Dambus

Traffic and revenue stats are needed on this one, most not in the public domain.

At a rough estimate BA accounts for over 40% of passenger traffic at LHR (33m/76m in 2016), presumably higher share of Business traffic and also of total ticket revenue.

Everyone else is a long way behind.

In many industries a strong #1 and #2 tend to help drive innovation and customer value. The problem with the airline industry is infrastructure incumbency limiting/constraining consumer choice.

Imagine if Unilever could buy up 40% of the shelf space in a hypermarket serving 76m customers!

Bluebrummie2000

Worcester psoes an interesting conundrum. Is BA really British? Other than it has offices in the UK and has a main base at LHR. Situation may even change again post Brexit if one beleives half the hot air re air travel emanating from the Ryanair camp..

elitetraveler

Both of these speak to the point that LHR is a unique airport and market - there is much, much, much larger O&D demand for LHR than FRA, MUC, MAD or AMS.

You can look at it this way - You can have an alligator farm attraction in St. Agustine Florida with 95% share of the 'attractions' market or you can be Disney in Orlando with 70% share vs Universal Studios at 25%.

Operating an airline with a hub in AMS is a different business than operating an airline that is the dominant player at LHR.

Do I think the Economist's solution makes sense? Not really - You really need to get the share down to around 20-30% and have 3-4 significant players as you do at LAX or JFK to see some solid price and product competition and that's not going to happen.

Right now BA does seem to offer some fairly decent prices ex-LHR -

And looking holistically, BA has actually been a leader in product - flat beds in F, flat beds in J, pre-flight dining, arrivals lounges, pajamas -- It just hasn't been a leader in the past 3-5 years.


Right now, there is not enough competition at LHR to drive BA to do a better job on the product side, and the JBAs only further shelter it.

I supposed the point the Economist was making is that BA's management is doing what most management would do in the same situation - milk every nickel of profit which was why it was proposing to radically reduce BA's presence at LHR - which is a pipe dream.

Internaut

You mean the Qataris? They support Muslim Brotherhood. Had they supported ISIS, instead, they wouldn't currently be on the naughty step with the Saudis.

navylad

I agree with some of your points, particularly para 5, the fact remains, the have less of a market share of their hubs than *A hubs it seams, in TATL at least which is what teh argument was made for.

I would argue that collectively in the UK, there is increasing demand for O&D traffic, which BA doesn't provide on LH except from London, if we looks on a UK basis, the amount of O&D TATL BA provides would be well below your 20-30%;

for example from LGW

JFK
BA 1 flight
Other OW 0 flights
Non OW 1 flight

LAX
BA 0 flights
Other OW 0 flights
Non-OW 1 flight

BOS
BA 0 flights
Other OW 0 flights
Non-OW 1 flight

MIA- no firect flights

or MAN

JFK
BA 0 flights
Other OW 1 flight
Non OW 2 flight

LAX- no direct flights

BOS
BA 0 flights
Other OW 0 flights
Non OW 1 flight

MIA
BA 0 fights
Other OW 0 flights
Non OW 1 flight

Obviously, this would be exaggerated if we took the other major North American destinations served by non-LON airports (principle PHL, LAS, SFO). Certainly, the competition is there and compared to other European airlines in their home country, there is greater competition.

binman

I am not sure that looking at competition purely on specific route basis is helpful. The issue is wider than that and I would argue that BA dominance in the UK market and lack of genuine competition at LHR is the leading cause of its rush to the bottom and deterioration in service. It had nothing to do with the LCC based at STN LTN or LGW. LGW alone dealt with the issues of competition many years ago. What we are seeing now is simply cutting costs to drive up profit and increases share prices....At any costs and things are now falling apart.

Even taking out last weeks catastrophic events and their handling of it, BA's attitude to customers as been in free fall for some time.

Competition is more that just the flight. The Frequent flyer programme is a very valuable tool and by allowing revenue sharing alliances the market in frequent flyer programmes as been restricted. Just compare the US credit card sign up deals with those that have been available in the UK. Even before the introduction of fee capping 100,000 avios points for joining a credit card was un heard of in the UK. There is little incentive to have AA advantage or QR card unless you travel frequently. Premium leisure passenger in particular are ill served with huge fees being charged by BA for travel on services where the operating carrier has no such fees. How do they get away with this?....because you have no alternative!

Aside from short haul, and I try to limit my paid BA experience 4 sectors I have abandoned BA for long haul though I appreciate that my money goes to them when I choose AA. Here again the lack of genuine competition plays in their favour as despite providing a service I wont pay for, they still get my money via the back door.
I agree with the economist, time to have a second flag carrier and if BA wont change then for intervention to change them.

Andriyko

Agree. More competition will not solve anything as BA already operates in one of the most competitive markets in the world. Let's not forget when the golden age of air travel that many here long for and think of fondly happened when there was no competition, prices were very high and few people could actually afford to fly.

navylad

I disagree @binman although I've used a few routes, in direct response to a posters ascertain, the extensive analysis in the other thread demonstrates there are few routes without direct competition.

I'd argue that actually the driver behind the reductions in service is the buying factor of most tickets being cost, fee businesses will choose the airline for an employee by the level of the catering or whether there is a flower in the toilet, and I think if you were to sample UK flyers that have self-funded, rather than those on here who obviously have a greater interest in the flight, most will choose their flight on value for money.

What people consider value for money is really dependent on their own tastes and budget.

HIDDY

Yet it's strange why millions of customers choose to connect with BA through LHR every year despite the airline and airport being 'so awful'. Those people could just as easily use AMS/CDG/FRA/MAD instead and receive far better service in the air as well as on the ground....they can't all be nuts.

LHR has some geographical advantages but it must be a hellishly expensive airport to have your main hub at I would have thought never mind its many other disadvantages.

Sealink

BA has had competition over the years:

British Caledonian
Dan Air
British Midland
Virgin Little Red

And what happened to all of them? All gone.

I still don't fully understand Flybe's presence at Heathrow, although it is welcome. They got the slots for free didn't they?

Competition isn't always a good thing - that's why we have multiple train terminals in London as competing train companies refused to work together. (Of course some might agree that many train stations is actually a good thing).

BA faces competition on every level: easyJet, Ryanair, Norwegian, Jet2, Wizz... to Virgin Atlantic, United, Delta... to Emirates, Etihad and Qatar. Is there a city pair where they don't face competition?

In hindsight, given the competition, I think selling GO was a huge mistake. They were a great little airline, and would have filled a void that BA is now itself filling, and how much damage to their reputation is that doing?

soy

I agree with those that say there is plenty of competition in the UK air market. (Its not all roses in the US either, consider if you are based at one of the domestic fortress hubs such as ATL or PHL). In general if you want to fly non-stop, all the airlines will charge you a premium whether you are departing FRA, CDG, LHR, DXB etc.

Basically it appears that BA have decided to focus more on cost rather than service in recent years. They feel the service is 'good enough'. Its a valid business strategy, though it remains to be seen if it is the best strategy. These things are often cyclical, if they see their numbers deteriorate, it will likely drive a change in management and strategy.

PS - I do think that some of the more recent cuts are counter productive and needlessly mean-spirited.

binman

I would agree that there are few routes without direct competition however I would argue that in the round there is no overall competition. For example I could chose AF/KL to fly to CDG /AMS and collect frequent flyer benefits, but I could not fly to DUS FRA or MUC and get the same benefits without using an indirect route. I can however if I fly BA to those places.

I

No its not strange. BA choose to offer fares from mainland EU and other points that are never seen from the UK and therefore people choose those based on cost. LHR T5 is a reasonable experience for Europeans if it works.

I wonder how many of those in transit are in premium cabins compared to joiners from LHR directly. Moreover how many are members of BAEC as opposed to those who join in LHR.

I have argued for a long time that only a new airport offering a true hub experience and able to operate 24/7/365 will provide the impetus for better services and lower fares. BA needs completion on JFK / LAX etc from the likes of the ME3 and CX, carriers from whom they are protected at present and from whom they have shrunk away from in recent years. They can't compete with CX on the HKG route and are not a patch to the ME3. Even when fares are the same.

navylad

I think FF benefits do add a different dimension to it with BA serving more routes from their main hub, just like the other major legacy airlines being the same. If you lived in Germany, you'd have more options to fly with LH for FF benefits.

What your essentially saying is that you prefer a different airlines service for you, and wish they'd move to being a U.K. Airline. That has less to do with competition and more to do with your own desires. Could have misunderstood you of course.

Don't forget, many people in the U.K. are solely or mainly *A flyers too.

BillyBleach

BA or course has competition if you class any carrier operating out of LHR.

However in reality there are very few carriers than can compete with BA as a worldwide carrier.

As pointed our earlier, if VS acquired say Flybe and started to build a European feeder network, and gained more LHR slots. I think BA would see a lot of status passengers shifting.

nallison

While I respect and appreciate all the work you did on that, I wouldn't agree with your conclusion at all.

I would say the data clearly shows a highly uncompetitive environment. There was some discussion about monopoly which is a red herring of course, as it doesn't require monopoly for a market to be highly uncompetitive. Especially given the nature of the London market and in particular London - USA, BA have an extremely privileged position, as seems to be acknowledged by most experts. Which is why BA focuses on that market, which with the JVs, basically gives it a license to print money.

Maintaining this dominant position is of course why BA are, incredibly, against the third runway.

Whether AF or LH etc enjoy the same benefits isn't particularly relevant to whether BA enjoy a privileged competitive position. BA certainly benefit from a ready made market in LON - USA that is given to them on a plate that is simply not available in other countries in europe.