UK Office of Fair Trading (OFT) launched a trial against three former British Airways executives and one current executive for allegedly scheming with Virgin Atlantic Airways to fix fuel surcharges on trans-Atlantic services (Bloomberg/Daily Mail/Travel Trade Gazette, 26-Apr-2010). The carrier reportedly earned an additional GBP64 million in revenue in one year (2H2004-1H2005) from the action. The defendants deny the cartel offence. No one from Virgin has been charged in the case, as they acted as whistleblowers to the OfT.
Office of Fair Trading launches cartel trial against former BA executives
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British Airways: cabin crew dispute tests the airline's resolve to reduce unit labour cost
A vote on 14-Dec-2016 by British Airways 'mixed fleet' cabin crew raises the real threat of strike action - and, as is often the case, in the lead up to a peak holiday period. This would be the first serious industrial action since strikes by cabin crew protesting at the 2010 introduction of mixed fleet crew. BA, and its parent IAG, have been praised by many observers (including CAPA) for their resolve in driving through important restructuring programmes in legacy airlines, while their European peers have fallen behind the field. A crucial part of this has been to generate labour productivity improvements, often in the face of union resistance.
British Airways has a good track record in improving the efficiency of its workforce, as measured by ASKs per employee. In 2015 it made its highest-ever operating profit margin, beating Europe's other major legacy airlines, and it looks likely to improve on this once again in 2016. However, it does not have a great record of lowering unit labour cost.
Moreover, BA is currently experiencing falling unit revenue. With help from lower fuel prices receding, cutting ex fuel unit cost will be vital if BA is to fight off the margin squeeze resulting from unit revenue weakness. Labour is a key element of ex fuel cost, so the cabin crew dispute is a test of BA's resolve.
IAG and Heathrow: airport decision welcome, but possible charges issues. Options at other IAG hubs
On 25-Oct-2016 the UK government announced its support for a new runway at London Heathrow Airport. There is still a lengthy set of processes to be observed before a new runway at Heathrow can finally be built. Moreover, opponents are likely to fight a fierce battle to try to prevent it. Even Heathrow Airport does not expect the runway to open before 2025. 2030 is more likely.
Airlines at Heathrow, led by British Airways and its parent IAG, have given a muted welcome to the UK government's decision. However, they are very clear that they do not wish to see airport charges increase as a result. IAG in particular has long been adamant that it will not pay for the expansion through tariff increases at Heathrow. The airport is among the most expensive in the world and its aeronautical yield rose 2.5 times from 2007 to 2014.
The UK government has set its aim on keeping landing charges close to current levels. Heathrow CEO John Holland-Kaye said that the expansion would provide an airport that is fair and affordable; but history suggests that the airport and its leading airline may define these terms differently. However, as this report demonstrates, IAG has other hubs and other airlines that give it alternative growth options.