|300,000 work in the City of London and a further 100,000 just on the Canary Wharf estate alone; so even in these times you’d think BA would be able to find the 50 to 64 people it needs to make this twice-daily route work.|
While British Airways grapples with its cost base and continues to seek concessions from key staff groups the simple fact is that British Airways (BA) has probably been hit harder by the turmoil in the financial markets than any other major airline. Having reported a record profit of £922m ($1.5bn) in 2007/08, just a year later the airline reported a massive £400m ($700m) loss. With London and New York two of the world’s key financial centres air travel demand between these two cities has been significantly impacted not only from a demand perspective, but more importantly from a revenue perspective. The problem for BA is that it is more heavily dependent on transatlantic traffic and revenues than its major European rivals.
Data for the second quarter of 2009 shows that just over 48% of BA’s RPKs (Revenue Passenger Kilometres) are accounted for on routes to the Americas. For Lufthansa (including Swiss) the equivalent figure for June was just under 40%. Although passengers on UK domestic and European routes represent well over 60% of BA’s total they contribute less than 20% to the airline’s RPKs (a much closer guide as to where revenues are earned). However, overall BA’s Americas demand has held up reasonably well in the second quarter of 2009 (down less than 1%), but the question is, how much has the average fare fallen to achieve this relative status quo?
|Region||Passenger share||RPK share||RPK change|
|Africa & Middle East||9.5%||18.4%||-1.4%|
|Source: Derived from BA data for April to June 2009|
Since the beginning of 2008 BA’s overall demand has been consistently down around 5%, with the notable exception of this April which benefited from Easter. Since last December the Asia-Pacific region has been the worst in year-on-year comparisons, not helped by the axing of routes to Dhaka and Kolkata.
|Source: British Airways|
|IATA reckons North Atlantic premium traffic is down 18% in 2009 while average premium fares have fallen by 20%; so BA’s premium revenue could be down as much as 35%.|
According to IATA premium traffic on the North Atlantic is down around 18% in the first four months of 2009, while the average fare for premium travellers has fallen by around 20%. As a result premium revenue could be down as much as 35%, a major issue for BA on its transatlantic routes.
Virgin on eight of BA’s top 10 US routes from Heathrow
Against this background competition in this core market is intensive. Latest schedule data for July shows that BA serves 16 US airports non-stop from London Heathrow. Of the top 10 Virgin Atlantic competes directly on eight of them (the only exceptions being Houston and Philadelphia).
|Source: OAG Max Online for w/c 6 July 2009|
While American is not a direct competitor as a result of its close co-operation with BA, other US carriers operate services on eight of BA’s top 10 transatlantic routes. To give it a competitive edge (lost after the retirement of Concorde) BA recently announced details of its planned double-daily London City to New York JFK service which will begin at the end of September utilising two specially configured 32-seat A318s. It will even re-introduce Concorde’s 001 and 002 flight numbers to highlight the significance of the service.
It’s certainly a tough job to re-invent a core-business premium travel product when it is ‘less cool’ with shareholders and a public that exaggeratedly believes that anyone who works in the financial services community is now employed by a state-owned bank. However, thankfully memories are short, when the financial markets inevitably recover and boom BA’s fortunes should presumably also recover relatively quickly.
|London City to JFK flights will have to make a fuel stop in Shannon although BA has mitigated this by offering passengers Shannon’s famous US Customs and Immigration pre-clearance facilities. Return flights are non-stop.|