Gatwick-3
Contrast this with Lufthansa's wholly unprofitable Eurowings short-haul subsidiary, which is being (mis)used by its parent to keep highly sought-after slots warm at Heathrow for strategic purposes (i.e., to prevent rivals like BA, Virgin and the MEB3 - first and foremost, Emirates - the airline Lufthansa loves to hate and blame for its largely self-inflicted woes - from buying the slots utilised for these loss-making Eurowings services, which don't even feed into the Lufthansa hubs in Frankfurt and Munich).
It's a real shame that BA decided to close down what was effectively its only profitable, non-leisure focused short-haul operation at Gatwick following its takeover of CityFlyer Express
Never confuse a full flight with a profitable flight unless you have seen evidence of these flights actually being profitable as well.
And as far as Air Berlin is concerned, for most of the airline's post German reunification's existence as a German company, they were losing money big time as the airline struggled to find a profitable USP in the German and global aviation market.
And as far as Air Berlin is concerned, for most of the airline's post German reunification's existence as a German company, they were losing money big time as the airline struggled to find a profitable USP in the German and global aviation market.
Fact remains however that the was, and indeed still is demand for 2nd tier German airports to connect with London, but perhaps as Rutan pointed out LGW isn't a good fit for them.
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CFE's recipe for success in the LGW short-haul market
Not quite. They were a franchisee flying ATRs on European short haul and were profitable as an independent business, albeit one branded as another (BA). When BA bought them out, two obvious things happened. The first was that their cost base changed overnight and not in a good way, and secondly BA was keen to drive higher volume and revenue from the slots and so many of the ATR routes went to BA (EOG) and onto B737s. That also ensured that many routes became immediate loss makers. Finance and cost attribution is a dark art, so of course the original CFE was closed and BA went on to make many more years of losses at LGW.
One of the key ingredients for CFE's ability to make LGW short-haul profitable on routes predominantly catering to people flying on business other than its significantly lower costs compared with the likes of BA, BCal and even Dan-Air is that they built their schedules primarily around the requirements of business travellers based in LGW's catchment, i.e., in addition to offering multiple daily frequencies at popular times for locally based business travellers, their schedules facilitated day-return trips saving business travellers in the area expensive overnight hotel stays at their destination. This was very different from what BA (incl. EOG) and BCal did: They primarily built their LGW short-haul schedules around the requirement to feed their LGW long-haul flights, with many of these short-haul feeders operating at suboptimal times for business travellers local to LGW, making it difficult or impossible to use these services for day-returns, especially on the majority of EOG feeders into LGW. By doing this, they disregarded the requirements of what are generally more profitable P2P passengers compared with most transit passengers, whose primary motivation for choosing an indirect routing involving a change of aircraft at an intermediate point over a direct or non-stop routing is a lower price. Such hub-and-spoke strategies can be very profitable if you are a blue-chip airline brand with a stellar reputation for consistent service delivery across all cabin classes, like Singapore Airlines for example, or if you are a well-reputed global super connector with a superior range of global destinations in high demand by both business and leisure travellers, as in the case of Emirates or Turkish Airlines for example, even if some of the connections involve longer layovers at the intermediate hub. If, however, like in BA's case re its unsuccessful attempt to make LGW a hub, you compete with a number of other airlines, like for example KLM, Lufthansa, Air France and Swissair at the time, which while not necessarily offering a substantially better inflight experience than you do, offer more conveniently timed indirect connections involving shorter layovers to the same destinations via their hubs as you do via your LGW hub (where BA was always at a disadvantage due to the airport's single-runway configuration) and, in addition, also offer indirect connections via these competing hubs to many more destinations than you do via your LGW hub, then you are screwed as most of your transfer passengers will only want to change flights at LGW if you sell your tickets at a discount to what your competitors charge, i.e., you end up catering to the least profitable segment of what is generally already a less profitable market segment (compared with P2P).
What IMO BA should have done instead to make LGW profitable as a hub is to close down EOG and keep CFE to serve a smaller number of short-haul routes mainly focused on business travel originating in LGW's catchment, serving these routes at higher frequencies than most of the EOG routes, with schedules specifically designed to enable day-returns for business travellers in the LGW area. And BA should also have exercised its option to buy GB Airways, its other LGW-based short-haul franchisee, to serve its more leisure focused routes from the airport instead of letting easyJet buy it.
And unlike these days, slot availability at LGW was not as much of an issue back then.
Last edited by FlyGatwick; 17th May 2024 at 00:44.
No, that's wrong. The business models of BA and CFE were the same, that's why they were a BA Franchisee. It would have been insane from an industrial relations and basic humanity standpoint to close down a based fleet of 30+ narrow bodies only to move the business to a 3rd party. It was the fact BA BOUGHT CFE that killed their profitability as their overheads changed overnight.
And to be clear, in those days, LGW slots were still very much an issue, LGW like LHR was effectively full and good slots were hard to come by. People keep talking about the "Gatwick catchment area", it's not distinct from the LHR one which runs from Bristol to Birmingham and all the way to Southampton and Bouremouth. BA LGW ended up cannibalising and competing with LHR and there was only one winner there. The only time short haul LGW ever made money was on point to point leisure many years later. The concept of BA having two competing London hubs was a commercial calamity.
easyJet coming to LGW was the biggest growth driver the airport has ever seen. There's no way BA could have done that level of growth profitably at LGW, Waterside don't know how, never did. They know how to run a network carrier out of LHR, but not much else. And that's fine actually, stick to what your best at. That's why they sold GO.
And to be clear, in those days, LGW slots were still very much an issue, LGW like LHR was effectively full and good slots were hard to come by. People keep talking about the "Gatwick catchment area", it's not distinct from the LHR one which runs from Bristol to Birmingham and all the way to Southampton and Bouremouth. BA LGW ended up cannibalising and competing with LHR and there was only one winner there. The only time short haul LGW ever made money was on point to point leisure many years later. The concept of BA having two competing London hubs was a commercial calamity.
easyJet coming to LGW was the biggest growth driver the airport has ever seen. There's no way BA could have done that level of growth profitably at LGW, Waterside don't know how, never did. They know how to run a network carrier out of LHR, but not much else. And that's fine actually, stick to what your best at. That's why they sold GO.
Last edited by Skipness One Foxtrot; 17th May 2024 at 03:03.
Just to be clear, when BA bought CFE it was initially run completely separately from BA and there was no change to the overheads and it remained very profitable. It was only when Bob Ayling (who had been a champion of CFE and wanted to see it expanded) left that things changed. While soley an ATR operator for quite a while, CFE ended up with a fleet of RJ100s.
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Distinct airport catchment areas
People keep talking about the "Gatwick catchment area", it's not distinct from the LHR one which runs from Bristol to Birmingham and all the way to Southampton and Bouremouth. BA LGW ended up cannibalising and competing with LHR and there was only one winner there. The only time short haul LGW ever made money was on point to point leisure many years later. The concept of BA having two competing London hubs was a commercial calamity.
And while easyJet's Gatwick presence has indeed been very successful and has massively driven the airport's growth, it is neither the only example of a successful scheduled short-haul operation at Gatwick nor is it true that mainly leisure-focused low-cost short-haul scheduled routes and operators are the only ones to succeed at Gatwick. CityFlyer Express is the best example of a Gatwick-based, predominantly business-focused, full-service short-haul scheduled operation that was consistently profitable on all routes it operated. And as CityFlyer was busy making money at Gatwick, BA mainline's short-haul Heathrow operation was losing millions, with almost all of its routes unprofitable in their own right, its existence only justified by the transfer traffic it delivered (and still continues to deliver) to underpin BA's long-haul profitability at Heathrow and thereby BA's total profitability as the millions it lost on short-haul were always absorbed by the billions it made on long-haul, especially transatlantic. Even BCal with its very limited short-haul network always made money as a full-service short-haul scheduled operator on Gatwick-Paris (CdG), Gatwick-Jersey and Gatwick-Genoa, i.e., those three routes were not only essential for BCal's long-haul (and overall) profitability by delivering transfer passengers for its long-haul services from Gatwick to Africa, North and South America (as did its remaining, loss-making scheduled short-haul services), but were actually also profitable in their own right.
One of the major issues for BA's consistent losses at Gatwick on short-haul was that its costs were too high and - as I had already mentioned before - its lack of focus on the Gatwick day-return business travel market.
Last edited by FlyGatwick; 21st May 2024 at 22:17.
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Might be an issue with terminology. ‘Local’ catchment might explain better ‘distinct’. The ‘local’ catchment are those (X) for whom a particular airport is clearly closest, considerably more convenient and preferable to other ones. Within that is a subset (Y) who would pay a premium to use that airport over another. Amongst other factors this explains why all six London airports have flights to eg Amsterdam, Malaga.
It is obvious that X and Y for Gatwick are considerable.
It is obvious that X and Y for Gatwick are considerable.
That's not right. Airports do have their own distinct catchment areas. While there may be overlapping areas between them, each airport has its own distinct catchment nonetheless, which is part of the USP. So, to say, for example, Gatwick's catchment is the same as Luton's is nonsense unless you define your catchmet as wide as you possibly can. If you do that, you might as well say that all of the UK mainland is one catchment.
And while easyJet's Gatwick presence has indeed been very successful and has massively driven the airport's growth, it is neither the only example of a successful scheduled short-haul operation at Gatwick nor is it true that mainly leisure-focused low-cost short-haul scheduled routes and operators are the only ones to succeed at Gatwick. CityFlyer Express is the best example of a Gatwick-based, predominantly business-focused, full-service short-haul scheduled operation that was consistently profitable on all routes it operated. And as CityFlyer was busy making money at Gatwick, BA mainline's short-haul Heathrow operation was losing millions, with almost all of its routes unprofitable in their own right, its existence only justified by the transfer traffic it delivered (and still continues to deliver) to underpin BA's long-haul profitability at Heathrow and thereby BA's total profitability as the millions it lost on short-haul were always absorbed by the billions it made on long-haul, especially transatlantic. Even BCal with its very limited short-haul network always made money as a full-service short-haul scheduled operator on Gatwick-Paris (CdG), Gatwick-Jersey and Gatwick-Genoa, i.e., those three routes were not only essential for BCal's long-haul (and overall) profitability by delivering transfer passengers for its long-haul services from Gatwick to Africa, North and South America (as did its remaining, loss-making scheduled short-haul services), but were actually also profitable in their own right.
One of the major issues for BA's consistent losses at Gatwick on short-haul was that its costs were too high and - as I had already mentioned before - its lack of focus on the Gatwick day-return business travel market.
And while easyJet's Gatwick presence has indeed been very successful and has massively driven the airport's growth, it is neither the only example of a successful scheduled short-haul operation at Gatwick nor is it true that mainly leisure-focused low-cost short-haul scheduled routes and operators are the only ones to succeed at Gatwick. CityFlyer Express is the best example of a Gatwick-based, predominantly business-focused, full-service short-haul scheduled operation that was consistently profitable on all routes it operated. And as CityFlyer was busy making money at Gatwick, BA mainline's short-haul Heathrow operation was losing millions, with almost all of its routes unprofitable in their own right, its existence only justified by the transfer traffic it delivered (and still continues to deliver) to underpin BA's long-haul profitability at Heathrow and thereby BA's total profitability as the millions it lost on short-haul were always absorbed by the billions it made on long-haul, especially transatlantic. Even BCal with its very limited short-haul network always made money as a full-service short-haul scheduled operator on Gatwick-Paris (CdG), Gatwick-Jersey and Gatwick-Genoa, i.e., those three routes were not only essential for BCal's long-haul (and overall) profitability by delivering transfer passengers for its long-haul services from Gatwick to Africa, North and South America (as did its remaining, loss-making scheduled short-haul services), but were actually also profitable in their own right.
One of the major issues for BA's consistent losses at Gatwick on short-haul was that its costs were too high and - as I had already mentioned before - its lack of focus on the Gatwick day-return business travel market.
I spend half my life dealing with commercial finance, it's a dark art. BA's short haul operation used to lose money if you looked at it as a the stand-alone operation that it wasn't. Well that's bonkers, if you take away the short haul feed then you screw over and undermine long haul and shoot your network carrier model in the foot. So technically it lost a fortune but in the wider strategy you wouldn't have x% of your profits and y% of your traffic and z% of your market share without it. On balance, the short haul business was a massive contributor to BA despite the technical loss assigned by finance once they chose what overheads to assign against it. They consciously decide how to to that and in doing so they can make or break a route. The day after BA bought the Euromanx J41 fleer they went from independent profit centre to loss maker overnight as BA overheads were assigned accordingly in the sale. They were sold soon afterwards!
BA have done nothing but slash costs at LGW since they bought BCAL. They have downsized Engineering, sold off catering, outsourced under wing then over wing handling and just recently set up an AOC with lower terms and conditions. Not to mention what they did to Dan Air! As to neglecting the "day return business market", well such a thing barely exists in the form it once did nowadays, and they DID try. They used to fly GLA/EDI/MAN/NCL/INV/JER/IOM/MUC/CDG/FRA etc etc all on jets on a day return basis. And let's be honest, when BA stepped away from these markets, easyJet stepped in and saw no need for old school business day return schedules. As for BCAL making money on LGW-CDG, well that's pre Chunnel days when BA flew L1011s on the same route from LHR. Bottom line is BCAL had to be bailed out before it went bust as the market changed and the "2nd force" concept wasn't working. And Richard Branson is on record as saying that had Virgin not been allowed to move out of LGW to LHR, he'd have gone bust in Gulf War 1. Adam Thomson was of the same view, being denied access to LHR and trapped at LGW stopped BCAL from being competitive.
It's a function of LHR being first to market and having critical mass of routes from the 1940s onwards, LGW (from 1958) was always late to the game as the big boys were at London Airport which only became Heathrow in 1966.
Again, I have nothing against Gatwick but it cannot be seen existing in isolation and must be seen in the context of being very close to one of the world's major hub and spoke airports.
The old maxim of catchment area is draw a circle around the airport which you might operate from and that is your main catchment area. Most of Manston is the SEA. I rest my case.
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Joking aside the classic catchment (defined as a 2 hour ground travel time) dynamic barely resonate .these days; especially in the price sensitive market whilst even business sectors through alliances , JV and code shares take you via various hubs, sometimes hours in the opposite to that you want to go .
Orange and Harp clients travel great distances to “ save” £15 and in the hundreds of thousands, and to be honest Gatwick in particular has a long long history with the historic inclusive tour companies going back the very start of mass travel.
Indeed it’s the very DNA of this airport, and with Manchester similarly.
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Yes sort of - However if there were perhaps a few rather frequent local rail services ( not having to travel 80 miles in the wrong direction and 80 miles back) much of Pas de Calais could also be included.
Joking aside the classic catchment (defined as a 2 hour ground travel time) dynamic barely resonate .these days; especially in the price sensitive market whilst even business sectors through alliances , JV and code shares take you via various hubs, sometimes hours in the opposite to that you want to go .
Orange and Harp clients travel great distances to “ save” £15 and in the hundreds of thousands, and to be honest Gatwick in particular has a long long history with the historic inclusive tour companies going back the very start of mass travel.
Indeed it’s the very DNA of this airport, and with Manchester similarly.
Joking aside the classic catchment (defined as a 2 hour ground travel time) dynamic barely resonate .these days; especially in the price sensitive market whilst even business sectors through alliances , JV and code shares take you via various hubs, sometimes hours in the opposite to that you want to go .
Orange and Harp clients travel great distances to “ save” £15 and in the hundreds of thousands, and to be honest Gatwick in particular has a long long history with the historic inclusive tour companies going back the very start of mass travel.
Indeed it’s the very DNA of this airport, and with Manchester similarly.
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Not disputed that why I caveated historical - Through much and most the Easyjet clientele would have been those IT passengers at the turn of the millennium.
Loss of Monarch, Thomas Cook (and its prior companies) First Choice , etc…. certainly changed the landscape .
The point was that a very very significant amount of Gatwick users travel the length of England and Wales by ground means to fly on that vacation (Many destinations remain available ONLY from Gatwick to this day)
This means that the traditional catchment area is largely irrelevant.
In the UK- Heathrow, Gatwick, Stansted, Luton and to a lessor extent Manchester are effectively National airports.
Loss of Monarch, Thomas Cook (and its prior companies) First Choice , etc…. certainly changed the landscape .
The point was that a very very significant amount of Gatwick users travel the length of England and Wales by ground means to fly on that vacation (Many destinations remain available ONLY from Gatwick to this day)
This means that the traditional catchment area is largely irrelevant.
In the UK- Heathrow, Gatwick, Stansted, Luton and to a lessor extent Manchester are effectively National airports.
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Airport Catchment Areas
Aren’t catchment areas a little more complex? Surely LGW’s catchment area changes with each destination being flown to? If for instance a destination is only served from LGW, then the whole of the U.K. would be its catchment area.
I’ve known flights out of LGW where pax have travelled down from Belfast or Inverness because it’s either the only option or it’s cheaper.
I’ve known flights out of LGW where pax have travelled down from Belfast or Inverness because it’s either the only option or it’s cheaper.
Last edited by pamann; 23rd May 2024 at 19:19.
Aren’t catchment areas a little more complex? Surely LGW’s catchment area changes with each destination being flown to? If for instance a destination is only served from LGW, then the whole of the U.K. would be its catchment area.
I’ve known flights out of LGW where pax have travelled down from Belfast or Inverness because it’s either the only option or it’s cheaper.
I’ve known flights out of LGW where pax have travelled down from Belfast or Inverness because it’s either the only option or it’s cheaper.
