded in Finland.  Essentially the 35-year old vessel, originally build in East Germany was gutted.  Although looking somewhat severe externally once inside it is as modern as can be with full air conditioning, a comprehensive video and film presentation unit and very nicely presented bars and dining room.  All the cabins have internet facilities, flat screen TVs, fridge and safe. There is an elevator too.  For the 2009 season English speaking Filipinos have been recruited for the resturant service. www.vikingrivercruises.com

BE WARNED ABOUT THE SERVICE, but it is bound to be terrific as it is Silversea.  The fly in the ointment is that John Cleese, him of ‘Fawlty Towers’ fame, Monty Python and the voice over in Spamalot, is joining Silver Spirit on its inaugural voyage at Buenos Aires for the Santiago portion, starting 20 February 2010.  As long as he sticks to entertaining and does not try to organise the Cruise Director all will be OK. www.silversea.com

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