An average of 15%of economy seats will be taken out of BA's transatlantic fleet to give more space for a revamped business cabin and the launch of a new class between business and economy - World Traveller Plus. BA hopes to sell these mid-range seats for a premium of around 20% on a full economy fare, targeting budget-conscious business passengers. The airline has also introduced bed seats in its business cabin.
The strategy has received a broadly favourable response from analysts. Chris Tarry at Commerzbank says: "Business class is the battleground and BA has taken the lead."
BA is targeting the top end of the economy fare market with its new mid-range class. However, analysts warn of a risk that this new product will lure passengers away from business class. In addition, continuing tough competition across the Atlantic could make it difficult to achieve its aim of raising yields.
The strategy of other airlines operating between London Heathrow and the USA will be crucial if BA is to prove successful. Virgin has a well-established mid-range product, Premium Economy, while BA's alliance partner American Airlines has opted to reduce the number of economy seats to increase seat pitch.
United Airlines has no plans for a similar system on international routes, although a source at the carrier says it is "looking at it". United already offers an economy-plus product on domestic routes, targeted at frequent fliers and the full fare economy market. It is also uncertain how US carriers operating from London Gatwick will respond.
Although European carriers will monitor the situation closely, no immediate response is expected. Chris Avery, analyst at JP Morgan, says Lufthansa and Air France face limited competition from US rivals with a business-economy product. For instance, Lufthansa only faces American at Frankfurt.
However, BA has clearly set a trend and "the market has fragmented more quickly than the airlines wished to think," says Tarry. Next on BA's agenda is what it does with its short-haul operations, where market fragmentation is happening even faster.
Bob Ayling, BA chief executive, hints that news on this can be expected later this year. As for the transatlantic strategy, Carl Michel, the carrier's commercial director, says: "By the end of the year we should have a clear idea of how it is working."
Source: Airline Business
