Originally Posted by
Often1
It's not all a supply side process. Despite the over-personalization of the CEO issues, it is also about demand side from customers.
As the large businesses which account for a large percentage of BA's revenues become more cost conscious and push for lower fares with fewer frills, you will see BA react, most certainly on the short-haul.
If a business requires its people to book the lowest logical fare and the answer is that BA provides a lounge, food & liquor onboard and whatever else, few businesses will see that as a reason for their people to pay for the BA ticket.
It is easy to differentiate SH from LH. It is already done. CE vs. CW by way of example.
The real problem is that this is an industry where the customer may not be the passenger but rather the passenger's employer.
I would agree that you can only sustain a more expensive employee base if your customers truly value the difference that they bring and the problem for BA is 2 fold (at least) first there is a group of customers that doesn't perceive any extra value from better paid staff and secondly (not entirely separately from the first issue) there is a group of staff who do not perform significantly beyond those in LCC's and thus don't allow the best possible application of a more skilled staff base.
I don't think this is helped though by dropping lower and lower in the value chain. The more LCC like that BA service becomes the more customers will reject any price premium and the more pressure will be applied to pay and conditions. It is the making of a perfect vicious circle and is not confined to the Y cabin. I no longer see any great value in flying BA for short haul (in C or Y) as the pain of a LHR connection and associated issues and delays is not outweighed by a moderately better lounge at LHR nor minimal product differential from U2. In many cases I would be prepared to pay more on a like for like basis to avoid connecting.
The other main problem in the industry is that BA can make a unique price offer to large corporates locking in a big chunk of business at minimal effort and subverting real competition in service or product standards, so long as it can keep filling seats. The next economic downturn though will be brutal for BA.