[lesmclaren]

Indeed Bigdog, thank you. Missed that one and a great article. Perhaps Norwegian also deserve a mention as their model is also a good one. [Although their pilots don’t think so at the moment!!].

SimonS1 -” you could alternatively argue that all BA is looking to do is direct available benefits to the people who are of value to the airline”. Know what you are trying to say but unfortunately that just underlines the whole argument – BA ONLY values the big payers and forgets those that built them into the major airline they are now and enables them to stay as a major player . They do so at their peril and indeed it is time as you say to vote with our feet!!

Surrey Travellr01 – you are so absolutely correct, my point entirely. As everyone in sales and marketing knows [except perhaps the geniuses at BA] once a customer is lost it is very hard to regain their business. But f course BA have been demonstrating their lack of 101 marketing skills for many years by adding a premium if you want to regain your status after loosing it!

[SimonS1]

@lesmclaren – I don’t think it forgets them – it has just determined that people who takes lots of short haul flights on the cheapest fares don’t deliver huge value. Therefore they benefit by enjoying the lowest fares ever in real terms, but don’t justify reserved seats, lounge access etc.

[lesmclaren]

Which is why BA only gives 10 tier points for those fares and you need to pay the extra for a seat at the front of the cabin then you get 40 points. Easy to work out how much someone who flies in economy all year and how much someone who flies in short haul “business class” have to send in a year to maintain their status! By a quick and dirty calculation I would estimate that the person flying short haul economy all year actually spends twice as much as the person flying business to maintain gold based on a fare of £200 for economy and £400 for business.
Because I live outside of the UK and am very restricted as to the availability of BA flights open to me [plus if I connect through London the additional tax’s which are of course nothing to do with the airlines] I also fly a lot with KLM. Their system is much more geared to maintaining customer loyalty. You fly 30 sectors in any class a year and you get Gold, you fly 60 sectors in any year and you get Platinum. You fall short in one year you get downgraded but only need the same number of flights to get it back in the next year.
The point you are missing is the erosion of benefits with BA for those that do spend the money regardless of flown class. That is what is getting everyone’s back up!.

[SimonS1]

It isn’t just about spending money or flying a lot though. I think you need to differentiate spending and profitability.

I would say for domestics and short haul an average of £200 economy is highly doubtful for anyone using HBO (which is what the thread is about). Book more than a couple of weeks ahead and you would likely be talking nearer £100, or even less.

As a random example a return EDI to LHR in a couple of weeks is £145, less if you fly via LGW (it’s about the same for Amsterdam, Brussels etc). Of that, £78 actually goes to the airline.

Book for the middle of April and it is only £113 of which £46 goes to BA.

Out of that the airline pays the cost of the flight. Then it is expected to let frequent travellers use a lounge at both ends – food, champagne etc.

Do that 25 weeks a year and you have your 50 sectors for silver but I suspect your value to the airline is close to zippo and to be honest I can see why BA thinks the model doesn’t work.

I agree that BA should look after it’s most *profitable* customers.

[AnthonyDunn]

@ BigDog. – 08/03/2015 12:16 GMT

As with almost everything relating to BA these days, the “vision” is laid bare in the November 2014 IAG Capital Markets day presentation. This states that the new, higher density seating and interior across the Airbus fleet delivers +16% satisfaction for the new interior, +12% for the new seat and +3% for the space…. I guess it’s the way you shape the question that determines the answer!

The substance for your assertion about BA versus low-cost carriers comes from pages 47-71 of the CMD presentation which makes explicit (a) the intention of having a common specification across the entire Airbus A318-321 fleet operating across BA, IB and VY enabling (b) aircraft transfers between operating companies and (c) substantial cost savings from procurement and in-service support and maintenance. Interesting also that at page 103, the IBeria Express model is described as “the best of a LCC with the attributes of a traditional carrier…” It is entirely possible to conceive (as Ian from HK has long commented) that BA could evolve into a long-haul carrier with a LCC(ish) short-haul sub-brand i.e. BA Express. Either that or Vueling takes over the intra-European operation.

At page 70, the comments are made that:

“Specification philosophy has changed: we now start with a zero-base design:
-Starting with the assumption of maximum density and minimum weight and deviate only when there is a strong revenue case;
-Network-wide deployment trumps sub-fleet optimisation; and
-Implications for future wide-body fleets for all Operating Companies considered”

Everything in the presentation shouts about cutting into costs anywhere and everywhere. Over and above the circa 50% per FTE reduction in the cost of Mixed Fleet cf Legacy Fleet, the new LHR customer services contract costs 60% of the legacy cost with more flexible T&Cs. The reality will be of most T3/T5 ground staff on short hours contracts (c.25 hour per week) and paid c.£11K p.a. plus shift allowances. So, the next time that LHR experiences one of its seasonal weather-sourced delays and flight capacity is cut, just don’t expect either to find many customer-facing staff or many who are capable of dealing with the problems arising. But if you pay peanuts…

Speaking of which, surely it cannot only have been me to have noticed in the FT on 05 March 2015:

Willie Walsh, the chief executive of International Airlines Group, secured a 28 per cent pay rise last year after successfully restructuring its Spanish subsidiary.

Mr Walsh’s salary and other benefits came to £6.4m in 2014, up from almost £5m in 2013, following a turnround of Iberia, the Spanish flag carrier that formed IAG through a merger with British Airways in 2011.

[WillieWelsh]

I believe the next ‘enhancement’ again designed to p*ss off frequent flyers is that there will be no more ‘soft’ landings so if you’re a gold who suddenly flies infrequently in a year you might get blue instead of silver and land with a bump.

I was comped to gold as a result of BD gold and have retained silver for a couple of years but now I’m heading for bronze and after another year blue unless they get the ‘enhancement’ in quickly in which case I’ll be blue soon.

[SurreyTraveller01]

@SimonsS1 Your argument about people who take lots of short haul flights on the cheapest fares is weaken by the fact that these people will now get much less airmiles due to BA other EC “enhancements”. Besides, It’s ok to differentiate spending and profitability in an accounting report. The REALITY is the PAX who flies highly profitable F or J fare classes is the SAME PERSON who will have (because of its company travel policy etc) to opt for a cheap fare when travelling short haul… if that person has to suffer waking up early to catch the first fly, gets no lounge access, ends up squeezed in the middle etc guess what this passenger will go. Vote with his or her feet to an airline / alliance that gives a better deal. For the past 2 or 3 years, BA claimed that their motto is “to fly to serve”, am sorry but the customer experience is being forgotten and easy gains will result in a loss for BA, in terms of loyalty and ultimately customers. I already started to opt

[SimonS1]

@Surrey Traveller. Confusing post really.

On the one hand you refer to people travelling under a company travel policy and in the next breath say the individual will vote with their feet and go elsewhere? Company travel policies don’t generally work that way.

Plus not all short haul travellers are long haul users. For about 3 years in the 2000s I maintained gold through a weekly commute into Europe using the cheapest flights I could get. Prices were a bit higher then (no HBO) but I doubt I was of much value to the airline. There were plenty of people doing that as it was the same faces I saw week after week.

[richardofFrancepp]

What is being lost is the public perception of BA towards passengers. If their service was top class they could take this attitude, but it is mediocre on land and in the air. Certainly CW is far behind and as BA has large clients they just do not care. Compare T% BA lounges with Emirates and Qatar at LHR. Then compare on board seating and service. I walked and will not turn back

[SimonS1]

Indeed richardoaten you are right. Either a great hard product, or great staff, and you can get by. However a tired product delivered by staff who don’t want to be there and you have an issue.

To be fair I’m sure the majority of staff work hard, unfortunately it’s the minority that always do the damage.

[KarlMarx]

SimonS1 – 10/03/2015 08:10 GMT

@Surrey Traveller. Confusing post really.

I don’t find it a confusing post, at all. It reflects the position in many organizations.

The policy for less than x hours can be very different to x hours or greater and the same traveller my be committed to the cheapest economy fare on short haul, but be able to buy business class for longer journeys with more leeway.

[canucklad]

Morning Simon,
Comparing like for like, you’re absolutely right about who brings the biggest profit margin to BA. However the arithmetic of airline accountancy suggests it’s all far more complex than comparing like for like..

You just have to look at BA’s ex-Europe fares, then add in their perennial free CW to F upgrade offer and you can see that the advertised headline fare ,minus the actual worth of the seat markedly reduces the differential between my 80 flights and the 4 done by a premium passenger.

And that brings me back to my premise that my quantity is as valuable to BA as the infrequent premium customer. I’ll pose this question, based on your regular commute, seeing the same faces quote…….Without you, me and the regular faces habitually using their services to commute back and forth would BA turn a profit. And BAEC is called A Frequent Flyer Programme for nothing.

And I’ll second Willie Welsh’s sentiment, at least BD recognised my Frequent Flying., I soon realised that I couldn’t maintain Silver with BA with the same activity.

Now blackmailing me out of a middle seat, will soon have me, spending my companies £200 to sit in a large comfy chair for 4 + hours watching the countryside whizz past me on the way to London.

To fly, to serve…..Indeed ?

[AllOverTheGaff]

Great article BigDog, particularly liked this quote:

For me the hero of the era of no-frills flying is easyJet. It has always understood the importance of clarity and simplicity in its fares. It drove the no-frills revolution without annoying its passengers. And it provides the model that Ryanair and BA are now copying. The future for travellers, it seems, is bright, and it has turned out to be orange.

The money you save with EZY more than pays for a nice meal at the airport, instead of a very average snack in the BA lounge, have a drink or two on board and you don’t have the aggravation of dealing with an airline which seems to want to irritate and gouge at every opportunity.

Like many on here, I’ve been using EZY for donkeys years and am over 500 flights with them, very few issues to report, consistent low fares, more-often-than-not on time and mainly friendly, happy crew who seem to enjoy their jobs.

As added bonus for me is that I can fly to a myriad of destinations from my three local airports and not have the schlep through LHR.

Rgds.
AOTG.

[MrMichael]

I am a regular BA/IB traveller on my roughly fortnightly trip to Madrid. Only last year I had my first experience of the low cost model, but have now been on Easyjet, Norwegian.& Jetstar Australia. My experience thus far is that all were on time, none were any less comfortable than BA/IB, all were when I booked them cheaper than legacy carriers. My flights to from Madrid will not change from the current purely because LHR is so much more convenient for me than LGW or LTN. But if in the future an airline such as Easyjet went from LHR (I know it is highly unlikely) then I would not be bothered if my travel dragon books me on it. I do not get any frequent flyer perks because of how our bookings are made, so such things bother me little. For what it is worth, as someone that worked in the Casino industry for some considerable time we rewarded people for the amount of time they spent gaming at the tables. In the case of Casino,s the small regular punter as Canucklad describes was more profitable in the long term than the high roller that popped in from time to time. We called it “grind action” low spenders, lots of them, just like Easy and Ryanair want.

[icenspice]

I am a big fan of easyJet and Ryanair, but I always go back to BA. Why? It offers thru-ticketing and IMO a lot more legroom, even in a regular Economy seat.

easyJet has got it right, however, with its ‘cheap’ flexi fares.

And don’t underestimate a free drink and snack on an A319 with 100+ pax. Just don’t even open your ham and cheese croissant on a morning flight from Heathrow to Luxembourg. Absolutely vile, not to mention stone cold. What a waste.

[Author]

Posts