Gate Gourmet/BA crisis - Gatwick to be Shafted!

[bealine]

Looks like poor old British Airways Gatwick will be shafted for the wasters' unofficial walkout last month at Heathrow!

We're being told that our short-haul operation is making huge losses (almost impossible to reverse when the company keeps on selling lower than low priced tickets on LGW flights) and unless we turn the corner by 2007 our short haul services will be a memory!

.........Making losses, my ar5e!!! There's some very fishy cooking of books going on at BA - Dirty Tricks stamped all over it!!!

(Indeed, it is rumoured by the "Conspiracy Theorists" that Rod Eddington and Willie Walsh may very well have engineered the whole Gate Gourmet fiasco between them in order to break the historic TU agreements and bulldoze new working practices into Terminal 5!!! If so, £35 million is a very cheap price to pay!!!)

It is very easy to show Gatwick making losses. However, when asked to show an individual aircraft's profit and loss account (which I did a few years ago) I was told it couldn't be done!

I put it to you that in a company the size of BA, accountants must be able to show the following sort of figures (if they don't, how would they know whether an individual aircraft is an asset or a liability?):

G-DOCY (for example) 1st Jan to 31st March

RECEIPTS
Pax Revenue
Cargo/Mail Revenue

OUTGOINGS
Fuel
Flying Crew Salary
Cabin Crew Salary
Ground Handling costs
Maintainance Costs
Landing Fees
Extraordinary Costs (pax compensation delays etc)
Contribution to Support Costs - Boardroom/Waterside/Jubilee House/ Compass Centre etc

If any of our accountants could fairly show LGW based services are loss-makers, I would be very shocked!!!

[kotakota]

bealine

Shame your figures never came up !! But I do know where you are coming from. BA LGW/EOG have always been convenient whipping boys /girls for any general woes that Big Airways might be feeling ,and victims of some great sharp-pencil offences and all of us who have ever been involved with LGW know its not true.
You have to live with it , and the real positive thing is that despite all the 'negatives' about LGW it is STILL there !! Got to be
a reason for that ?
Apropos of nothing..........Shame we didn't let it all become GO at LGW 5 years ago ( about the same fares anyway ? ) EZY would be struggling at LGW by now. BA LGW still a very good product for the punters.

[apaddyinuk]

Well if LGW SH isnt making money then why waste all the time and effort to merge the two fleets if they will only be looking at getting rid of the majority of the crew afterwards?

[Lars Torders]

LGW has always been the target of BA management. In the days before EOG it is rumoured that Shorthaul LGW was dumped with the entire flight ops catering bill with only LGW budget.

Another angle -- The CC at LGW are about to become LH/SH if you then get rid of SH you have a very cheap LH crew. Is this rumour? Ask all the CC who have been told to move to LHR.

[Re-Heat]

I put it to you that in a company the size of BA, accountants must be able to show the following sort of figures (if they don't, how would they know whether an individual aircraft is an asset or a liability?)

As an accountant, I can positively say that if you were able to do this, you would be nothing short of God, since the complexities involved are massive - an asset and liability are quite different from what you imply.

You can work out if you are making a profit or loss, and if so the optimum fleet size and a profit/loss per aircraft attributed on a per aircraft basis, but not what x of y reg aircraft earns the company as tracking an aircraft itself is unnecessary when it goes to different destinations. You may work out exactly what a route earns however - that is constantly reviewed to ensure profitability.

Besides, your calcs are limited as they omit many other charges such as depreciation, and though G-DOCY is owned, the lease costs of the -300s or finance costs for example.

You have to ask (1) why does it still exist if it so bad and (2) shorthaul has often been shafted through management accounting transfers to ensure Ts and Cs remain low (namely of some LGW longhaul costs).

That however is common knowledge, so I can't see how it comes as a surprise to you...?

[atyourcervix73]

It seems from the outside looking in..(and pardon me if Im a little wide of the mark..just my observations)..that the implicit cost base at LGW is rather high. I would agree that LGW crew are the poor cousins to LHR, but BA are competing with a different animal at LGW. Easy, Jet2, Ryanair in the Lo Co sector in particular pose a rather significant threat.
IMHO, BA are going to have to face up to the realities of competing head to head in the short-haul sector, given this, cost cutting may well have to be part of that.

[PAXboy]

The old BOAC/BEA split looms again. The last time BA did a public change to the format of the company (something about Future Size and Shape) they specifically ruled out a return to long haul only.

I did not believe it then and I do not believe it now. When, eventually, all the short haul goes (to a mix of the LCCs and BDs etc.) they will say, "The market changed." Rather than, we mucked it up. Of course, the Brit govt forcing the merger over 30 years ago also mucked it up.

[Carnage Matey!]

One look at the passenger transfers list on any long haul flight will explain why BA won't be pulling out of the short haul market any time soon.

[DownIn3Green]

Carn..Matey,

I couldn't agree more....!!!

I fly BA quite a bit from MIA to Eastern Europe for the simple reason that Virgin won't take me past London without a seperate ticket (at corresponding prices) to my final destination.

All things considered, in over 10 years of flying BA from the states to Riga and Spain, I really can't recall anything less than a very far above average trip....

The above statement encompasses the entire journey....departure, connections and arrival points...and all of the dedicated staff encountered enroute...

[bealine]

It seems from the outside looking in..(and pardon me if Im a little wide of the mark..just my observations)..that the implicit cost base at LGW is rather high

The operating cost base of LGW (those people and equipment actually involved in looking after aircraft and their payload, whether pax or freight) is, in fact, very low in comparison with full-frills carriers. EZY and the lo-cos don't carry Mail or Cargo, (and they usually use off-pier stands) so our costs will inenevitably be higher than theirs. We also have a heavy management and administration cost compared to other carriers.

As an accountant, I can positively say that if you were able to do this, you would be nothing short of God, since the complexities involved are massive. You can work out if you are making a profit or loss, and if so the optimum fleet size and a profit/loss per aircraft attributed on a division basis, but not what x aircraft earns the company.

Whilst I agree that the issues are complex, British Airways arguably has access to the most up to date computer systems available, and an Im department other airlines can only dream about! What is the use of all those resources if simple aircaft profit/loss analyses can't be obtained! (I bet you Ryder's Transport manager can almost instantly obtain a report on one of our road vehicles!!!)

[Wee Weasley Welshman]

I think there is plenty of money for BA to make in shorthaul. I recently wanted tickets to Marakesh and only BA could do it and the cheapest deal was £1052 pp.

For the sake of going 40 mins beyond Malaga there is an incredible amount of yield available it would seem. Plus as one of the richest countries in the world there are plenty of citizens who couldn't give a toss whether their tickets to the Alps/Pyrenees are £50 or £150.

Cheers

WWW

[yachtno1]

And the whole of Concords fuel bill allegedly LT !

[bealine]

Sorry - Wee Weasley Welsman, Marrakesh and Malaga are GB Airways routes!

Whislt on the subject, the only short-haul routes under threat are BA Mainline and EOG Flights at Gatwick (the best would probably transfer to Heathrow) and, of course, 2007 is T5 opening time!!!

And the whole of Concords fuel bill allegedly LT !

........Nothing "allegedly" about it! The General Manager at the time was aghast to find that not only had Concorde\'s fuel bill been allocatewd to Gatwick for some ffive years, but also Concorde\'s crews were somehow on Gatwick\'s crew strength (and their salaries being paid from EOG\'s purse!)

[SilentHandover]

The majority of Easy flights using non-pier served gates at LGW??? When was the last time you opened your eyes and looked at the south terminal Bealine? At a guess I'd say around 80% + are pier served these days, probably the same percentage as BA pre Terminal 3 ..oops Pier 6!!!

[bealine]

....I stand corrected, Silent Handover!

[hec7or]

Carnage

One look at the passenger transfers list on any long haul flight will explain why BA won't be pulling out of the short haul market any time soon.

Revenue to the operator from transfer pax is much lower for the shorthaul part of the journey than from point to point travel. This is one of the reasons why Maersk/Duo were forced to drop their franchise and also explains why Air UK disappeared after they restructured their operation to feed into AMS. Quite simply, there is not enough revenue in the transfer market, particularly when you have to offer business class service on short sectors.

This means that the longhaul operation has to subsidise the shorthaul operation to some degree which means that the shorthaul operation tends to look like a loss maker.

Or, if you like, the fewer transfer pax on the shorthaul operation, the greater the revenue to the operator for a given number of seats sold. Now, since the shorthaul operation relies heavily on the fact that the longhaul operation is what drives its ticket sales, it follows that margins in shorthaul are tight.

If BA choose, then they can try to reduce costs on shorthaul by attacking terms and conditions and I would not rule this out, but by viewing shorthaul as a standalone operation they would be very shortsighted since a failure to deliver passengers to the longhaul sector whether by industrial action or by financial collapse would create a similar problem to the airline as the current outsourcing fiasco.

All very difficult to resolve, glad I'm not part of it.

[Globaliser]

bealine: Whislt on the subject, the only short-haul routes under threat are BA Mainline and EOG Flights at Gatwick (the best would probably transfer to Heathrow) and, of course, 2007 is T5 opening time!!!

T5 at opening isn't going to have enough capacity to handle existing LHR routes, let alone take on LGW routes as well.

[Speedpig]

You have to ask (1) why does it still exist if it so bad and (2) shorthaul has often been shafted through management accounting transfers to ensure Ts and Cs remain low (namely of some LGW longhaul costs).

Gatwick is BA's loss leader and always has been. Long may it continue! Can you imagine the North Terminal covered in the dreaded orange?

Inventive accounting was always a feature of Lord King's tenure.

Gatwick has not made a profit since Airtours ceased to exist (RIP). In those days, also prior to the take over by BCal, the scheduled services made money. Anyone care to hazard a guess how if they don't now?

Ask a travel agent to book you from London to anywhere in Europe and I bet you don't get offered a flight from Gatwick unless every flight from Heathrow is overbooked by more than 20%. The marketeers seem to forget Gatwick.

[bealine]

Ask a travel agent to book you from London to anywhere in Europe and I bet you don't get offered a flight from Gatwick unless every flight from Heathrow is overbooked by more than 20%.

.........Unless its the add-on sector of a long-haul and worth 9/10ths of f*** all!!!

[HZ123]

If there are to be cuts surely then LGW BA operation must be run as an outstation. In doing so a lot of the cost of the admin and ops must be transfered to LHR.

Once again LHR ops has lots of monies to spend as some of its number move to Cranebank while changes are made to the Compass Centre. What is the point of this when the Compass will close in the near future.

LGW is right to be concerned as LHR lose / spend money with little logic. WW I believe will have to move very fast in the near future if he is to implement any changes to custom / practise prior to T5.

The BA rag is out and actually states LGW must make savings of £13 millions