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Home | Update | LATEST ISSUE | Gallery | FR Profile | Datafiles | FR 10/98

BRITISH AIRWAYS TROUBLES CONTINUE

The VIP passenger was not allowed aboard. "We will not fly him", BA repeatedly stated at the beginning of August. It must be fear of political complications and attacks that compels the airline to leave behind the writer Salman Rushdie, who has been sentenced to death in Iran for his "Satanic Verses".

Thousands of passengers have found out what it means not to be taken aboard. Striking cabin crews, who were fighting against changes to their pay agreements, caused serious disruptions to many flights in the summer of 1997. It took two weeks for the turmoil to subside. Due to the strike, BA lost about DM 360 million in revenue - the loss to the company's image was even greater.

However, according to Chairman Colin Marshall the strong pound has had much more detrimental effect on the airline than the strike. BA's rivals have a definite advantage in international competition because they can offer flights more cheaply. 53 per cent of the airline's business derives from foreign currencies. Apart from this the economic crisis in Asia has hit British Airways more than other airlines: Many destinations are in that region, the Far East is one of the main sales areas.

Economists have also detected a new trend in the home market. Trade and industry growth in the UK has slowed down, resulting in more empty seats. Markedly fewer seats are being taken in the first and business class areas of BA aircraft when compared with last year.

However, the airline's bosses are troubled most of all by the tug of war over the alliance with American Airlines. There is still no definite agreement on the link between the two companies. Two years have passed since they first declared their partnership. However, the European Commission manages to put more and more stumbling blocks in their path. The first hurdle was that BA and American had to give up 267 slots per week to their competitors at London-Heathrow - free of charge. BA pleaded for a sales option. After all, one of the rare time windows at the crowded airport is worth several million DMs. The commissioners said no - the dispute is about to enter a new round. At the moment the decision-makers in Brussels are considering giving the go ahead. But at the same time they want BA and American to cancel all plans for a combined frequent flyer programme, or at least to enable competitors to get access to such a programme. However, how valuable is an alliance when competitors can call the shots? The situation remains tricky - in autumn the EU-Commissioner Karel van Miert will come to a final decision.

Experts have stated that British Airways is heading for a crisis. The series of small disasters is harming the reputation of the world's most profitable airline. Despite improved turnover and an increase in passenger numbers, profits are dwindling. In the first quarter of this financial year yields were reduced by 4.3 per cent.

Maybe the new venture with "Go", a daughter company offering low-cost flights, is a move in the right direction. BA-Boss Bob Ayling comments, that "Go is our answer to increasing demand in the low cost sector".

At the same time BA's Chief Strategist John Patterson is working on an answer to Lufthansa and its "Star Alliance". Against the strong and profitable presence of the Germans in Eastern Europe is pitted an alliance with Finnair, the Polish LOT and now the Hungarian National Carrier Malev. However, a partner in Asia is still missing in the global BA strategy. BA had been involved in negotiations with the Hong Kong carrier Cathay Pacific Airways for a long time. Unfortunately this airline decided not to land in London, but a lot further south with Swissair in Zurich.

From page 22 of FLUG REVUE 10/98