COMMENT: British Airways - What Now ?

British Airways quarterly results until the end of December, reported elsewhere in AERBT, were not as bad as many had predicted.  However January is likely to be poor, a combination of bad weather and customer anxiety regarding trade union guerrilla tactics not helping the situation.  Analysts are predicting a total loss of between £500m and £750m for the 12 months up to the end of March.

2010 is likely to be a momentous year for British Airways.  Will the proposed merger with Iberia go ahead?  The airline was talking about it happening by June but now it seems that a December target is more likely.  Will the pension fund deficit be sorted out?  Who wins the battle with the Unions?  There are signs of a softening of attitude by Unite, the union beginning to realise that its lack of diplomacy is having an effect on passenger numbers, and therefore job security for its members. 

At the end of the day British Airways is a business operation and without passengers it will cease to exist.

Although he has the title of Chief Executive, Willie Walsh tends to act a Chief Operating Officer with less emphasis on sales and marketing.  Since Martin George fell on his sword over alleged dealings with Virgin Atlantic in October 2006 his post, that of Commercial Director, has remained vacant with no new blood.  Non-Executive Chairman Martin Broughton is less visible than his predecessor. 

News from British Airways is very limited and often reactionary rather than pro-active.  A classic example is the (12 months late) introduction later this week of the new First Class, said to be “low key” and hidden away in the quarterly results published last week.  AERBT welcomes any contributions from readers who might travel in the new cabin, or get a peep through the curtain.  The Business Travel Show in London (see below) would be a marvellous opportunity to unveil the new product to travel buyers and for BA to take centre stage. 

British Airways is accepted as the national airline whatever the people based in Crawley might say.  It “flies the flag” (well a bigger flag than Virgin) and was self-acclaimed as the “world’s favourite airline”, which it justified by noting that it carried more international passengers than any other IATA airline.  Its success, or otherwise, reflects on the United Kingdom.  Arriving at some foreign airport there is nothing better than to see the Chatham pennant on a tailplane.

There is no doubt BA faces serious problems.  The ever increasing price of oil.  Low cost carriers, with no historical baggage, and questionable passenger service.  Poor staff moral in some areas.  And finally the horrendous APD charges, driving travellers away from the United Kingdom (although it could be argued that BA failed in its backroom dealings at Westminster, a charge that could never be levelled at the previous administration).

This  week sees the alleged loss making Open Skies (a BA subsidiary for those who don’t know) launching an undisclosed route out of Paris Orly.  However brilliant the choice of the destination is, it will make a loss for the first two years.  New routes normally do.

The London City – New York service is something of an enigma.  It certainly suits a few but does it add, or in fact detract, from the bottom line?  The so-called load factor (75%) is a nonsense figure dreamt up by some airline Managing Director years ago to confuse his non-executive, non-airline experienced board members.  It actually means nothing as the seats could have been given away.  Yield is what really counts.  How much money has come in?  In the case of London City will BA be bold enough to survey its clients and ask “If not from LCY where would you have flown from and on which carrier?”  If the answer is T5 all the service is doing is taking money away from one British Airways route and giving it to another.  With Continental mounting an even stronger effort this year (see AERBT 1 February 2010) and Delta/Air France strengthening its position, the national airline needs to focus only in one direction. The American Airlines tie-up is far from resolved.

Traditionally British Airways has always set high standards of cabin service.  Will the Iberia partnership mean a change of direction?  With Iberia you pay (expensively) even for a cup of tea.  Willie Walsh talks about dropping Business Class in Europe but how will his traditional customer react?  Long haul, the two carriers do not compare.

Let’s hope that Mr Walsh sorts out his union problems and does not spend too much time with Iberia.  He should know how deal with the Spanish.  In a previous life he ran the now failed Futura.  Focus is needed in getting the passengers back.  “Bums on seats” is what it is all about – readers of AERBT and the like.

Will the affable Irishman be remembered as the man who saved British Airways, or the guy who wrecked it?

Malcolm Ginsberg

Editor in Chief

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