Exclusive: Bmi Update

22 Nov 2010 by Tom Otley

Wolfgang Prock-Schauer has been Chief Executive of Bmi since December 2009. Prior to that he was in top management positions at Austrian Airlines in the 1990s and was responsible for the integration of Lauda Air after its takeover by Austrian Airlines, and also the integration of Austrian into the Star Alliance. From 2002-3 he was chairman of the Star Alliance Management Board and then spent six years as CEO of Jet Airways.

What is the vision for Bmi ?

The vision is for it to be a top quality product, to be embedded in the Lufthansa group and Star Alliance, for it to be contemporary British and covering all the UK regions, so not only London-centric but the whole of the UK, that’s it in short. And keeping in mind our heritage, an international focus, but not forgetting the heritage of Bmi – so we call it British Midland International.

In this all three of the airlines have a specific role to play. Bmi International is out of LHR. Regional serves the regions and more, and will serve over water routes to continental Lufthansa hubs, and Bmibaby we want to keep so we have a foothold in the UK low cost carrier market as the UK is predominantly low cost, as part of our complete offering, just as Lufthansa has Germanwings.

If that’s the vision, why withdraw services on UK domestic?

If you look at the main routes we are serving right now, you’ll see we had about eight frequencies per day and these have now gone down to six frequencies per day. With that you can still offer a very competitive product for the local traffic but also all the connecting traffic. It’s rather better to fly with six than eight because this is an environment for domestic. The majority of our losses came out of domestic, but we want to keep a core frequency in the domestic market.

What’s the vision with Europe? You talk of not wanting to fly into “unfriendly” territories?

Flying to continental Europe we will fly into the hubs of Lufthansa group and Star Alliance. The reason is the onward connectivity to the respective networks. Unfriendly territories don’t have that, so we had to restructure the network and withdraw from Paris and Amsterdam. On top of that they are very short routes and the high fixed cost structure at London Heathrow is such that you need longer routes to recover the cost of taking off and landing there so you shift over to longer routes such as Berlin and Vienna, and other routes which will follow.

How are your former BMED routes doing to the Middle East and CIS?

The mid-haul routes have improved significantly, particularly the Middle East routes and they are profitable at this point of time. We are serving 11 destinations and will add Tripoli in February, and will increase frequency in the existing network such as Beirut, and whatever we can do adding larger aircraft or flying certain routes non-stop rather than adding. Our aim is to establish the current network further but also see new destinations after Tripoli, which we will reveal in due course.

Any plans for long haul to North America from London Heathrow?

North America is the missing link in our network. There is a logical big traffic flow for the Middle East to North America and London Heathrow is a preferred gateway and transit point, so it would be very logical to add North America, but we only want to go North America when we feel strong enough, have the right product and have sufficient preparation time. We don’t want a trial and error policy as has been the case in the past. If we go there with our own aircraft it will be embedded in the bigger entity and cooperation that Lufthansa has with North American carriers.

You have disposed of some slots and leased out others at London Heathrow

We have slightly less than 10 slots leased out, yes, and they will come back over the next one to three years which puts us in the unique position of probably being the only airline at London Heathrow which can expand there, not only with slots but also with aircraft size because we predominantly use small aircraft and can use big aircraft instead. If you add up our 10 per cent and the Star Alliance slots you come up with 30 per cent of the slots in Heathrow which will make us a very formidable second home carrier at the airport.

There is a concern amongst Diamond Club members [Bmi’s frequent flyer programme] that they will lose out when the programme joins or is merged with Miles & More.

First of all let me say I have stated in public that a roadmap has been agreed upon for the integration of Diamond Club into Miles & More, however this will not come as a surprise and we will give enough notice that the miles earned for our members are rewarded in terms of a transfer.

From my experience in the past [at Austrian Airlines], I have been through this transfer of frequent flyer programmes and at the end the passengers appreciated very much the value of Miles & More which is the leading Frequent Flyer Programme globally. We will naturally make sure that the status earned is respected, so no one should worry they will lose their status. We will also take care that the branding is preserved. The Bmi branding and the way we communicate with our members will remain specific and uniquely British. It will not be a big conglomerate.

But won’t Bmi members find the miles they earned are dwarfed compared with the miles other members have earned on the long haul networks of Star Alliance?

No, I don’t think so. Diamond Club members have had ways of earning extra miles in the programme through other deals, and those things were in place to help the programme compete with the programmes of the other home carriers in the UK market. Also, in Diamond Club you have had the opportunity to earn miles on the Star Alliance long haul network, so Diamond Club members were also earning there as well. And every country has its specific dynamics in terms of Frequent Flyer Programmes and we will naturally look at what the main competitor – British Airways – is doing here so we have a competitive product in the market.

Easyjet will soon compete on your Cairo route. Are you worried?

My opinion is that the low cost model has a certain ideal range for flying in terms of flight duration. I think if you get to four or five hour flights you clearly see the disadvantages of the low cost model. An A321 aircraft we would fly in mid-haul configuration with 120 seats, whereas easyjet would have 180 passengers on it, so you could hardly move. I think people will respond to that in who they book with. On top of that, the cost advantage that the low cost carriers gain is eroded on the longer routes in the sense that the relative costs advantage becomes less.

You have now unveiled the new mid-haul seating. Do you have any further plans?

On the A320 family aircraft we will improve the nine mid haul A321 aircraft we have and the two A320 aircraft that we use for mid-haul routes, and then we will have new seats throughout the fleet.

Do you mean new seats or just new cushions?

New seats, but it will be a seat bought from our parent company which enables us to standardise to the current Lufthansa standard. The whole thing will be branded in the new brown leather seats so we have a uniform setup in our fleet and all the aircraft will be painted in the same livery by the beginning of 2011.

To see Prock-Schauer's presentation on Lufthansa's Investor Day in June of 2010, click here. (The pdf of the Bmi presentation is in English)

Tom Otley

For a review of the refurbished seating on board Bmi’s A321 mid-haul service from London Heathrow to Beirut, click here.

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