BA business strategy

BA and its approach to the UK regions was always an awkward marriage. Lack of volume premium traffic to and from the regions did not sit well with its full service multi class strategy. Long haul regional operations in total were counted at best on the fingers of one hand. European services were stop/start. Meanwhile bilateral agreements and restrictions at the base hub protected the carrier and its profitable premium cabin and volume economy revenues from any competition intensity.

Creating regional subordinates with more attractive(cost wise) operating strategies failed over the long term to deliver returns on investment necessary to support regional continuation. Hiving off the regions to a regional carrier has been the next step. Is this done with a view to building up the operation based on a different 3rd party cost platform and then re incorporating back into the BA fold at some point in the future-- well only BA know that answer for sure right now.

Are we giving BA too much credit for shrewd business thinking?

Is there even a plan? Maybe its simple- they just abandoned the regions cause they couldn't make money and moved forward to further strengthening the Heathrow operation.

Meanwhile at fortress Heathrow premium traffic is in decline . It s major hub is under attack by major legacy carriers who have been granted further access through the liberalisation of restrictions . Its European economy traffic is under threat from the low cost carriers operating direct from/to more convenient regional points thus bypassing the need for an often awkward transit at the Heathrow hub. The availability of new slots to other carriers with the opening of the controversial third runway will shrink the future asset value of the large slot bank held by BA.

In BA's defense they have inherited high operating and pension costs that require to be managed.

Where can they go from here? Premium traffic in decline - some corporate travel supporters introducing a 'no premium cabin' travel policy in the current climate. European routes under threat in the back cabin from the low cost carriers. The unthinkable starting to happen - low cost models now appearing albeit in small numbers on competitive long haul services. Success will however encourage more. Little opportunity for BA in terms of new profitable Heathrow services- they've got the world pretty well covered from Heathrow hub with the destinations it feels are potentially profitable . Overseas European and long haul carriers successfully moving into the regions to take BA's European and long haul customer base.

BA's share price sitting at less than 30% of it value 3 years ago and with a banking system reluctant to lend to even strong businesses for growth investment. Did its relatively protected position at Heathrow cause it to become lazy or undynamic ?-only to find that more dynamic business competitors have charged through the front door and landed an accurately placed

left hook on its glass jaw.

Is there a way out of the cul de sac? Is the unthinkable happening - BA loosing its 'global' status to become a specialist niche operator?

Maybe they should have abandoned the suits and ties a little earlier and moved Waterside to Glasgow, or Liverpool or Newcastle or anywhere apart from London to provide a little opportunity for some fresh thinking !

Do I hear cries for help?

The commercial pilot training environment

The traditional sponsored European pilot training programmes have all but disappeared. The airlines have largely released themselves from the burden of pre employment training costs leaving the potential pilots with the task of covering the costs to frozen ATPL of up to GBP70,000

Sure the UK situation is not aided by political positioning where VAT is levied against training costs leaving UK schools at a disadvantage compared with other more accommodating Euro governments.Thus UK training industry whilst arguably providing some of the highest levels of competency is disadvantaged compared with overseas training. European countries, by offering VAT exemption on training allow FTO's in those countries to offer significantly reduced comparable training costs.


But what of the instructor ratios?


These are not local airfield flying clubs catering for the private pilot, but organised professional flying training organisations with syllabus structure and timescales for student throughput. It has become apparent that even during the good times, some of the FTOs have been under pressure and the ratio of students to instructors sometimes sits at a 5 or 6:1 ratio. This, leaving the students to sit twiddling their thumbs and covering additional housing costs whilst they wait for their overworked instructors to allocate time to the students' one flight a week .

And what of the current climate ?

The industry as a whole and this segment included has a history of poor forward planning. During this downturn uncertainty of short term future pilot requirements and new graduate employment is having an impact on new student numbers.

Will the climate see the instructor volumes downsize and thus the organisations still under deliver to the student or will some sense prevail and the appropriate instructor /student ratios return.

Some FTOs will not survive this trough. Who will manage the business successfully through the cycle and who will stick their heads in the sand?

Are you a student at one of these FTO's ? What is your experience of the current training situation?

At best the passive carriers will just be left behind !

One thing is for sure - If you stick your head in the sand and hope it goes away-- IT WONT !


The airline graveyard is already full of once great and some not so great airlines for whom all of us still shed the occasional tear - ''Ah they were a great carrier- great people-fun times- shame they're not still around''

Carriers only marginally surviving during the good times now face possibly an impossible survival task.

The current economic cycle brings out the marketing aggression in the potential survivors and for the strategic thinkers, the stronger they work to survive, the more they are allowed to take market from the weaker, less responsive and less capable .



Looking at the weak from a pure business perspective how could this have been allowed to happen? A business strategy agreed at board level, which was at best marginal in times of economic strength and now in intensive care? Skills and leadership in poor measure? Not enough of one or not enough of both?

How many wise businesses 'put a bit aside against a rainy day' and how many others squandered the revenues made during the good times on questionable projects or consultants, only to realise that they now need that cash but no longer have the use of it?

Look at the carriers currently beefing up their commercial teams - bringing in individuals who can take a fresh view, who can identify fresh revenue streams to improve the business. Look at those who are not ! How many have already delivered their survival strategy and are already working ahead in expectation of business improvement in 12 months ?

Load factors down and high yield traffic falling through the floor for some carriers . With the airline graveyard becoming fuller by the month- who will be the next - Plenty are in 'intensive care' already .



Which will have the life support machines turned off by those who have contributed most to bringing the economy to this shameful point?

Heathrow third runway- a strange twist in the tail !

Having delayed the decision but finally announced conditional approval for the concept of the additional runway at Heathrow in January , the carbon emission issue once again rears its head after less than a month to threaten necessary expansion at other UK airports.

It appears now that in combination with the use of the established runways at Heathrow , a 3 runway operation at Heathrow is likely to use the UK 's agreed air transport carbon maximum almost completely by mid century. If not re examined and clarified, this would then limit use and expansion of all other airports nationally.

What a position UK government has got itself into !

Conditional approval was announced in the face of much backbench disapproval for the concept in addition to 'green'' objections. And now the approval is potentially alienating the rest of the country who overwhelmingly support the wish to use local departure points . These regional airports have their own detailed expansion plans . In fact regional airport expansion has been very much encouraged by this very government whose detailed papers and forecasts up to 2030 highlighted the enormous local benefits attached to regional air transport operations and the need to develop them further. Whose existence and success brings much local prosperity, and arguably provides a 'greener' air transport solution. This by encouraging air travel from local points requiring much less surface travel delivery distances and by reducing the need for much carbon producing surface transport volumes required to deliver customers to the hub near Hounslow. So how much of this regional asset is now threatened and how much regional customer convenience is ignored in order to maintain Heathrow as a showcase global hub?

Is this a case of another embarrassing gaff with government just not thinking it through? It confirms once again that when it comes to air transport, government really has NOT got its act together .

Tasked to manage the country ? I'm not sure I can trust them with the skill to put a hook up in my garage !!

What do you think ??