A resurgent BA - will LCCs be erradicated?

[Wee Weasley Welshman]

One reads that BA are turning the corner. Premium long haul pax are returning, employee costs are being tackled and generally the future is looking brighter - as is the share price.

Now lets imagine this in 1996. In which case BA over the next 3 years is going to start raking it in with the upswing of the business cycle. Remember their £2bn annual profit? They didn't know where to stuff the cash!

Say we return to that situation.

Will they choose to use the money derived from Long/Medium haul to mount a counter attack on their European shorthaul network. i.e. Will they take on easyJet by underpricing them?

Most have got used to the mantra of BA shorthaul is doomed and the company are too top heavy to survive. And yet. How soon could this be reversed given a resurgent economy between here and the States..?

Cheers

WWW

[LTNman]

Easyjet’s HQ is the old spectators building and a series of portokabins at Luton while BA operate out of a plush office block. Who has the lower cost base I wonder?

[Flightmapping]

I will show more interest in BA when they show some long term interest in BHX, and start offering one way fares like everyone else does.

[Wee Weasley Welshman]

But who looks sillier - easyJet for hauling around people for £40 or BA for £400?

You can subsidise a lot of plush offices out of Business Class and First yields...

Cheers

WWW

[HZ123]

WWW; Whatever you view now it must follow that in due course LC costs will rise as they now compete with each other as well as the likes of BA. BA is well aware of its worse case scenario, the LCs I feel sure have made their risk assessments but may find things get a lot tougher in the next couple of years, doubtless we will see casualties.

[flapsout]

WWW,

Who looks sillier ? Easyjet for flying full of people who paid £40, or British Airways for flying with European Business Class Cabins empty because the days of people paying £400 for a seat are gone........

I have seen flights go from regularly having over 100 people in Club Europe two years ago to less than 20 on average now.

Total business class travel into and out of Europe is declining at 25-40% per year across all the carriers.

Last time I checked an empty seat not only doesnt subsidise waterworld, it costs money to carry.

Better to sell tomatoes today that are fresh than wait until they are going bad and realise that your prices were too high.

Who said airlines were complicated, it is just like running a greengrocer.

[Wee Weasley Welshman]

The nineties showed that BA could go from bleeding cash to printing it in a blink of the business cycle.

If that happens again and they return to £2b profits will they:

a) Continue to let LCCs take passenger share off them on domestic and shorthaul European routes, or

b) For three years spend half a billion or so cross funding the shorthaul European routes offering the BA product for less than the LCC product

Plan b) would see the even the largest LCC share price collapse and without lots of cashflow and lots of growth the business models collapse. They go out of business - BA reigns again.

All the LCCs could do is bleat about unfair competition and I don't know enough about that byzantian world to understand whether they could win their argument.

Cheers

WWW

[OLNEY 1 BRAVO]

WWW - Whilst the scenario you describe is quite possible, the lo-co's have added another factor to the decision making process that potential passengers go through before choosing their airline. Sure cost is a big factor, but the availability of flights from the passengers local airport is also an important one.


Even if BA do reduce their fares, passengers who find it easier to travel from Luton or Stansted or wherever there is a lo-co, will continue to use that airport rather than to waste their time travelling overland to an airport that BA deigns to fly from.

[flapsout]

Also,

The likes of Easy and Flybe now give better service than BA, and with a smile......at least with Easy I can buy something to eat...on BA I get what they allow me to have.........which isn't a lot.....

Also Ryanair's punctuality is far superior to BA's and that alone would make me continue to fly Ryanair even if the price is the same....

And then there are airports, I flew out of Gate 86 in T1 on Sunday, a BA flight I thought..........it was actually an EI flight and I had to pay for a drink and a snack......full service ? I don't think so.......And the walk to 86 ? Give me Southampton or even Stansted.........

So poorer service, poorer airports, full service sometimes....poorer punctuality........remind me of the advantages of BA ? Even if they do throw money at it.......customers will not naturally choose them

[omoko joe]

gotta agree with flapsout re EI. Bit of a nonsense BA codesharing with a 'low cost carrier'. The service is also the worst I've seen on any LCC.
Regards the original topic, Southwest have survived well through similar times in America. The market will right itself eventually as I believe there are too many LCC's in the UK for long term survival.
I'm sure EZY will survive but they are in danger of becoming the very operation thay set out to attack..High Cost! Big new headquarters in LTN full of 'middle management' lining their own nests. Too many chiefs and not enough indians spring to mind much like BA. Ryanair runs its operation on about half the staff of Easyjet..just as well too considering todays EU ruling.

[Wee Weasley Welshman]

I hardly think the warehouse formally know as Vauxhall Business Mall Unit B represents any Waterside-style extravagence!

Just how the nations second largest airline runs out of 40 old portacabins is a mystery to me. Mind you - that might explain a few things ;)

Cheers

WWW

[faq]

Hi WWW,

Did you return from commercial instructing in Spain to work for one of the low cost airlines?

If so I wondered if it was Easy Jet?

No motive for asking, I was just curious

faq

[Bagso]

"I will show more interest in BA when they show some long term interest in BHX, and start offering one way fares like everyone else does."

Here her to that...

.And how about Manchester too !

One pathetic 767 a day.......to New York like it has been for 10 years !

We are desperate for a 777

[twistedenginestarter]

BA can never run European services cheaply firstly because their overhead is too high (they'd have to do GO again to avoid that) and secondly because they insist on flying from congested airports, so their utilisation is bound to be poorer.

In markets like this you get 'umbrella' players. These are the top brand who know if they lower prices then the also-rans will always cut as well, so they are forever forced to charge more. They can only attract customers by offering a premium product (frequency, reliability, air miles etc). The product differentiation is currently not sufficiently attractive.

An analogy is Shell. Shell are the unbrella brand for petrol stations. The whole market has been under attack from supermarkets for 20 years. Now and again they try something like now special petrols, or putting all their faith in the forecourt shops etc. Utlimately they don't solve the problem. I doubt they make any money from petrol sales but they have to keep their network as an outlet for their refineries. They don't want to get into relying on anyone else particularly a Wal*Mart.

I suspect BA are like this. European is largely to support their long-haul so they don't risk too many of their passengers getting ensnared by competitors.

[Wee Weasley Welshman]

yep, Go let me in just before Christmas 2001 bless them.

I still think BA may have a nasty suprise up its sleeve when the worm finally turns and it starts raking in cash at an astonishing rate again. Everybody has got rather used to BA being on the ropes in shorthaul is all I was thinking about.

Mind you, if they'd just have kept Go and let Barbara get on with it, they might even be in profit right now :rolleyes:

Cheers

WWW