January 2013

Kampala

British Airways sources in Uganda have claimed that there is no threat to the future of the airline’s thrice weekly service from London. After the airline recently announced that they would be pulling services from Dar Es Salaam at the end of March due to a lack of profitability, there were concerns that the vital link to Uganda would follow suit.


Although the airline’s takeover of bmi in 2012 led to a significant increase in its available slots, the fact that Heathrow (the airline’s main base) is effectively full means that British Airways is more constrained in its potential route development than any other major European airline and accordingly has to ‘sweat’ each slot to the maximum. The airline has also been very bullish in its comments about opportunities in the fast growing Far East market (hence new routes to South Korea & China) which probably hasn’t helped calm the nerves of airport operators and governments in several African countries.

In Tanzania, the Director of Tourism has reportedly held talks with Virgin Atlantic about replacing British Airways although how serious these are it is hard to know at this stage. It wasn’t so long ago that intense competition forced Virgin to withdraw from the London – Nairobi market and whether Tanzania is a suitable replacement is doubtful.

 

 

 

British Airways Club World Kitchen

British Airways and Twinings have got together to produce a new blend of tea which, it is hoped, will retain more of its flavour at high altitude. The new tea is a blend of Assam, Kenyan & Celyon and, as the airline serve some 35 million cups a year, any improvement will clearly please an awful lot of people. Of course it isn’t just tea that suffers at altitude and airlines have invested heavily in trying to work out just what works (and what doesn’t) so as to secure marginal gains in what is a cut-thoat business. Previously, British Airways have hired specialists to determine which wines work when flying while, more recently, Heston Blumenthal devoted one episode of a tv series to trying to improve the taste of good on planes without using so much salt.

 

A report in the Wall St Journal has suggested that British Airways has been in talks with Indian budget airline IndiGo about a possible alliance. India is a key market for British Airways and, with the near collapse of Kingfisher Airlines, it now needs a new partner if it is to fully take advantage of one of the world’s largest potential markets. British Airways already flies direct to Delhi, Mumbai, Hyderabad, Chennai & Bangalore and having a strong, local partner would allow it to serve smaller, secondary destinations which cannot justify their own dedicated flights from the UK.  In return, IndiGo would have access to British Airways route network into Heathrow and beyond.

IndiGo

Talk of an alliance follows the long-awaited decision by the Indian government to allow foreign airlines to take a stake of up to 49% in Indian airlines. The same article reports that IndiGo president Aditya Gosh has denied any plans to sell a stake in the airline although he failed to confirm or deny that talks had taken place about a more general alliance. With finances in aviation always tight, common sense would suggest that IAG (the parent company of British Airways) has little to gain from taking a stake in IndiGo, other perhaps than preventing anyone else from getting too close.

In this respect British Airways may not be entirely misguided. While the brand remains popular in both countries, and lack of slots at Heathrow precludes much in the way of direct competition, British Airways is struggling to compete with Gulf carriers such as Emirates who are able to fly huge numbers of passengers from all over the UK to Dubai and then connect to both primary and secondary destinations within India. Whether these Gulf carriers want to go even further and invest in local carriers cannot be ruled out and, unlike their European counterparts, they have the funds to do so.

 

British Airways parent, IAG

British Airways parent company, IAG, has seen its share price climb 5.1p to 222.5 on the back of JP Morgan moving from neutral to overweight (buy) in its advice to investors. The reason for this shift has been positive news coming out of negotiations between unions and management aimed at reducing headcount at Spain’s struggling flag-carrier, Iberia. While British Airways has been trading relatively successfully over the last 18 months, Iberia has found itself struggling both with the downturn in the Spanish economy and it’s own structural weakness.


During the boom years at the start of the century any such problems at Iberia were set aside as the airline benefited from a growing economy at home as well as a surge in travel to Latin America, the airline’s dominant international market.   The relative weakness of the airline industry in Latin America has mitigated what could have been a far worse situation for the airline although local competitor Air Europa may be more more of a worry now.

With British Airways taking delivery of a number of new long-haul aircraft over the coming years, and with its increased slots at Heathrow following the takeover of bmi, don’t be surprised if the airline introduces both increased frequency and new routes to Latin America. The new Boeing 787 Dreamliner in particular will allow British Airways to look at routes which otherwise might not have been viable such as Bogota & Santiago de Chile. Of course any decisions that the airline makes in this regard will also be shaped by the outcome of the LAN / TAM merger and whether the new airline group remains within the One World alliance.

 

British Airways 787 Dreamliner

With the grounding of the world’s entire fleet of Boeing 787 Dreamliners, a very large section of the airline industry will now be increasingly worried as to just how quickly Boeing can identify and then fix the problem. British Airways have 24 Dreamliners on order, split between the existing 800 series and the future, larger 900, with deliveries meant to have begun in the summer of 2013. With its increased range and and far greater fuel efficiency, British Airways had planned to use the aircraft to replace some of its older 767s although it now seems almost certain that there will be delays to its introduction. Although the airline hasn’t yet said where the new aircraft will fly to, it would seem that the eastern coast of the US would be an obvious initial destination. Thus far, all British Airways have said is that they retain full confidence in the aircraft and have no plans to delay or cancel any of their orders.


It could be far worse of course. At least, unlike other airlines (most notably JAL & All Nippon in Japan), British Airways don’t currently have any Dreamliners in service and aren’t therefore having to dust down older, retired aircraft and press them back into service. With only a few of the aircraft set for delivery this year, and spare aircraft in their fleet, British Airways won’t be too troubled by delays of a few months although, if only from a public perception point of view, they won’t want these problems to drag on for too long. The last aircraft to be grounded was the DC-10 and it could be argued that its reputation was never the same again.

Nor is British Airways even the first UK airline to be introducing the Dreamliner. That accolade goes to TUI who had been promoting the introduction of the aircraft into their fleet with a glossy tv campaign. The first flights on the new aircraft were due to operate to Cancun in May so no doubt management and excited passengers will be watching the news closely.