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I am going to come to the defence of the airlines on this one. They operate on pretty small margins generally and thus they are unable to empower staff without the risk of the small margin they do make going down the proverbial plug hole. Thus the staff are given a process to follow, and T&c’s dictate how the process works. For a large organisation working on small margins it can only really work that way.
Having said that, I absolutely agree that in you example AOTG it would suit all parties to have made the change for you. But, it is an unrealistic expectation that low ranking staff should be able to see a business benefit and go for it, that would be entrepreneurial, and call centre staff are generally not employed or empowered to do that. Process , process process…computer says no.
You don’t like it, I don’t like it, but it is what it is. Your story about Hotels.com surprises me…good on them I say. I use them for leisure travel sometimes and have always found them ….well…almost human!19 May 2016
MrMichael – 19/05/2016 19:43 BST
I am going to come to the defence of the airlines on this one. They operate on pretty small margins generally and thus they are unable to empower staff without the risk of the small margin they do make going down the proverbial plug hole.
Nah, sorry – not having that one.
Weren’t you telling us just the other day about how great it is to be a shareholder of IAG because of their amazing profitability? You know IAG made £2.34 BILLION pounds worth of operating profit in 2015??
Tell me again about airlines slim margins.
Oh, the airline in question? “Air France-KLM reported net income of €898m for the three months to September 30 — the highest level in at least a decade for the quarter.”
Re hotels.com – not the 1st time I’ve spoken to them, in fact did so last week on another matter when I booked rooms for 2017 instead of 2016, was changed with no problems, no fee and no fuss. Great business, and best of all, build up 10 nights and you get one free! (I am in NO way affiliated with hotels.com or their parent Expedia)
AOTG.19 May 2016
Surely the interesting point here is that airlines can (presumably) still make decent profits on indirect routes, sufficient to merit a discount to passengers prepared to fly on indirect routes. In other words, if (to take a random and hypothetical example) BA can still make money on a DUB-LHR-HKG-LHR-DUB ticket, but charge more for a LHR-HKG-LHR ticket in the same class on the same flights, then perhaps the proposed legislation would have the effect of driving down the direct prices since people would buy the indirect tickets but only fly the direct flights? Perhaps I am wrong and the result would be to restrict competition (and increase prices) since airlines could no longer indulge in price competition on A-C tickets on the basis of passengers having to fly A-B-C to get better prices.
I’m not an economist or a competition expert, so would welcome thoughts….20 May 2016
IanFromHKG – 20/05/2016 06:26 BST
If you look at it on a marginal costing basis, you can sell tickets to the point where you hit break even and then everything after that is contribution to profit – if you can set your break even loads at a reasonable %, then you make a fortune in the good times.
So airline planners try to price tickets to fill flights and make a profit, but not necessarily every ticket will be profitable on a standalone basis, only as part of the mix.
Despite BA’s high levels of profitability at present, they cannot fill their aircraft with O&D pax (Origin and Destination), so become reliant on transfer passengers, meaning that they use pricing elasticity as a lever to attract transfer traffic, whilst relying on corporate contracts and higher direct prices ex London. (Martyn Sinclair is an example of how to take advantage of lower prices for connecting pax, note the good deals he gets by starting journeys from outside the UK.)
Whilst the skies are currently sunny, all it takes is one significant factor to change and the walls will come tumbling down.
Before I am accused of BA bashing, I suggest people look at the roller-coaster financial results over the last 25 years, the model is potentially fragile and swings between high levels of profits and huge losses.20 May 2016
I agree, FDOS, but think I perhaps didn’t postulate my theorem as clearly as I could.
If airlines are able to make money on indirect routes at a discount to direct routes, that would seem to imply that the profit-driver is the long-haul segment, given that the airline’s marginal cost on the long-haul remains the same (or perhaps higher, since lounge access and higher-cost priority services such as premium check-in would be available to the passenger on the short-haul segment as well). The short-haul segment, therefore, is presumably a loss-leader. If passengers are able to purchase a loss-leader ticket without the drawbacks that it would normally entail but still take advantage of the long-haul flight, then perhaps the cost of the long-haul segment would be driven down in order to avoid the losses inherent in the loss-leader approach?
Of course, this might drive up prices on short-haul segments since these would no longer be subsidised (in terms either of prices or of traffic volume which of course would have an effect on prices)20 May 2016
IanFromHKG – 20/05/2016 08:04 BST
I agree and that is probably one of the reasons why O’Leary keeps floating Ryanair as a potential short haul feeder, for the legacies don’t have the cost base to run short haul at today’s low prices if their long haul margins are reduced.20 May 2016
OK, forgive my ignorance here as I may be wide of the mark.
Easyjet, Ryanair and latterly Jet2 make healthy profit ONLY flying short-haul, but the argument is BA don’t? I don’t follow, surely BA HBO fares, their pricing etc should make them equally as profitable as these other airlines? Particularly given their dominance at LHR. Oh, and their planes from EDI and GLA are packed whenever I’m on them.
No sarcasm involved, I am genuinely confused why BA should look at their short haul as a “loss leader” with only their J & F being profitable.
PS £2.34 BILLION!20 May 2016
I would suspect the problem is the costs BA have to pay LHR for landing fees etc. This will be why EasyJet and the like do not fly to LHR. I would love to see some competition on the GLA/LHR route where BA has a monopoly but I don’t see that happening any time soon. There is also the issue of legacy staff costs.20 May 2016
AllOverTheGaff – 20/05/2016 08:59 BST
BA doesn’t have a comparable cost base to the locos, thus their flight (pun intended) from the regions, due to lack of competitivity – Go Fly! was meant to address this, but they flogged it off and then easyjet bought it, accelerating the rate of the problem.
I am somewhat out of date with the internal politics at BA, but in years gone by, the apportioning of the revenue from connecting flights did seem to be in favour of the long haul operations and there were arguments about whether this was fair – I’m talking about Heathrow here.
It’s not just legacy staff costs either, though DerekVH makes a very good point, it’s the proportion of the ground based employees (including Waterside etc.) to the employees who fly – again, I haven’t seen any figures for over 10 years, but it used to be much higher than other airlines, it may be lower these days, but it will certainly be much higher than the locos.
Also, Heathrow is not efficient as an airport, airlines need the metal to keep flying to generate revenues, ‘wheels up’ as they say at Southwest. Long taxi/hold times don’t help and drilling holes in the sky over Bovingdon or Biggin aren’t good news, either – this has a disproportionate impact on short haul ops, for obvious reasons.20 May 2016
FDOS, agree with you, but would add that BA fly from premium airport to premium airport. To my knowledge have not chosen an airport due to landing fee’s, they choose based on traffic. So for example a BA flight to CDG will undoubtedly be considerably more expensive than say LGW to Orly.20 May 2016
Customer service should involve on time departures, arrivals & connections….as someone leaning to Brexit I’m worried that if that were to happen how much hay would be made by airlines no longer subject to the EU compensation for their bad timings and careless abandonment of passengers during delays that “just happen to suit them”…22 May 2016