Wednesday, 7 October 2009

From BAd To Worse

It seems not a day goes by without another tale of woe from BA and I have blogged before about an airline that is dying a death of a thousand cuts.

It turns out I was wrong - it's around 1,700 cuts, of jobs that is plus a pay freeze. Well that's just the latest round. Further, this is just a week after BA launched an ill-fated new Business Class only service to New York from City Airport when two such airlines operating similar models have gone bust inside the last 12 months. Despite CEO Willie Walsh claiming that this service would be profitable in a year, all indications are that it was dead before it took off. In the launch interview he even claimed BA was on the verge of buying another airline that is slowly dying, Iberia. I have said it before but I think Walsh is BA's problem - he just seems to lurch, punch drunk from one bad idea to the next and just does not seem to have in his mind a cogent strategy for survival. And that is the key here - after a £401m loss last year, the biggest since it privatised in 1987, BA will announce another loss this quarter and it is battling for survival. In many respects, an ill-starred takeover of another ailing airline is about the worst way to spend precious cash.

But Walsh soldiers on. Amidst several petty ways to save cash he is now taking on the Unions in promoting the idea that many staff should take early retirement or voluntary redundancy. There is also an issue over the roll of cabin crew for the future where the proposal is to drastically change the current roles, slashing their status and pay and bringing on new recruits at rock bottom prices. The staff are up in arms as, rightly, the former 'World's favourite Airline' had a good reputation on service and that's what kept customers loyal. But it seems that BA is losing itself in a 'Neverland' as it is caught in the vanilla whirlpool of budget airline menu-style services and high quality class service that customers pay a lot of money for. BA is a strategic dead duck and that flows right the way to the top. The final straw could be a strike of any sort - a prolonged one would almost certainly bring a failing airline to its knees.

Central to BA's woes has been the depletion of the higher class cabins as customers book more economy flights in the face of a recession. The passenger figures in that category are 13% down year on year and falling. Despite several silly offers to get people to upgrade by offering a free ticket when buying Club of First Class, or if you buy at economy ticket you are offered to buy an upgrade on one or more legs for idiotic prices considering you have usually just paid over the odds for a higher priced ticket anyway, BA has not stopped the exodus from the higher class seats. This means that these seats at the front of the airline are going empty.

But BA have several other problems, to my mind. The first is a silly rigidity about changing tickets once bought. If you arrive for a flight early and want to see if you can get on an earlier flight, BA, unless you have paid stupid money for a fully flexible ticket, do not allow such a useful thing. It means that seats go empty on the early flight but had they been filled, the later flight would have empty seats which BA would then have time to sell. And at any price, as it would be incremental money. Not so with BA (many airlines suffer from this dumb logic). They actually try to charge more for these newly freed up seats and so they remain empty whereas simple logic would say as long as you are covering the cost of the meal and and the fuel, you are making some money rather than cutting off your nose to spite your face.

Further, it remains to be seen whether Walsh and his management team understand where the future lies for BA. You can cut costs easily in a business like that without thinking hard and the biggest issue will be the Unions. Given that you think that you can handle the Unions, what is it you want to the airline to do after you have cut all the costs and ditched the staff? Do you want to be a flagship, high service carrier or do you want to be a low budget, menu-service airline? If so the latter, you are in the wrong place today as your hubs are the two most expensive of airports and you have a purpose-built terminal to handle customers. Yet that's what seems to be the plan - as BA sequentially withdraw simple things like meals and seat booking to charge for them but they do not lower the prices of the ticket in return.

In the middle of all this remains the staff - loyal and capable people who love the airline and give the service that the company was once famed for and proud to advertise. Effectively, Walsh is trashing their skills and abilities and looking to replace them with 'Easyjet-style' crew. The result could be tragic in terms of service - make no bones about it. The difference in the levels of ability and skill of cabin staff between low budget and BA is enormous and there is an immense confidence factor involved. If an incident occurred in mid air, I know who I would want to be running the plane - I think I best summarise it as that. On the last Easyjet flight I was on, we were served by a young man wearing a stewardess's outfit bought from a joke shop with his boxer shorts sticking out from his mini skirt as the staff laughed at the unwitting groom-to-be and took photos. Good fun but airlines are, in fact, serious business.

I wonder why the investors in BA carry on with the current management. From the Terminal 5 total fiasco to the series of knee-jerk, almost fag-packet attempts to save the business to a total lack of strategy, the airline is slowly dying and Walsh seems powerless and witless to do anything about it. The enduring image I have of him of late is his interview on the converted Airbus 318 taking off from City Airport, refuelling at Shannon and going on to New York running an already dead Club-only service for just 100 passengers talking of his new attempt to take over an equally dying airline, Iberia.

It was all wishful thinking.

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