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This is how the new British Airways low cost subsidiary at Gatwick will work

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Last week we covered the announcement that British Airways was planning to set up a new low cost subsidiary at London Gatwick.

This was a very vague announcement, made internally to staff and not to the outside world, which did not specify where the ‘low cost’ elements of the proposal were going to fall. It wasn’t clear if ‘low cost’ applied to the airline itself or just to its cost base.

Over the last couple of days, the fog has begun to clear.

British Airways Gatwick Airport restructuring

A BA pilot made a detailed post on Flyertalk a couple of days ago (see post 191) which I have been able to independently verify. I have also received a statement from British Airways itself.

It seems that:

  • the new Gatwick airline will retain British Airways branding and will look and feel as it does at Heathrow (Club Europe cabin, Avios-earning, free water and snack etc)
  • around 16 A320 aircraft will initially be transferred from Heathrow to Gatwick – this implies that the remaining A319 aircraft may be pensioned off
  • the new operation will have its own operating licence and be a stand-alone subsidiary of British Airways along the lines of BA CityFlyer

To go back to the original question, the ‘low cost’ element appears to come entirely from changes to pilot and cabin crew terms. There will be no obvious change to the customer-facing operation and we will not see the launch of Vueling UK, LEVEL UK, Aer Lingus UK, Air Europa UK etc.

British Airways told us in a statement that:

“customers will continue to benefit from the same full standard of service that they currently receive from us, alongside competitive fares”.

It is worth noting, however, that the statement continued:

“Alongside this British Airways is in parallel running a process of evaluating alternatives for the London Gatwick slots.”

This may be posturing for the benefit of BALPA, but Vueling UK or indeed a Gatwick slot sale to easyJet or Wizz Air may not be completely off the table.


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Comments (51)

  • ThePenguin says:

    I wonder what happened to that guy who used to post about his investment in IAG shares?
    Seem to remember he was doing rather well.

    • Rhys says:

      I have some. Underperforming recently (good time to buy!) but confident they will come back in the next 2-5 years.

      • Brighton Belle says:

        A business that uses machines that emit large quantities of CO2 is in trouble. They’ll need sustainable aviation fuels soon and that’s not low cost.

        • Rhys says:

          The stock doesn’t need to rise much for me to make a profit. But it’s also just a little side bet. Most of my investments are in passive.

          • Brighton Belle says:

            I’ve had some BA shares since shareholders got flight discounts. It’s been a dreadful investment so I keep them for nostalgia. But I’d make more cash with a begging bowl on Brighton seafront. I’m not selling them though.😵‍💫

        • Andrew says:

          Find a business that doesn’t emit large quantities of CO2.

          If you were truly worried, you wouldn’t be connected to the internet or have a mobile phone. Data centres and crypto mines are massive emitters.

      • GenX says:

        Re IAG shares. Lots of debt, lost earnings, no growth, dividends stopped, which is a taboo in itself. £1.56 a share is attractive, however P/B is high and D/E is just shocking. It does have a bit of cash though. I’m sitting on a fence whether it’s an investment for me. Who knows, the company may pick up again from 2023. I hope so.

      • Ken says:

        Underperforming recently or underperforming for the last 30 years ?
        Will profitable PE recover?
        I would say yes, aging, fatter, richer leisure travellers happy to pay more for a bit of comfort.
        Will J recover to pre-pandemic levels?
        I doubt it. Blended office working, a desire to cut travel budgets, a desire to show ‘sustainable’ credentials all suggest it won’t.
        Even if it did, the competition is still there, BA still utterly reliant on monopoly of Heathrow slots.

        I think BA/IAG will prove just as bad an investment over the next 3 decades as the last 3 decades.

        • GenX says:

          Thanks Ken, some good points there. BA (IAG) probably won’t go kaput but that’s all there is to it.

    • TGLoyalty says:

      If you bought around the time of the share issue you’re sitting on a 80% profit right now.

      I think that commentator is still extremely happy

  • KBuffett says:

    Seems like an exercise to shaft BA’s Gatwick Staff. Everything else remains the same.

    • Rhys says:

      BA told us Gatwick wasn’t even profitable during the 2019 peak summer season.

      • Jonathan says:

        I can easily believe this. Flying BA from LGW was often substantially cheaper than Ryanair/Easy/Jet2 from MAN/LPL/LBA etc pre Covid. Considering a decent proportion of the passengers will also have had status then it’s not surprising the margins were negative.

        In such a competitive environment if you know you can never really match rivals costbase in a market that is fundamentally price driven then you may as well give up. If people want CE & a lounge they can get themselves to LHR.

        • swifty says:

          because of the airport tax to Heathrow do you think? I was happy as from Brighton like belle, and dislike the drive to Heathrow. Always ended up shelling out for an overnight hotel plus a pizza for the teens

      • Memesweeper says:

        Why on earth are they returning with the same model then? Trimming a few staff costs won’t change the fundamentals. As a shareholder Rhys you should be up in arms… they’re burning your cash!

      • Dubious says:

        I was once lead to believe that BA see their Gatwick operation as a place for business travellers who are used to using Heathrow to come when they want to take a leisure break with their status benefits and points redemptions…
        ..i.e. even if the Gatwick operation makes a paper loss, overall it might be driving some business to BA at Heathrow (away from other airlines at Heathrow).

      • Rob says:

        You can define ‘profitable’ 100 different ways. This is why you get film stars sueing studios who claim Star Wars etc were not profitable so the profit share is not due.

    • Briand says:

      Here we go again…..

    • ChrisW says:

      Aren’t all cabin crew on the single cheaper contract now thoigh? Are they planning to pay them even less?

      Is this whole operation just to pay a few hundred pilots a bit less money?

      • Rob says:

        Seems so.

        • Tim says:

          For now… before they find a way to move it to short haul LHR and then to long haul somehow. This will drive a massive wedge between old and new pilots. It’s essentially fire and re-hire.

          • Journeying John says:

            Fir and rehire… As BA have done to their entire workforce except pilots and executive management…
            … the select committee put it best “a national disgrace” despite the fact that in reality BA is the UK division of a Spanish multinational, focussed only on profits and dividend. Customers & staff come last.

      • Given the “regular” BA Mid and Short haul planes already; charge for luggage and seat choice, have been densified to greater extent than eg Ryanair and that BA deliver aess responsive customer services and a far less reliable set of IT systems, it’s difficult to see how a new venture would compete in the low cost space without drawing business from other BA flights. Admittedly BAs fares are almost double what equivalent carriers offer but I’m fairly sure that the poor value of BA flights & reality of 2021 service means that this too will fail.

  • Rui N. says:

    Can the slots at Gatwick be sold?

    • ChrisC says:

      Yes. But probably not the best time to do it to get the best price.

      There are other slots floating about that would be available for free from the pool (ex VS for example) so an airline wanting to start or expand at LGW might try for those first.

    • Rob says:

      Yes.

  • Kishan Majithia says:

    How do you think this will impact the 2022 summer schedule at Gatwick. For example, the flights to Kos during May half term are completely sold out. Will the schedule change and/or additional services added as a result?

  • Simonbr says:

    Is this why my flight to Turin from LHR next March returns a few days later to LGW rather than LHR? Or is it a mistake?

    • Richie says:

      The summer timetable starts 27 March 22 when Gatwick SH is planned to re-start.

  • Tom says:

    This doesn’t sound like good news! I was hoping for all of the LGW flights would transfer across to LHR because I’m looking to book a flight to TFS which is out from LHR and back to LGW.. was hoping the latter might move! Sounds like they might be keeping the schedule after all?

    • Rob says:

      It will, legally, be a different airline so any move would let you cancel for free.

  • Briand says:

    @KBuffet

  • ChrisW says:

    I never thought BA were trying to compete on price with EasyJet at Gatwick. Their cost base will always be too high.

    I thought the whole point was there was enough passengers who would pick BA even if it was more expensive than EasyJet for leisure routes because they wanted a full-service experience, had status, wanted to earn Avios etc. The well-heeled who want a comfortable start to their ski trip or Greek island holiday.

    I.e. I thought BA and EasyJet were going after completely different customer segments.

    • C says:

      Not completely different, but differentiated.

      But with business travel down, the appeal of status as a marketing lever may be declining. For many years I have picked BA for leisure travel even with a small price differential, because of status benefits. But I have 0 TP business travel forecast for the foreseeable future (instead of Silver or Gold continuously for the past 15 years), and I’m sure I’m not the only one who will be reassessing strategies and brand preferences over the next few months.

      • ChrisW says:

        That’s a good point. There’s likely to be a lot less BA elite status holders next year because people won’t be earning status through business travel.

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