Business Travel Tech Talk London, 16 October,
Business Travel Awards Europe, 30 October, JW
3rd Annual Business Travel Intelligence Summit
Aviation is facing a ”deeper, more protracted and fundamental crisis” since 9/11 or the Gulf War, BA ceo Willie Walsh warned.
He said the crisis was worse than any of the ”previous shocks” which had hit the industry since mass air transport began in the 1970s.
Speaking at the London Chamber of Commerce yesterday, Mr Walsh said the cause was a ”devastating combination” of high oil prices and a fall in demand.
He said about 30 airlines had ceased trading this year with more to come as ”we head toward the traditionally poorer returns of the winter travel season.”
BA”s response was to cut costs and seek alliances and mergers.
With fuel now 35% of its costs, Mr Walsh said it was ”prudent” to cut winter schedule and ”essential we do everything we can to bring down our non-fuel costs.”
This included a freeze on recruitment and some senior management level redundancies.
BA was also seeking a merger with Spanish carrier Iberia and, also with Iberia, a ”joint business agreement” with American Airlines on transatlantic flights.
He said a successful application (to the US Department of Transportation) for anti-trust immunity (ATI) would allow the three carriers to work on the same basis that Lufthansa and Air France KLM operate with their alliance partners.
Mr Walsh said that there were 42 carriers on the transatlantic route which was a high level of competition.
The biggest players Star Alliance, with 35% of the market, and SkyTeam, with 28%, had been granted ATI years ago.
”Without ATI, we and American are trying to compete with one arm tied behind our back,” Mr Walsh said.
He said that Star”s share of transatlantic seats from Lufthansa”s hub at Frankfurt was 80%, but BA and American had only 51% of the Heathrow transatlantic market.
He said the level of competition was growing but Virgin Atlantic claimed ”this intense level of competition would somehow melt away if our partnership with American goes ahead. I do not believe it for a moment.
”Virgin also claims that our venture with American would lead to higher fares and poorer services. I do not believe that for a moment either ” and I will tell you why.
”Because if we were crazy enough to do what Virgin claims, our customers would vote with their feet - straight on to the planes of our many competitors.”
For related stories please click here.