Report says BA was wrong to sell Go

Monday, 19 Feb, 2002 0

British Airways’ current problems are due to bad decision making, as well as tough market conditions, according to a new GartnerG2 analysis report*.

Following the release of British Airways’ ‘Future Size and Shape’ strategy review, GartnerG2 reports that the airline’s plan to deliver cost savings does not address the real problem – that the low cost airlines are stealing BA’s most prized customers.

The report highlights four key factors that have contributed to BA’s estimated loss of at least £500 million for this financial year:

Highly profitable transatlantic routes have been hit hard by the terrorist attacks of 11 September;

Business traffic is down;

The pursuit of unsuccessful mergers that have been blocked or made too unattractive by regulators and;

the fact that BA sold its low-cost subsidiary Go in 2000 for a quick cash boost.

The report suggests that had British Airways kept Go, the no-frills carrier could have taken over BA’s short haul routes, running them cheaply and profitably. It says that in the meantime low-cost carriers have been taking business customers away from BA. The report says: “Travellers aren’t just sold on the low fares — frequent flights from well-connected and less congested airports help reduce all-important total journey times. Knowing the frills don’t matter, the low-cost players deliver a better suited product to BA’s most prized customers. Nothing in ‘Future Size and Shape’ deals with this.”

The report concludes: “BA has left it late to address its high cost base and changing market conditions. Selling Go has limited its options. Some measures it is adopting are astute, but the focus is still too much on operations, and not on delivering what the customer wants.”

* The GartnerG2 report ‘Cutting Costs Won’t Solve Problems at British Airways’ examines British Airways cost-cutting in light of the airline’s Future Size and Shape strategy review.

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