Banking crisis hits BA’s premium services

4th Dec 2008

The banking crisis has hit BA‘s premium figures, which showed a 10.8 per cent year-on-year slump in the number of business and first-class passengers it carried last month. A large part of BA’s premium business comes from the financial sector. Nine of BA’s twenty largest corporate customers are thought to be investment banks, including Barclays, HSBC and Royal Bank of Scotland. Lehman Brothers was also a key BA customer until its collapse in September.

BA’s strategy of keeping fares high is also thought to have contributed to the fall in premium passengers as a number of its competitors have slashed their fares. However, BA says that if it can keep the yield from its premium seats high it will return to high profit margins once the economy recovers.

Meanwhile Ryanair
has reported an 11 percent rise in its passenger numbers to 4.32 million last month, citing the rise on its fare cuts. The low-cost carrier also increased its load factor by one percentage point to 81.5 per cent.

BA is trying to cope with falling demand by cutting management jobs and seeking mergers with rival carriers. This week it announced that it was entering merger talks with Qantas to create a new, dual-listed company.
It is also in merger talks with Iberia and hopes to expand its alliance with American Airlines.

Analysts calculate that a BA-Qantas tie-up could lead to cost synergies of between £100 million and £200 million a year, albeit less than the £400 million it is estimated that the Iberia merger could generate.


If BA can overcome the regulatory hurdle, its tie-up with Qantas, Iberia and American would create the world’s largest airline and be the first global carrier.

BA also reported that November was its first month of full capacity operations at Heathrow Terminal 5. It says the number of bags delayed per 1000 customers in November was reduced to 12. This is down from a peak of 38 delayed bags per 1000 customers in summer 2007.


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