[Henkel.Trocken]

It would be nice to think that BA had a future at LGW but in some ways all they are doing is divesting themselves of part of the workforce to a different employer with who there will be limited length agreements about contracts and then it will all be down to price.

BA would also be in the position of having fewer staff to deal with if redundancies are planned and no doubt crews could be moved to LHR so there would be very few left once the main ground services staff are gone.

[Hippocampus]

RichHI1, Regarding BA and demand at LGW, no-one could accuse BA of not promoting LGW. There has been a long running dedicated advertising campaign for LGW in newspapers and on billboards in London. Where BA seems to suffer is not through lack of demand but through competing against EasyJet who are perceived to be cheaper and without the ancillary revenue streams that EasyJet has.

Going head on against EasyJet is unlikely to work as they have such a large presence at LGW but if BA can find a niche for itself at LGW then prospects could be good. BA has proved it can be successful at LCY. Granted this is in part because of the attractiveness of the airport but an attractive product on a new and efficient fleet has proved BA can compete in short-haul.

As for head office costs these have long been rationalised and a lot of work has been going on behind the scenes to develop common back office functions in IAG.

[RichHI1]

Hippo, my point on the LGW services is not so much lack of BA promotion or even lack of marketing by the new owners of LGW, rather LGW needs to be easier to get too for the target market segment. LCY works because its location and transport links work well for its target segment. Interesting to see if Crossrail changes this as LCY is hampered By space and runway length when looking at expansion.
My main question for BA is what should be the strategy to grow LGW? As you say competing with Loco’s is not where they want to be, they have moved down market (along with almost all the industry) in the last 40 – 50 years so what suitable segments can grow? This must be a relationship of economic growth, disposable income per segment and destination fashionability. I think the new approach to sell British industry worldwide instead of focussing all UK effort on the EEFTA a la 1992 will help
As more And more business is done in Africa, Asia And Latin America. Hopefully more trade will make those destinations more popular for
Recreational travel. I think for many LGW will always be more of a recreational travel.
As regards overhead efficiencies, I do not think BA have done nothing. I do believe there is still opportunity in non operational functions for streamlining and reduction of non added value complexity. I think some outsourcing of hesenfunctions could result in exonomies.

[LeTigre]

While I cannot find figures to prove/disprove this theory, I think that the following is true of BA’s Gatwick operations:
-They are unprofitable
-They are underutilised (worrying load factors)
-The staff costs are much higher than LHR
-The fuel costs are much higher (those old 737s cannot be efficient)
-The operations would do well to be expanded but lack the commitment similar to LHR from Head Office, so the operations do not have the same efficiencies of scale
-The operations lack long-term focus, so staff lack morale, and it’s a bit of a mess

On the plus, these staff changes indicate a new direction (forwards I hope), and cements BA’s position as highly profitable by removing potential drags on profits. This will no doubt widen the huge gulf of finances between BA and its European competitors.

[RichHI1]

Interest to see hard numbers, my understanding was LGW contracts for staff were not as generous as LHR and consequenyl staff. Oss were lower. I read a Long time ago that airport cists as LGW were lower than LhR ( may have changed). The older 737’s are less efficinet that newer 737 NG’s or the latest A32x euqipment however modern A32x s
Maintenance and finance costs are greater. So on a flight to say Athens there could be a swing to Modern A32x but may be to BRU or AMS the equation may go the other way. Also you must factor the extra fuel wasted lining up for take off and circling in hold pattern at LHR.
Havjng less flights from LGW there are less pax to allocate fixed costs such as check in desks, systems. Gate furniture and ground services.
I suspect the picture is not as clear cut as you speculate.
My personal feeling is the short haul services from LGW are doomed due to Easyjet and locos however mid and long haul such as Florida, Ewr, 2nd tier China, etc could be a growth area using Cascaded a330’s and 767’s to ne replaced by 787’s in due time And on key routes 777’s.

[Tete_de_cuvee]

Many airlines have operated profitably out of Gatwick.

However when you have an airline prepared to manipulate their finanacial position in the way necessary justify their agenda of the day and give credence to their actions it is hard to have a fair and rational debate.

Intra-company allocations; cross charging; transfer pricing, asset transfers, are all perfectly legitimate practices which are used to paint whatever picture is required. Add in a half decent Corporate Finance Lawyer who is adept at Section 110 reconstruction et al and you can make a case which would convince any high court to give unequivocal support to your actions as they are unavoidable and necessary keep the entity viable.

It has happened many times over, and will no doubt continue.

[VintageKrug]

I think bmi has the grand total of one (maybe two) A330s remaining; operating it as part of the BA fleet would not be economical.

The 767s really don’t have the range for many of the longer sectors (Caribbean, South America, Asia) so that’s a non-starter.

– I don’t believe they are unprofitable, but I don’t think they are making much money and costs are too high; they’re certainly not making enough profit to plough into a new fleet order right now.

– I also wouldn’t say the load factors are low; I was commuting through LGW much of last year, and flights were often sold out.

– Staff costs are the same or lower than LHR (the Gatwick agreement, supported by BASSA) was pretty much the same as the Mixed Fleet contract introduced at LHR.

– Fuel costs on the 737s will be higher, but as has been said, there’s not much in it on the shorter sectors, and the costs of the aircraft is entirely written off so no lease or depreciation costs makes them financially pretty good value (until they go technical, of course). But they’re in good engineering order and have a few years in them yet.

– The operation doesn’t really need to expand just yet; it needs to do what it’s doing more profitably. These redundancies will help that, but there’s a lot going on behind the scenes, as evidenced by BA putting in Silla Maizey to run the show. Waterside couldn’t be accused of lacking commitment, were it not for that commitment it would have flybe’d or Cityflyer’d the shorthaul operation years ago.

– Staff morale may be low, but honestly you have to look at where they get their news from and whether or not they’re being well advised by their “friends” in the union.

Gatwick is really two stories; shorthaul, which needs rationalisation which might include some form of product simplification (particularly removal of CE) while retaining the differentiation from Easyjet and a new fleet in due course. Running it via Cityflyer/flybe/Iberia Express model seems to be the obvious way to go.

The second story is longhaul which does bear the hallmarks of being the poor cousin; LGW isn’t really a hub these days (no NYC connection) BUT it works well on point to points and would be a good place to start up less established routes, particularly if they could lease a few 787s pronto. One plan might be to make it a feeder airport for MAD…

With an overcapacity of 120 people (some of whom will be working part time) that suggests there’s plenty of scope for efficiency at LGW, especially now automated check in requires fewer people. There may also be scope for combining/cross-training roles from ticketing to check in which would add value to the airline and also skill up their best people.

Anyway, my view is that LGW shorthaul is not long for this world in its current format, but that longhaul has a brighter future and that BA’s commitment to Gatwick is strengthened by the re-organisation rather then weakened by it.

[RichHI1]

So we agree that Long Haul has some opportunities. South America is outside the range of many aircraft (EZE,GIG,SCL,LIM) but I am surprised about your comments re Caribbean and China 2d tiier. UA 763’s did the LHR-LAX run before the 777 and That is farther than caribbean destinations or maybe Cancun. Or are BA 763’s specially configured for shorter and midha routes? (smaller tanks for more cargo?)

Separate point poster suggest removal of CE ex LGW. I think there could ne an opportunity to introduce a Euro Traveller Plus ex LGW offering an improvement against loco at a price which comes within recreational budgets.

[KeaneJohn]

Ive not flown BA from LGW for a number of years but used it a lot when I was living in Jersey. Its a shame when outsourcing happens even if it does provide cost cutting as you dont get the pride or loyalty from the agent sometimes. Am I right in thinking that BA Check in staff at Manchester are outsourced as I got a very frosty check in at the Premium Check In desk there recently.

[LeTigre]

Your comment of “LGW shorthaul is not long for this world” interests me particularly.

Could this be the first stage of BA Express? Or is the “feeder for MAD” comment indicative of an Iberia Express hub?

Another interesting point (seriously, don’t ever stop posting VK, yours posts contain far too many interesting hints) is regarding 767s being obtained. I understand that Jetstar is transferring some A330s to Qantas when it gets the 787s so Qantas will probably return some of the leased 767s or retiring others (including some with RR engines like BA). Is this likely to be a viable source?

[FormerlyDoS]

Rich

BA’s 767’s are all -336ER, even the short haul configured aircraft.

Here is the Boeing range chart for the 767 series

http://www.boeing.com/commercial/767family/pf/pf_rc_london.html

BA configures the 763 with 189 seats for long haul ops.

http://www.britishairways.com/travel/boeing-767-300-seatmap-189/public/en_gb

Range on an aircraft is always a trade-off between load and fuel (with winds aloft also a factor), so valuable freight can be loaded, but at the expense of duration, which in turn affects the range. Also fuel reserves shorten the range, because it ‘costs’ typically 20% of the reserve carried to carry the reserve.

But all in all, I prefer to believe the manufacturer when it comes to the mission capability of an aircraft.

[RichHI1]

Thanks, supports what I thought. EZE, SCL definite no, LIM, GRU and MEX tight And CaribbeN and China are very possinle and orig post was misinformed. 767 is Not latest design and smaller than 777 cabin but many airlines are using them still quite satisfactorily.

[pixelmeister]

“Many airlines have operated profitably out of Gatwick”

Um… like BCal, DanAir, Laker…. Reality is that the only UK carriers who have operated profitably (and even that is debatable) have been charter operators and LoCos. LGW suffers from being saddled with a workforce who have to pay SE living costs and consequently need higher wages to compensate. On the other hand, the airport is heavily limited on runway capacity, is seen as the poor relation to LHR, and is not the destination of choice for a lot of travellers. The main reason that full service carriers operate from LGW is because they can’t get slots at LHR, but want to be able to say that they fly to London.

BA invested a lot in LGW over the years, particularly in North Terminal. There is a degree of inevitability though about the announcement of redundancies. The whole travel experience has changed over the past few years. Online checkin and fast bag drop means the need for checkin staff has to be reduced. Why have your own people when a) the numbers you need are reducing and b) you could buy in the service locally. All that is happening is that LGW is now being treated a bit like an outstation as far as ground services are concerned.

[VintageKrug]

BA uses a 767 on the Grand Cayman route, as well as some others in the nearer Caribbean zones. But the demand on the more distant southern Caribbean would exceed the capacity of a 767, so it’s a non-starter. Added to that the increasingly higher margin cargo carrying demand….

Would a 767 really be able to reach Peking? But again I think cargo capacity is a priority on these routes, and without winglets the 767s aren’t that fuel efficient.

Would be better to retire the ones which aren’t being refurbed and lease something more economical, like additional 787s.

[RichHI1]

I think you are right on size. UA used 763 lhr-lax and currently it does ORD-GRU so LHR-PEK should not be a problem. Boeing rate max is 5990 NM.

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