It takes a lot of guts to launch a new airline and not all will make it. Just ask the backers of MaxJet — the business only service that went into administration over Christmas.Yet British Airways has launched not one but two new ventures in just a month. The first, Open Skies, will fly from New York to Paris and Brussels. The second, announced today, is a niche business-only service that is venturing into just that tricky market that did for MaxJet.
That BA feels it needs to tackle the upstart young airlines, Silverjet and Eos, that are flying out of Luton and Stansted respectively, is curious. However, as it gets more and more difficult to travel to Heathrow it seems that the top City bigwigs who pay the going rate of £3,000 that BA demands for flat beds want to have a service right on their doorstep.
Even more curious then, that BA thinks premium paying passengers will enjoy a quick “technical stop” on the West Coast of Ireland for refuelling. The hour to an hour and a half stopover will make the journey to New York almost nine hours — which seems quite lengthy for time-pressed masters of the universe. Apparently, by shaving check-in down to 15 minutes, BA believes it will still cut the overall journey time for these customers. It’s hardly a glowing advert for Heathrow, BA’s main money spinner.
BA was bullish today — insisting that it can make record profits in the full year and hit all its targets, particularly the one its been working to for three years — a 10 per cent operating margin. But Willie Walsh refused to comment on Deutsche analysts’ note that today’s figures were a warning that operating margins beyond this financial year will be lower.
With fuel prices showing no signs of falling and rivals reporting weak passenger numbers, BA is flying into some very strong headwinds. Investor sentiment for airlines is at a low point and BA cannot escape this, even if it does hit record profits at the end of the year.
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Pressure on costs at BA is so heavy that capex for the year has already been cut. Admittedly the move to T5 at the end of March will be a catalyst for further cost savings, but it can only be a matter of time before another round of redundancies or a tight pay round prompts another bout of industrial relations problems. The near-term picture is not at all rosy.