UK carrier bmi is studying whether to continue providing a two-class service on short-haul services out of its main London Heathrow base as it struggles to regain profitability after four consecutive years of operating losses.
Although bmi's mainline operation saw rising passenger numbers and load factors last year, business class bookings and yields fell, says Nigel Turner, chief executive. "We are reviewing our business model to ensure we have the right product," he says. One option is to go to a single-class service, with a decision being taken by the summer.
The product revamp, coupled with further cost cuts and an improving business environment, should mean the bmi group returning to operating profit this year, says Turner. The group made a small pre-tax profit of £2.1 million ($4 million) in 2004, based mainly on the interest made from strong cash flows and anciliary revenue.
Of particular importance in the turnaround is a return to profitability of its joint venture with shareholders Lufthansa and SAS on European routes in and out of the UK. This venture, called the European Co-operation Agreement (ECA), was given European Commission approval in 1999 and runs until the end of 2007. "A focus of the new management team is to produce better results out of our leg of ECA," says Sir Michael Bishop, bmi chairman. "I am very confident that the business will be into sustainable profits well before January 2008."
With Heathrow's slot restrictions bmi's growth at the airport is limited to improving the margins of current operations or using its slots for more lucrative long-haul services. The first of these starts in May with bmi launching operations to Mumbai, India, followed shortly afterwards by a service to Riyadh in Saudi Arabia.
Source: Airline Business
