While British Airways' decision to sell its low cost subsidiary Go speaks volumes about the direction the UK flag-carrier is likely to take under new chief executive Rod Eddington, the repercussions of the move are likely to be felt beyond UK shores. The decision marks a retreat from a no-frills experiment that only BA and KLM - among European majors - had been prepared to countenance, and in the process grants a breathing space to low-cost carriers which until recently had feared that they would be overwhelmed by national flag-carriers storming the sector.
At the same time, the move entails a refocusing on full service provision by an airline which has, despite recent hiccups, commonly been at the forefront of innovation in Europe, and should therefore concentrate the thoughts of rivals.
BA's low-cost foray always appeared somewhat anachronistic, sitting uneasily alongside the wider strategy defined by Eddington's predessor Bob Ayling. While Ayling may have been caught out by the Asian financial downturn, failing to anticipate the knock-on effect on BA's key transatlantic market, his response to the UK heavyweight's subsequent profits crisis was as decisive as it was innovative.
His decision to focus on the high-yield business market - and tailor BA's fleet, route network and in-cabin product offerings accordingly - was pursued almost to the exclusion of all else, the obvious exception being the Go experiment.
While a half-way convincing business case could be made for BA entering the low-cost fray, it is hard to escape the conclusion that Ayling was acting not so much in defence of a key market threatened by no-frills upstarts, but in defence of BA's public image. There is no doubt that the UK press column inches commanded by media friendly figures such as easyJet's larger than life Stelios Haji-Ioannou and Ryanair's slick Michael O'Leary irked the more sober Ayling, and though Go initially attracted criticism over its likely impact on competition, the airline later won media endorsement and is now moving into the black.
For BA, though, the low-cost challenge was always a pinprick when compared with the bigger battle on transatlantic routes and elsewhere, and the Go sale reflects this reality. The disposal also removes the possibility of BA using Stansted as an alternative to Heathrow and Gatwick, making the rationalisation of its two hubs an even more pressing priority.
BA owes its Gatwick presence to the acquisition of British Caledonian and Dan Air, the latter forming the basis of EuroGatwick. Further moves, including the purchase of CityFlyer Express, have left BA with a cats cradle of shorthaul subsidiaries and franchise operators, and pushed up running costs.
Juggling its subsidiaries, franchisees, EuroGatwick and Go was well-nigh impossible, and the low-cost carrier is unlikely to be the sole victim of Eddington's knife, with reorganisation question marks over EuroGatwick and BA's Manchester and Birmingham hubs.
Even if Go is successfully sold, the European low-cost model cannot yet be declared a success. 'European' is in itself a misnomer - the sector is UK-based, Ryanair and Virgin Express relying heavily upon UK traffic - and the experiment has already produced casualties, including Debonair, AB Airlines and Norway's Color Air. And though Europe has its own Southwest Airlines in the form of Ryanair, the low-cost culture has not yet embedded itself.
In pre-liberalisation Europe, charter carriers offered the only realistic low-cost alternative to the majors, and largely succeeded in forcing scheduled carriers out of the Mediterranean leisure market. Fully fledged no-frills travel now has a European bridgehead beyond the British Isles, but it is hardly thriving. Virgin Express, which has suffered from a split personality, one eye being on the charter market, is struggling on and will now focus solely on scheduled service, but studies by majors on the continent - Lufthansa in the 1990s, for example - have led nowhere. With BA's exit, only one major - KLM with Buzz - remains in the low-cost sector, and given its own strategic troubles that operation is hardly a top priority.
Source: Flight International
