British Airways has unveiled a major package of measures designed to return the airline to profitability, following a wide-ranging analysis of its business led by chief executive Rod Eddington.
Mr Eddington said: “We started this review with one clear objective in mind - to turn this company around. We will remain true to our heritage of being a full service network carrier committed to customer service excellence and world class products. But we must transform British Airways into a simpler, leaner, more focused airline so we can thrive and prosper in an increasingly competitive market.”
The conclusions of the review - known as “Future Size and Shape”- signal a significant change to the size of British Airways as it takes further steps to address its cost base and sets the company on course to achieve a 10 per cent operating margin. This will be supported by an annualised cost saving of £650 million achieved by March 2004, with £450 million of this secured by the end of the first year (2002 - 2003).
There will be a further 5,800 job losses over the next two years, in addition to 7,200 announced in September 2001. In total, this amounts to a manpower reduction of 13,000 or 23 per cent of the airline`s workforce of 56,700 in August 2001. Head office and support staff will reduce by more than a third (36 per cent). The company wants to achieve the manpower reduction by voluntary means and will work with the trade unions to achieve the target. The airline is making a provision of £200 million over the next two years for restructuring costs.
British Airways will restructure its European short haul business to provide a competitive response to the no-frills carriers. This will include a change to its short haul pricing structure - giving business travellers and holiday makers lower fares, greater flexibility and more choice - a simpler short haul fleet and higher aircraft utilisation. The new pricing structure will be rolled out from June 2002.
The airline will cut its global distribution costs to generate £100 million of savings, including reducing payments to travel agents in the UK for short haul bookings. This is also being introduced in June 2002 and will result in British Airways?Elowest fares being available on the internet.
Mr Eddington said: “We will not become a no frills airline nor will we launch one. We will compete profitably and intelligently alongside them by adopting what they do well - online bookings, high aircraft utilisation and pricing simplicity. We will mix it with what we do well - providing a great network with frequent flights from convenient airports, as well as delivering world class customer service.Our premium and frequent customers remain as important as ever and we will continue to invest in products and services that they value.”
In response to these British Airways announcements made yesterday, Travelocity, the leading online travel website, comments on the shift in BA strategy in areas such as short haul travel and distribution.
These changes are expected to position BA as a stronger competitor in the European travel market and around the world.
UK managing director Jamie Cole said: “BA`s competitive response to the growing market share of the low-cost carriers can only be positive for our mutual customers. We support a strategy that will ultimately improve customer choice and offer real value for money in low cost European travel.
As an existing global partner of BA, we look forward to nurturing our longstanding relationship to offer even more competitive fares over the internet.”
Cole continued: “The changes that BA has introduced signify the next steps of
re-structuring for the whole UK travel industry. Travelocity is well positioned and prepared to participate and benefit in these latest industry changes, having adapted to similar changes that have occurred in other markets outside the UK.”