Originally Posted by orbitmic

Absolutely, but then an equal truth is that for a whole range of reasons, legacy airlines cannot match the costs of long haul low cost airlines, and therefore cannot match their prices whilst making a profit. Their salary base is higher (not least pilots), they have to bear the costs of connections, lounges, over-staffing due to multiple cabins, expensive airports, older fleets, etc.

The question therefore becomes: if BA cannot match the prices of, say, DY, then how do they ensure that at least some people continue to fly the former rather than the latter? That is a truly complex equation: fail to save and you cannot compete on price, save on the wrong stuff and... people will choose solely on price and therefore not you!

There are so many options available: densification (10 across 777, etc), flexible long haul cabin sizes (the AF way), meals, luggage, drinks, ancillary payments (from a la carte meals to family couches a la NZ, internet, duty free, special occasion options a la CX, etc), pillows, blankets, amenity kits, or even change of airports served.

Pick the wrong thing and you lose crucial reputational capital and therefore customers to competition (other European airlines competing for the same overall markets, ME3, etc). Fail to pick enough and your costs are too high. To make things even more complicated, customers do not always neatly fit into 'leisure' and 'business' types. Attack your leisure market by downgrading Y too much, and you may well lose top premium traffic as most business pax in large companies or high up roles effectively have a choice of airlines on business trips, and will often rationalise that choice according to what they want to use when they go on holiday with the kids. Save the wrong £100 on that 4 passenger holiday trip, and you might lose £100,000 of that executive business travel, or even £5 million of their company travel.

So that's the more complex picture. European airlines such as BA need to compete on price but also, at the exact same time, give people reason to justifying paying more on them than on the DYs of this world. They are uncomfortably stuck between airlines which costs they can never match whatever they decide to cut, and others which service they can never equal regardless of how much effort they make. Those centrifugal forces probably largely explain why BA and the rest often seem so unclear regarding service evolution.