British Airways is preparing a further major streamlining of its loss-making short haul European operations in a bid to bring the services back into profit in the next 18 months.
A taskforce set up to review the overall structure of BA in the wake of the 11 September attacks has been told to report back to the chief executive, Rod Eddington, by Christmas.
The "size and shape" team, as it is known, has been asked to take a radical look at all aspects of the airline but in particular the short-haul operation, where BA in common with other full-service airlines is losing out badly to low-cost carriers such as easyJet and Ryanair. BA's short-haul business lost £180m last year. The result of the review is likely to be a further significant cut in the number of its European routes but increased frequencies on those routes where the airline can make a profit.
The five-strong team carrying out the review has been told to assess each route on three criteria: whether it is profitable in itself; whether it makes a "network contribution" to BA by feeding passengers on to more profitable long-haul services; and whether the route is important to any of BA's large corporate clients. If the answer to all three is negative, then the service is likely to be scrapped. Mr Eddington said: "There was once a philosophy in BA that anywhere there was 3,000 metres of concrete we would operate a service. That has got to change."
BA has already begun to trim European services, suspending eight routes from Gatwick such as Stockholm, Zurich and Rotterdam, reducing frequencies on other routes and scrapping the Heathrow-Belfast service. But Mr Eddington maintained that BA had no intention of abandoning the short-haul European or domestic market completely, saying that while some of its shuttle services were unprofitable they were an integral part of BA's network strategy.
Mr Eddington also said that he expected the European Commission to outline the concessions it would demand in return for approving the BA-American Airlines alliance by the end of this month. BA's previous attempt to merge its transatlantic services with AA was abandoned in 1999 after Brussels ordered the surrender of 267 take-off and landing slots at Heathrow. BA says it will walk away from the deal again if the price demanded by regulators is too high. Nevertheless, it believes there is a real prospect of getting the alliance approved along with an accompanying open skies agreement across the Atlantic by the turn of the year.
In a speech in London last night, Mr Eddington stressed the need for consolidation of Europe's airlines if the industry was to recover from the trauma of 11 September. "My guess, based on what has happened in America, is that instead of 15 inter-continental hubs in Europe, we will have fewer, perhaps as few as three, although the market should decide the final number and the players," he said, delivering the annual Brabazon lecture.
There was good news for BA yesterday as it secured a place in the FTSE 100 following a 17 per cent share price rise that left the company valued at £2.4bn.Reuse content