Chris Jasper/LONDON
British Airways is to sell its low-cost subsidiary Go after acknowledging that the London Stansted-based carrier is a non-core operation. Former BA chief executive Bob Ayling founded Go in 1998 in response to the growth of UK no-frills airlines such as easyJet, but his successor Rod Eddington says it does not fit with BA's strategic goals.
BA says it has had "expressions of interest" in the now-profitable Go from "the traditional market and other sectors", and that it would like to dispose of the airline "by February". Finding a buyer may not be easy: selling Go to a rival flag-carrier or low-cost airline might be unacceptable, even if one were interested, and BA sources say bids will be assessed "not necessarily in terms of price". Other options include a management buy-out, a takeover by an institutional investor or purchase by one of Europe's major tour operators.
Eddington says BA has decided to sell now in order "to gain the benefits of its investment and realise the considerable value it has created in Go", which operates 13 leased Boeing 737-300s. But a BA source says the main reason for selling is that the subsidiary "does not really fit" with BA's core full-service market.
The source adds that with a study into BA's Gatwick operation likely to be completed "in the coming weeks", it would be "very difficult for BA to make the changes it will have to make when Go is growing and perceived, by some staff, as champing into BA's own business".
Eddington confirms that BA is examining how it "can better rationalise and integrate" its European activities "to deliver better value". Though Ayling's Go experiment has been deemed inappropriate, his wider strategy of focusing on high yield markets is bearing fruit. BA's pre-tax profits for the quarter to 30 September rose to £200 million, from £40 million last year, and operating profits grew 125% despite rising costs, with many of Ayling's route, fleet and cabin product changes yet to kick in.
Source: Flight International
