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- British Airways Plc,
PO Box 365,
- Main hub
- London Heathrow Airport
- United Kingdom
- Business model
- Full Service Carrier
- Joined Alliance
- Association Membership
- Codeshare Partners
- Aer Lingus
Sun Air of Scandinavia
British Airways (BA) is the national carrier of the United Kingdom, a subsidiary of publicly-listed International Consolidated Airlines Group (IAG), and is based at London Heathrow Airport with a secondary base at London Gatwick Airport. Using a fleet of wide and narrow-bodied Airbus and Boeing aircraft, BA’s extensive network, including that of franchise partners Sun Air (Turkey) and Comair (South Africa), includes services to Europe, North America, Latin America, Canada, Africa, Asia and Australia. BA is a founding member of the oneworld alliance.
Location of British Airways main hub (London Heathrow Airport)
International Airlines Group share price
2,682 total articles
247 total articles
On 23-May-2013, Flybe announced it had conditionally agreed to transfer all of its 25 daily slot pairs at London Gatwick (6% of the total at the airport) to the airport’s leading carrier easyJet for GBP20 million. The deal is subject to approval by Flybe shareholders at an EGM (expected in Jul-2013). Flybe intends to continue to use the slots to operate its existing routes from Gatwick until Mar-2014.
Flybe may have been pondering the decision to end its 22 year association with Gatwick for some time. Its slot share at the airport has declined in recent years, while airport charge increases have disproportionately hit operators of regional aircraft.
Why did Flybe make the decision; what does the deal say about the value of Gatwick slots versus those at Heathrow; and how might easyJet use the slots?
Across the world, premium air travel demand has slackened. And it is hurting the world's airlines.
In the early days of aviation, it was all about the glamour. Images from the 1930s and 1940s evoke an era of silver and linen service, with passengers and crew dressed as if they were in one of Europe’s grand hotels rather than in a noisy metal tube dodging bad weather and landing to refuel on any flight longer than a few hours. As air travel became more popular and affordable, first class cabins remained the domain of the rich and famous, but the advent of business class gave busy executives a haven from their daily stresses and appealed to the ambitions of the aspiring rich and famous.
Now, in the era of low-cost carriers, aviation is mostly about getting from A to B as cheaply as possible. Airlines such as Southwest, Ryanair and AirAsia have led a popular revolution democratising air travel and making it as accessible and common-place as catching a bus.
So where do first class and business class, collectively known as the premium cabins, fit into this new world?
If airline groups can be thought of as families, then profitable British Airways is the strait-laced older sister of the petulant, unreliable and loss-making Iberia. BA has learnt from its hedonistic, free-spending youth and matured into the sensible, trustworthy one. Parents are not meant to have favourites, but it is clear that IAG looks on BA with a glint in the parental eye, while Iberia is constantly being scolded. IAG refuses to buy its irresponsible Spanish child any new toys until it mends its ways, while it now trusts her British sister with shiny new 787s and A350s.
Nevertheless, BA should not allow itself to feel too smug. It remains much more dependent on a single hub (Heathrow) and on a single intercontinental market (North America), but less connected to domestic and European markets than its peers. Moreover, cost benchmarking points to the need for a reduction in CASK, which it has not managed since before the merger. As any parent knows, it is not just the children that are most visibly struggling that need attention.
It’s a familiar story as we approach the next five-year regulatory period for airport charges at London’s Heathrow, Gatwick and Stansted airports starting from Apr-2014. The airports seek big price increases, while the airlines want them cut and the Civil Aviation Authority (the regulator) tries to make proposals in the middle that displease both sides. A CAA-commissioned study shows that all three airports have significantly increased their realised airport charge yield over the past decade and are above the averages of their comparator airport baskets.
The CAA’s initial proposals were met on 30-Apr-2013 with immediate howls of displeasure from airline chiefs describing the proposed Gatwick price increases as “completely unjustifiable, totally unacceptable”, referring to Stansted’s “absolute pricing power” and calling Heathrow “over-priced, over-rewarded and inefficient”. For their part, the airports complained about “heavy handed regulation”, fearing that the proposals “will put passenger service at risk by not attracting the necessary investment”.
British Airways now holds more than 50% of the slots at capacity-constrained Heathrow, thanks to its bmi acquisition. Nevertheless, BA had managed to grow its holding for years, mainly due to secondary slot trading. After years of uncertainty over its legality in EU law, the EU clarified its position in 2008 and allowed the practice. It went on to commission a 2011 study which concluded that slot trading had clear beneficial impacts at Heathrow.
In this report, CAPA analyses the small proportion of the total number of Heathrow slot trades where slot values have been reported in the media and elsewhere. For many years until the mid 2000s, the average traded value per daily slot pair calculated from such transactions was around GBP4 million. A series of trades at more than GBP20 million per pair captured headlines in 2007 and 2008 before the market went underground. Surprisingly, after such a long quiet period, 2013 has seen two deals valuing Heathrow slots at GBP15 million per daily pair.
Few have single-handedly changed the landscape of global airline alliances the way Willie Walsh has. As the CEO of International Airlines Group, the owner of British Airways and Iberia (and soon Vueling), Mr Walsh had an instrumental role in bringing Qatar Airways into the oneworld alliance.
The ascension of Qatar occurs at a time alliances are undergoing significant change: Qantas in Mar-2013 launched a partnership with Emirates; oneworld's airberlin may partner with Air France-KLM; and Etihad has a staggering number of partners. Mr Walsh is respected amongst fellow executives for his candid and direct views – which peers perhaps wish they felt at the same liberty to say.
During CAPA's recent Airlines in Transition conference in Dublin, Mr Walsh gave a number of his thoughts on global alliances. He supports bilateral relationships and thinks the Qantas-Emirates alliance will be good for both partners. Mr Walsh also noted the limits of alliances: they are mainly to deliver additional revenue, not cost savings, and perhaps exist only because global mergers are not permitted by regulators.
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