CityFlyer Express was a short-haul
regional airline
A regional airline is a general classification of airline which typically operates scheduled passenger air service, using regional aircraft, between communities lacking sufficient demand or infrastructure to attract mainline flights. In North ...
with its head office in the Iain Stewart Centre next to
London Gatwick Airport
Gatwick Airport (), also known as London Gatwick , is a major international airport near Crawley, West Sussex, England, south of Central London. In 2021, Gatwick was the third-busiest airport by total passenger traffic in the UK, after Hea ...
in England.
In 1993 it became the first
British Airways
British Airways (BA) is the flag carrier airline of the United Kingdom. It is headquartered in London
London is the capital and List of urban areas in the United Kingdom, largest city of England and the United Kingdom, with a populati ...
(BA)
franchisee
Franchising is based on a marketing concept which can be adopted by an organization as a strategy for business expansion. Where implemented, a franchisor licenses some or all of its know-how, procedures, intellectual property, use of its busine ...
operating as ''British Airways Express''. CityFlyer's ownership passed to BA in 1999 when that company bought out the original promoters as well as
3i, the airline's main shareholder at the time. Initially, CityFlyer continued to operate as a separate unit, but it was eventually absorbed into British Airways' mainline short haul operation at
Gatwick
Gatwick Airport (), also known as London Gatwick , is a major international airport near Crawley, West Sussex, England, south of Central London. In 2021, Gatwick was the third-busiest airport by total passenger traffic in the UK, after Hea ...
in 2001, the result of a change in British Airways' strategy for its Gatwick operation.
Following its absorption into British Airways, the airline's
turboprop
A turboprop is a turbine engine that drives an aircraft propeller.
A turboprop consists of an intake, reduction gearbox, compressor, combustor, turbine, and a propelling nozzle. Air enters the intake and is compressed by the compressor. Fuel ...
s were retired, while the company's fleet of regional short-haul
jetliners
A jet airliner or jetliner is an airliner powered by jet engines (passenger jet aircraft). Airliners usually have two or four jet engines; three-engined designs were popular in the 1970s but are less common today. Airliners are commonly clas ...
and the associated crews were transferred to British Airways' regional operation in
Birmingham
Birmingham ( ) is a city and metropolitan borough in the metropolitan county of West Midlands in England. It is the second-largest city in the United Kingdom with a population of 1.145 million in the city proper, 2.92 million in the West ...
and
Manchester
Manchester () is a city in Greater Manchester, England. It had a population of 552,000 in 2021. It is bordered by the Cheshire Plain to the south, the Pennines to the north and east, and the neighbouring city of Salford to the west. The t ...
. This in turn resulted in British Airways mainline short haul crews based at Gatwick operating most of the erstwhile CityFlyer Express routes using the former's Gatwick-based
Boeing 737
The Boeing 737 is a narrow-body aircraft produced by Boeing at its Renton Factory in Washington.
Developed to supplement the Boeing 727 on short and thin routes, the twinjet retains the 707 fuselage width and six abreast seating with two un ...
fleet.
History
CityFlyer's origins
CityFlyer Express can be traced back to the formation of Connectair in 1983. Connectair became a feeder airline for
British Caledonian
British Caledonian (BCal) was a British private independent airline which operated out of Gatwick Airport in south-east England during the 1970s and 1980s. It was created as an alternative to the British government-controlled corporation airlin ...
, at the time the UK's so-called Second Force airline, on 30 May 1984 when it commenced a regional scheduled service between Gatwick and
Antwerp
Antwerp (; nl, Antwerpen ; french: Anvers ; es, Amberes) is the largest city in Belgium by area at and the capital of Antwerp Province in the Flemish Region. With a population of 520,504, with a single, leased
Embraer EMB 110 Bandeirante
The Embraer EMB 110 Bandeirante (English: ''pioneer'') is a Brazilian general purpose 15–21 passenger twin-turboprop light transport aircraft designed by Embraer for military and civil use.
The EMB 110 was designed by the French engineer Max Ho ...
turboprop. A small number of larger capacity, more efficient
Shorts 330
The Short 330 (also SD3-30) is a small turboprop transport aircraft produced by Short Brothers. It seats up to 30 people and was relatively inexpensive and had low maintenance costs at the time of its introduction in 1976. The 330 was based on ...
turboprops eventually replaced the Embraer Bandeirante.
There was joint ticketing for both airlines, Connectair flight numbers were prefixed with British Caledonian's BR designator, the two-letter
International Air Transport Association
The International Air Transport Association (IATA ) is a trade association of the world's airlines founded in 1945. IATA has been described as a cartel since, in addition to setting technical standards for airlines, IATA also organized tariff ...
code identifying the airline on whose behalf a flight is operated, and all of the company's aircraft were painted in the ''British Caledonian Commuter''
livery
A livery is an identifying design, such as a uniform, ornament, symbol or insignia that designates ownership or affiliation, often found on an individual or vehicle. Livery will often have elements of the heraldry relating to the individual or ...
. However, this relationship stopped short of a
franchise
Franchise may refer to:
Business and law
* Franchising, a business method that involves licensing of trademarks and methods of doing business to franchisees
* Franchise, a privilege to operate a type of business such as a cable television p ...
agreement.
Following British Airways' takeover of British Caledonian in December 1987, Connectair operated its flights under the UK flag carrier's BA designator without adopting the British Airways livery for an interim period.
The ILG era
In June 1988 the firm was acquired by the International Leisure Group (ILG), the parent company of
Air Europe
Air Europe was a wholly privately owned, independentindependent from government-owned corporations British airline, established in 1978 under the working title Inter European Airways.Simons It adopted the Air Europe name the following year. Its ...
. Following ILG's acquisition of Connectair, the airline was re-branded ''Air Europe Express'' and adopted a new
corporate identity
A corporate identity or corporate image is the manner in which a corporation, firm or business enterprise presents itself to the public (such as customers and investors as well as employees). The corporate identity is typically visualized by ...
as of 1 February 1989.
[''It was nice to fly with friends! The story of Air Europe.'', Simons, G.A., GMS Enterprises, Peterborough, 1999, p. 123]
ILG's decision to purchase Connectair was part of Air Europe's
corporate strategy
In the field of management, strategic management involves the formulation and implementation of the major goals and initiatives taken by an organization's managers on behalf of stakeholders, based on consideration of resources and an assessment ...
at the time to establish itself as a major short haul scheduled operator at its Gatwick base. Gatwick had become very busy during the late 1980s. This meant that the much-coveted early-morning peak time
slots, which Air Europe needed to be able to operate at times that were attractive to business travellers as well as competitive with its rivals' departure and arrival times, were in increasingly short supply. Connectair held a fairly large number of conveniently timed slots at Gatwick, which it had accumulated since its ''British Caledonian Commuter'' days. ILG's acquisition of Connectair therefore represented a golden opportunity to substantially increase the number of slots the group's airlines controlled at Gatwick, thereby strengthening Air Europe's competitive position at that airport.
Air Europe Express flew under the same AE airline designator as its bigger sister airline.
Its scheduled services initially linked Gatwick with Antwerp and
Rotterdam
Rotterdam ( , , , lit. ''The Dam on the River Rotte'') is the second largest city and municipality in the Netherlands. It is in the province of South Holland, part of the North Sea mouth of the Rhine–Meuse–Scheldt delta, via the ''"N ...
.
[''It was nice to fly with friends! The story of Air Europe.'', Simons, G.A., GMS Enterprises, Peterborough, 1999, p. 122]
Larger
Shorts 360
The Short 360 (also SD3-60; also Shorts 360)Mondey, David. ''Encyclopedia of the World's Commercial and Private Aircraft''. New York: Crescent Books, 1981. , p. 228. is a commuter aircraft that was built by UK manufacturer Short Brothers during ...
s gradually replaced the Shorts 330s.
In addition, ILG purchased Guernsey Airlines in April 1989, another small, independent regional airline, which operated scheduled services between
Guernsey
Guernsey (; Guernésiais: ''Guernési''; french: Guernesey) is an island in the English Channel off the coast of Normandy that is part of the Bailiwick of Guernsey, a British Crown Dependency.
It is the second largest of the Channel Islands ...
and Gatwick as well as between Guernsey and Manchester at the time. On 29 October 1989 ILG fully integrated Guernsey Airlines into its existing Air Europe Express operation.
These moves provided Air Europe with additional transfer traffic for its developing short haul
Europe
Europe is a large peninsula conventionally considered a continent in its own right because of its great physical size and the weight of its history and traditions. Europe is also considered a Continent#Subcontinents, subcontinent of Eurasia ...
an scheduled route network. They also enabled Air Europe to launch new routes where there was insufficient traffic to support its larger Boeing 737 and
Fokker 100
The Fokker 100 is a regional jet produced by Fokker in the Netherlands.
The Fokker 100 is based on the Fokker F28 with a fuselage stretched by to seat up to 109 passengers, up from 85.
It is powered by two newer Rolls-Royce Tay turbofans, an ...
jet aircraft
A jet aircraft (or simply jet) is an aircraft (nearly always a fixed-wing aircraft) propelled by jet engines.
Whereas the engines in propeller-powered aircraft generally achieve their maximum efficiency at much lower speeds and altitudes, je ...
or where these aircraft were too big to provide a frequent schedule during the start-up phase, such as Gatwick—
Düsseldorf
Düsseldorf ( , , ; often in English sources; Low Franconian and Ripuarian: ''Düsseldörp'' ; archaic nl, Dusseldorp ) is the capital city of North Rhine-Westphalia, the most populous state of Germany. It is the second-largest city in th ...
and Gatwick—
Jersey
Jersey ( , ; nrf, Jèrri, label=Jèrriais ), officially the Bailiwick of Jersey (french: Bailliage de Jersey, links=no; Jèrriais: ), is an island country and self-governing Crown Dependencies, Crown Dependency near the coast of north-west F ...
for instance.
Following the replacement of the Air Europe Express Shorts 360 turboprops with Air Europe's larger and faster Fokker 100 jets on the Gatwick—Düsseldorf and Gatwick—Jersey routes, Air Europe Express launched a new thrice-daily Gatwick—
Birmingham
Birmingham ( ) is a city and metropolitan borough in the metropolitan county of West Midlands in England. It is the second-largest city in the United Kingdom with a population of 1.145 million in the city proper, 2.92 million in the West ...
schedule with its Shorts 360s.
During the year ending August 1990 the Air Europe Express operation carried more than a quarter of a million passengers across its route network for the first time.
Air Europe Express was forced to halt its operations on 8 March 1991 along with its sister airlines in the ILG-controlled Airlines of Europe group as a result of its parent company's decision to put all the group's companies into administrative receivership on that day, even though Air Europe Express itself had remained profitable throughout that period.
A new beginning
The management of Air Europe Express quickly started a new airline, Euroworld Airways, and began operations in May 1991 using two Shorts 360 aircraft and staff from the old Air Europe Express. The new carrier also carried on night freight and mail contracts from the defunct airline. The airline soon began flights from Gatwick to Guernsey, Antwerp and Rotterdam, for which two additional Shorts 360s were purchased. At this time, the airline approached several large carriers with a view to establishing a link, but in the event only British Airways was to show any interest, and a
code share
In communications and information processing, code is a system of rules to convert information—such as a letter, word, sound, image, or gesture—into another form, sometimes shortened or secret, for communication through a communication c ...
agreement was struck between the two.
Choosing a new corporate identity
The airline rebranded as CityFlyer Express in 1992.
1992 also marked CityFlyer's second year of operation, during which it managed to
break even
Break-even (or break even), often abbreviated as B/E in finance, (sometimes called point of equilibrium) is the point of balance making neither a profit nor a loss. Any number below the break-even point constitutes a loss while any number above it ...
for the first time. (It had recorded a loss of
£0.5
mn in its first year of operation.) From this point onwards, the airline was to post a consistent
profit
Profit may refer to:
Business and law
* Profit (accounting), the difference between the purchase price and the costs of bringing to market
* Profit (economics), normal profit and economic profit
* Profit (real property), a nonpossessory intere ...
.
Launching a new generation of turboprop planes in the UK
CityFlyer Express was the UK launch customer for the
ATR 42
The ATR 42 is a regional airliner produced by Franco-Italian manufacturer ATR, with final assembly in Toulouse, France.
On 4 November 1981, the aircraft was launched with ATR, as a joint venture between French Aérospatiale (now Airbus) and ...
regional turboprop, acquiring two in 1992.
In the same year
Aer Lingus
Aer Lingus ( ; an anglicisation of the Irish , meaning "air fleet" compare Welsh 'llynges awyr') is the flag carrier of Ireland. Founded by the Irish Government, it was privatised between 2006 and 2015 and it is now a wholly owned subsidiary ...
abandoned the Gatwick to
Dublin
Dublin (; , or ) is the capital and largest city of Republic of Ireland, Ireland. On a bay at the mouth of the River Liffey, it is in the Provinces of Ireland, province of Leinster, bordered on the south by the Dublin Mountains, a part of th ...
service, allowing CityFlyer to step in with a daily service.
BA's takeover of
Dan-Air
Dan-Air (Dan Air Services Limited) was an airline based in the United Kingdom and a wholly owned subsidiary of London shipbroker, shipbroking firm Davies and Newman. It was started in 1953 with a single aircraft. Initially, it operated cargo a ...
also left the Gatwick to
Newcastle Newcastle usually refers to:
*Newcastle upon Tyne, a city and metropolitan borough in Tyne and Wear, England
*Newcastle-under-Lyme, a town in Staffordshire, England
*Newcastle, New South Wales, a metropolitan area in Australia, named after Newcastle ...
route vacant for the airline to assume, offering a three-times daily service and requiring a third ATR 42.
The addition of Düsseldorf to the network in 1993 and a frequency increase on the Dublin route led to the acquisition of a fourth ATR.
Formalisation of code-share relationship with British Airways
Meanwhile, the code share agreement had resulted in several complaints being lodged with British Airways by customers expecting a BA flight and the BA product.
BA proposed a solution to this by offering CityFlyer a franchise agreement, which it accepted. This occasion marked the conclusion of the first-ever franchise agreement between British Airways and another airline. It also marked the conclusion of the first franchise agreement in the UK airline industry.
Under this arrangement the CityFlyer aircraft would be painted in full BA livery with interiors and cabin layout conforming to BA's contemporary, standard two-class European product. Staff would wear BA uniforms and all flights would operate under BA flight numbers. British Airways itself would take over CityFlyer's marketing and handle all reservations on its behalf. To all intents and purposes, CityFlyer Express would present itself and trade as British Airways.
The deal came into effect in June 1993.
Further expansion
The franchise agreement allowed CityFlyer Express to take advantage of the UK flag carrier's marketing clout,
pricing power
In economics, market power refers to the ability of a firm to influence the price at which it sells a product or service by manipulating either the supply or demand of the product or service to increase economic profit. In other words, market powe ...
as well as its
global distribution system
A global distribution system (GDS) is a computerised network system owned or operated by a company that enables transactions between travel industry service providers, mainly airlines, hotels, car rental companies, and travel agencies. The GDS ma ...
(GDS) and worldwide sales force.
The airline was again UK launch customer for the larger, 66-seat
ATR 72
The ATR 72 is a twin-engine turboprop, short-haul regional airliner developed and produced in France and Italy by aircraft manufacturer ATR (french: Avions de transport régional or it, Aerei da Trasporto Regionale), a joint venture formed b ...
, the first of which was delivered in October 1994.
By the end of the 1995 financial year, CityFlyer served ten destinations.
Ushering in the jet age
CityFlyer Express acquired its first jet aircraft in March 1997 when it became the first UK-based airline to introduce the
Avro RJ100
The British Aerospace 146 (also BAe 146) is a short-haul and regional airliner that was manufactured in the United Kingdom by British Aerospace, later part of BAE Systems. Production ran from 1983 until 2001. Manufacture by Avro International ...
. A second Avro RJ100 was acquired in May of that year. Three more were added in 1998 and a further two joined the fleet in 1999. (At the time, the airline also operated six ATR 42s, one of which was returned to its lessor in 1999, as well as five larger ATR 72s. Three additional ATR 72s were delivered in 1999. Eventually, these replaced the remaining ATR 42s.)
By the turn of the millennium the company's jet fleet had expanded to 16 RJ100s.
Selling out to British Airways
With the franchise agreement due to end in 1999, CityFlyer Express was the second largest slot holder at Gatwick Airport (behind British Airways). It held 96 daily slots at Gatwick, employed 677 people and returned a pre-tax profit of £6.4mn on
sales
Sales are activities related to selling or the number of goods sold in a given targeted time period. The delivery of a service for a cost is also considered a sale.
The seller, or the provider of the goods or services, completes a sale in r ...
of £89.4mn. The airline's shareholders took the opportunity to realise their
investment
Investment is the dedication of money to purchase of an asset to attain an increase in value over a period of time. Investment requires a sacrifice of some present asset, such as time, money, or effort.
In finance, the purpose of investing i ...
and put the airline up for sale.
HSBC
HSBC Holdings plc is a British multinational universal bank and financial services holding company. It is the largest bank in Europe by total assets ahead of BNP Paribas, with US$2.953 trillion as of December 2021. In 2021, HSBC had $10.8 tri ...
was appointed to handle the process, and approached a number of carriers about the sale. Of the airlines approached, both British Airways and
Virgin Atlantic
Virgin Atlantic, a trading name of Virgin Atlantic Airways Limited and Virgin Atlantic International Limited, is a British airline with its head office in Crawley, England. The airline was established in 1984 as British Atlantic Airways, and w ...
stated their interest to acquire the airline.
At the time Virgin chairman
Richard Branson
Sir Richard Charles Nicholas Branson (born 18 July 1950) is a British billionaire, entrepreneur, and business magnate. In the 1970s he founded the Virgin Group, which today controls more than 400 companies in various fields.
Branson expressed ...
attacked British Airways' intention to bid for CityFlyer Express by claiming publicly that it already had a "total
monopoly
A monopoly (from Greek language, Greek el, μόνος, mónos, single, alone, label=none and el, πωλεῖν, pōleîn, to sell, label=none), as described by Irving Fisher, is a market with the "absence of competition", creating a situati ...
" at
Heathrow
Heathrow Airport (), called ''London Airport'' until 1966 and now known as London Heathrow , is a major international airport in London, England. It is the largest of the six international airports in the London airport system (the others bei ...
and now wanted a "total monopoly" at Gatwick as well, thereby undermining its rivals' ability to compete with it on a
level playing field
In commerce, a level playing field is a concept about fairness, not that each player has an equal chance to succeed, but that they all play by the same set of rules.
In a game played on a playing field, such as rugby, one team would have an unfai ...
.
Disregarding a publicly stated offer from Virgin Atlantic to purchase the company for £100mn, HSBC announced the sale of CityFlyer Express to Virgin's arch-rival British Airways for £75mn in November 1998. This immediately caused controversy, with Richard Branson stating that HSBC never responded to Virgin's offer despite numerous requests from Virgin. CityFlyer's management defended its decision to sell to British Airways by stating that it had never received Virgin's
bid in the first place.
This resulted in the already agreed takeover of CityFlyer Express by British Airways being referred to the
Competition Commission
The Competition Commission was a non-departmental public body responsible for investigating mergers, markets and other enquiries related to regulated industries under competition law in the United Kingdom. It was a competition regulator under t ...
.
The Competition Commission eventually cleared the sale of CityFlyer Express to British Airways for £75mn in 1999. However, it also imposed a ceiling on the maximum number of slots British Airways and its newly acquired subsidiary CityFlyer Express were allowed to hold at Gatwick.
According to this ruling, British Airways and CityFlyer could control a combined maximum of 41% of all Gatwick slots on an annual basis as well as no more than 70% of the airport's slots on an hourly basis and up to 65% of these slots within a two-hour time span. These limits were designed to enable other airlines to offer competitive schedules on short haul routes where British Airways or CityFlyer was the sole or dominant carrier, without resorting to compulsory slot transfers that would have impeded British Airways' ability to run an effective
hub-and-spoke operation at Gatwick.
Background to British Airways' acquisition of CityFlyer Express
The main reason for British Airways' acquisition of CityFlyer Express was the fact that CityFlyer held about 13% of Gatwick slots at the time. BA did not want these to fall into any competitor's hands. BA also needed CityFlyer's slots to expand its Gatwick operation so that it could offer enough
feeder services that would help it turn around its loss-making operation at the airport by improving long haul load factors. It was hoped that this would shore up the profitability of the UK flag carrier's long haul routes from Gatwick, thereby enabling it to return the entire Gatwick operation to profitability in the long term.
CityFlyer and its predecessor Connectair had a proven track record of operating a network of regional domestic and European scheduled services from Gatwick profitably. This was in stark contrast to BA's mainline short haul operation at Gatwick, which had racked up huge losses ever since BA had established a major presence at Gatwick as a result of the British Caledonian and Dan-Air takeovers. The losses BA's mainline short haul services generated at Gatwick were at the heart of the unsatisfactory financial performance of the entire Gatwick operation. After the failed attempt to use the acquisition of Dan-Air, which was on the verge of bankruptcy at the end of October 1992, to form a new low-cost, short haul unit within BA's mainline short haul operation at Gatwick, franchising seemed to offer the best solution for providing the level of feeder services BA needed to protect its long-haul loads and profits at Gatwick, without re-creating the complex organisation and fleet mix, and without duplicating the costly
overheads
In business, overhead or overhead expense refers to an ongoing expense of operating a business. Overheads are the expenditure which cannot be conveniently traced to or identified with any particular revenue unit, unlike operating expenses such as r ...
of the BA mainline short haul operation at Heathrow, which did not suit the
revenue
In accounting, revenue is the total amount of income generated by the sale of goods and services related to the primary operations of the business.
Commercial revenue may also be referred to as sales or as turnover. Some companies receive reven ...
environment at Gatwick. Apart from the additional transfer traffic this generated for BA's long haul services at Gatwick, the main benefit of this arrangement for BA was that CityFlyer was to remain completely independent of the BA mainline operation. The feeder services CityFlyer provided for BA at Gatwick under the franchise agreement did not impact the direct operating
cost
In production, research, retail, and accounting, a cost is the value of money that has been used up to produce something or deliver a service, and hence is not available for use anymore. In business, the cost may be one of acquisition, in which ...
s of BA's mainline operation. CityFlyer also had very low costs as a result of a flat organisational structure and a simple fleet. This suited Gatwick's revenue environment and was the main reason BA decided to make the franchise agreement with CityFlyer Express a central plank of its strategy to achieve sustained, overall profitability at Gatwick.
=BA's inability to operate profitably at Gatwick following the acquisition of British Caledonian and Dan-Air
=
The prime causes for BA's inability to operate profitably at Gatwick are:
* The unwieldy route structure it inherited from British Caledonian.
* The
Monopolies and Mergers Commission
The Competition Commission was a non-departmental public body responsible for investigating mergers, markets and other enquiries related to regulated industries under UK competition law, competition law in the United Kingdom. It was a competiti ...
's decision to require BA to give up 5,000 annual slots at Gatwick to its competitors and to re-apply for some of British Caledonian's short haul feeder routes, as well as the subsequent decision of the
Civil Aviation Authority
A civil aviation authority (CAA) is a national or supranational statutory authority that oversees the regulation of civil aviation, including the maintenance of an aircraft register.
Role
Due to the inherent dangers in the use of flight vehicles, ...
(CAA) to award these routes to rival airlines.
* Its failure to transform the short haul operation inherited from Dan-Air into a low-cost unit within the Gatwick mainline short haul operation.
* The fact that on identical routes with the same fare structure its costs at Gatwick are only marginally lower than at Heathrow, whereas load factors, revenues and
yields — the profit per passenger — are significantly lower at Gatwick than at Heathrow.
* Gatwick's location and its smaller catchment area compared with Heathrow.
The route structure with which BA was left following its takeover of British Caledonian in December 1987 was notable for the unplanned and unsystematic manner in which it had grown since the early 1960s.
At the time
Sir Freddie Laker
Sir Frederick Alfred Laker (6 August 1922 – 9 February 2006) was an English airline entrepreneur, best known for founding Laker Airways in 1966, which went bankrupt in 1982. Known as Freddie Laker, he was one of the first airline owners to a ...
had begun building up
British United Airways
British United Airways (BUA) was a private, independentindependent from government-owned corporations British airline formed as a result of the merger of Airwork Services and Hunting-Clan Air Transport in July 1960, making it the largest wholly ...
' scheduled route network in his capacity as that airline's managing director. In those days only very limited opportunities existed for wholly privately owned, independent airlines to provide fully fledged scheduled air services on major domestic and international trunk routes. This resulted in a poor fit of many routes in British United's network of scheduled services, thereby making it difficult to offer sensible connections that could be marketed to the travelling public. It also represented the best network structure the late Sir Freddie was able to put in place under the then prevailing regulatory regime.
[''No Frills - The Truth behind the Low-cost Revolution in the Skies'', Calder, S., Virgin Books, London, 2002, p. 132]
British Caledonian, which BA acquired at the end of 1987 in what was widely acknowledged to be a rescue deal to prevent that airline from going under and its assets to pass into the hands of foreign-owned or -controlled competitors, had inherited British United's scheduled route structure at the time of its creation in late November 1970 when that carrier was taken over by
Caledonian Airways
Caledonian Airways was a wholly private, independentindependent from government-owned corporations British charter airline formed in April 1961. It began with a single 104-seat Douglas DC-7C leased from the Belgian flag carrier Sabena.''Flyi ...
.
The most fitting description for the resulting network of domestic, European and intercontinental long haul scheduled services from Gatwick was a motley collection of routes resembling a rag bag. This made it difficult to develop profitable streams of transfer traffic using Gatwick as a
hub. For this reason it was always going to be a challenge to persuade people to fly to Gatwick from relatively minor places like
Genoa
Genoa ( ; it, Genova ; lij, Zêna ). is the capital of the Italian region of Liguria and the List of cities in Italy, sixth-largest city in Italy. In 2015, 594,733 people lived within the city's administrative limits. As of the 2011 Italian ce ...
or Jersey in order to make an onward connection at the airport to what many people would consider secondary places in
Africa
Africa is the world's second-largest and second-most populous continent, after Asia in both cases. At about 30.3 million km2 (11.7 million square miles) including adjacent islands, it covers 6% of Earth's total surface area ...
or
South America
South America is a continent entirely in the Western Hemisphere and mostly in the Southern Hemisphere, with a relatively small portion in the Northern Hemisphere at the northern tip of the continent. It can also be described as the southe ...
, and an even greater challenge to do this profitably.
At the height of its commercial success in the late 1970s and early 1980s, British Caledonian managed to turn the dilemma the structure of its route network presented to its advantage by focusing on those routes that carried a very high proportion of potentially very profitable, oil-related, premium business traffic. It even managed to become the preferred carrier of many high-ranking
oil industry
The petroleum industry, also known as the oil industry or the oil patch, includes the global processes of exploration, extraction, refining, transportation (often by oil tankers and pipelines), and marketing of petroleum products. The larges ...
executives based in
Texas
Texas (, ; Spanish language, Spanish: ''Texas'', ''Tejas'') is a state in the South Central United States, South Central region of the United States. At 268,596 square miles (695,662 km2), and with more than 29.1 million residents in 2 ...
, the centre of the global oil industry, by providing convenient, hassle-free connections between
Houston
Houston (; ) is the most populous city in Texas, the most populous city in the Southern United States, the fourth-most populous city in the United States, and the sixth-most populous city in North America, with a population of 2,304,580 in ...
/
Dallas
Dallas () is the List of municipalities in Texas, third largest city in Texas and the largest city in the Dallas–Fort Worth metroplex, the List of metropolitan statistical areas, fourth-largest metropolitan area in the United States at 7.5 ...
,
Lagos
Lagos (Nigerian English: ; ) is the largest city in Nigeria and the List of cities in Africa by population, second most populous city in Africa, with a population of 15.4 million as of 2015 within the city proper. Lagos was the national ca ...
and
Tripoli
Tripoli or Tripolis may refer to:
Cities and other geographic units Greece
*Tripoli, Greece, the capital of Arcadia, Greece
* Tripolis (region of Arcadia), a district in ancient Arcadia, Greece
* Tripolis (Larisaia), an ancient Greek city in ...
via the airline's Gatwick base. However, the downside of this initially successful strategy was that it made the company dependent on a small number of markets whose fortunes were tied to the commodity price cycle, in often unstable parts of the world, for most of its profits.
Although this worked in British Caledonian's favour when the price of a barrel of crude oil was sky-high during the late '70s/early '80s, it started working against it when the oil price collapsed in the mid-'80s. It also further compounded the firm's growing financial problems at the time, culminating in the financial crisis that led to its takeover by archrival BA.
In July 1987 BA publicly announced its intention to take over its ailing, home-grown rival British Caledonian. This led to a counter bid from ILG who sought to take over British Caledonian themselves and merge it with Air Europe.
Although Air Europe eventually failed to merge with British Caledonian, its management succeeded in having the rival BA bid referred to the Monopolies and Mergers Commission (MMC), a forerunner of today's Competition Commission, by claiming that this deal would destroy the UK's entire independent airline sector if approved without requiring BA to make any concessions to redress the resulting competitive imbalance.
The decision by the MMC to require BA to give up 5,000 annual slots at Gatwick to competitors and to re-apply for some of British Caledonian's most important short haul feeder routes, as well as the subsequent decision by the CAA to award all of these routes to rival, independent airlines left BA's Gatwick operation with only ten short haul routes. This reduction in the number of short haul routes the airline continued to serve from Gatwick was accompanied by a corresponding reduction in the company's Gatwick-based short haul fleet from 14 to ten Boeing 737-200 Advanced aircraft.
The routes the CAA had awarded BA's independent rivals included the most profitable former British Caledonian short haul routes that had generated a substantial amount of transfer traffic for that airline's Gatwick-based scheduled operation, such as London Gatwick —
Paris
Paris () is the capital and most populous city of France, with an estimated population of 2,165,423 residents in 2019 in an area of more than 105 km² (41 sq mi), making it the 30th most densely populated city in the world in 2020. S ...
Charles de Gaulle
Charles André Joseph Marie de Gaulle (; ; (commonly abbreviated as CDG) 22 November 18909 November 1970) was a French army officer and statesman who led Free France against Nazi Germany in World War II and chaired the Provisional Government ...
and Gatwick—
Brussels
Brussels (french: Bruxelles or ; nl, Brussel ), officially the Brussels-Capital Region (All text and all but one graphic show the English name as Brussels-Capital Region.) (french: link=no, Région de Bruxelles-Capitale; nl, link=no, Bruss ...
. It also included a number of British Caledonian's loss-making domestic routes, such as Gatwick—
Glasgow
Glasgow ( ; sco, Glesca or ; gd, Glaschu ) is the most populous city in Scotland and the fourth-most populous city in the United Kingdom, as well as being the 27th largest city by population in Europe. In 2020, it had an estimated popul ...
, Gatwick—
Edinburgh
Edinburgh ( ; gd, Dùn Èideann ) is the capital city of Scotland and one of its 32 Council areas of Scotland, council areas. Historically part of the county of Midlothian (interchangeably Edinburghshire before 1921), it is located in Lothian ...
and Gatwick—
Manchester
Manchester () is a city in Greater Manchester, England. It had a population of 552,000 in 2021. It is bordered by the Cheshire Plain to the south, the Pennines to the north and east, and the neighbouring city of Salford to the west. The t ...
, which were important feeder services for that airline's profitable long haul routes.
The loss of these vital routes to rival airlines and the consequent reduction in the number of passengers making connections between BA's short and long haul flights at Gatwick threatened the company's ability to continue operating profitably on the long haul routes it had inherited at Gatwick from British Caledonian.
BA's acquisition of the bulk of Dan-Air's scheduled activities at the end of October 1992 was intended to create the basis for a new in-house, low-cost unit that would enable the airline to reverse the heavy losses its own mainline operation's Gatwick-based short haul services incurred by transferring its entire short haul operation at the airport to the new unit.
To attain this goal, BA's management unilaterally imposed the pay scales and terms of the old Dan-Air employment contracts on the entire workforce of its Gatwick-based short haul operation at the beginning of 1993. This effectively cut average pay for everyone by 20%.
Management hoped this decision would help bring its short haul operation's costs in line with what Gatwick's revenue environment could sustain to enable it to return to profitability.
However, BA's unilateral decision to force everyone working for its short haul operation at Gatwick to take a pay cut caused bitter feelings towards the company, among both former Dan-Air staff as well as BA's existing employees at Gatwick who were already working for its short haul operation there prior to Dan-Air's acquisition. The former, who were now officially members of the BA family, were upset that they did not enjoy the same pay and terms of employment as the other family members who were working for its long haul operation at the same airport as well as those who were based at Heathrow. The latter were equally upset at having their pay and terms of employment downgraded to what they considered the inferior standards of a
charter airline
Air charter is the business of renting an entire aircraft (i.e., chartering) as opposed to individual aircraft seats (i.e., purchasing a airline ticket, ticket through a traditional airline).
Regulation
Charter – also called air taxi or ad h ...
, which their employer had saved from bankruptcy at the eleventh hour.
The resulting unrest among BA's Gatwick-based short haul staff culminated in an unofficial, one-day strike during the first quarter of 1993. As a result of this unofficial industrial action, BA was forced to reverse its earlier decision to cut its Gatwick-based short haul workers' pay unilaterally. These events had clearly demonstrated the power of BA's unionised workforce. The power of the unions representing the affected workers as well as the entrenched attitudes of the middle management within BA's complex, hierarchical organisation also meant that the airline was unable to win any concessions that would have helped it offset the additional costs it was going to face in its short haul operation at Gatwick against increased labour productivity, in return for not cutting those workers' pay.
Therefore, BA's attempt to extend the lower pay scales and less generous terms of employment that prevailed at Dan-Air to align the costs of its short haul operation at Gatwick with the airport's revenue environment eventually turned out to be a costly failure.
BA's failure to simplify its complex, hierarchical organisation to enable it to reduce its overheads has been the main reason that has until now prevented the airline from achieving a cost structure that would make its Gatwick operation profitable. This situation has been further compounded by the fact that the company enjoys fewer
economies of scale
In microeconomics, economies of scale are the cost advantages that enterprises obtain due to their scale of operation, and are typically measured by the amount of output produced per unit of time. A decrease in cost per unit of output enables ...
at Gatwick compared with Heathrow because the firm's operation at the former airport is smaller than the one at the latter.
As a general rule, on average, a full-service scheduled operation at Gatwick with a fare structure that is identical to a similar operation at Heathrow produces a 10% lower load factor. It also generates a 20% lower revenue and results in an up to 25% lower yield.
Although the growing presence of aggressive low-cost, "
no frills" airlines on an ever-increasing number of UK domestic and European routes since the late 1990s has rendered this rule largely invalid for short to medium haul operations, it is still valid for most long haul operations where the competition from low-cost airlines is still in its infancy.
Heathrow's and Gatwick's respective geographic location as well as the number of people living within each airport's catchment area accounts for this difference in load factors, revenues and yields.
The former has a bigger catchment area than the latter because more people live north of the
Thames
The River Thames ( ), known alternatively in parts as the River Isis, is a river that flows through southern England including London. At , it is the longest river entirely in England and the second-longest in the United Kingdom, after the R ...
than south of it. Heathrow's catchment area includes about three-quarters of
London
London is the capital and largest city of England and the United Kingdom, with a population of just under 9 million. It stands on the River Thames in south-east England at the head of a estuary down to the North Sea, and has been a majo ...
's population and roughly two-thirds of the population in the whole of
Southeast England
South East England is one of the nine official regions of England at the first level of ITL for statistical purposes. It consists of the counties of Buckinghamshire, East Sussex, Hampshire, the Isle of Wight, Kent, Oxfordshire, Berks ...
. London is where most of the demand for air travel in the Southeast originates. This means that 5.6mn people in London live in Heathrow's catchment area as opposed to 1.9mn in Gatwick's catchment area (out of an estimated total
Greater London
Greater may refer to:
*Greatness, the state of being great
*Greater than, in inequality (mathematics), inequality
*Greater (film), ''Greater'' (film), a 2016 American film
*Greater (flamingo), the oldest flamingo on record
*Greater (song), "Greate ...
population of 7.5mn). The comparable figures for the Southeast are: 6.7mn people in Heathrow's catchment area as opposed to 3.3mn in Gatwick's catchment area (out of an estimated total population of 10mn).
This is of particular significance for the premium travel market as Heathrow's larger catchment area means that it is able to offer more frequent flights to a greater number of destinations with more conveniently timed connections. This, in turn, helps attract a greater number of business travellers who generally tend to be the airlines' most profitable customers. It also means that there are four to five business travellers in Heathrow's catchment area for every business traveller in Gatwick's catchment area.
On the other hand, the differing sizes of Heathrow's and Gatwick's catchment areas are far less significant for non-premium travel as many people are prepared to travel to an airport outside their catchment area to take advantage of a cheaper flight.
However, the growing presence of aggressive low-cost, "no frills" airlines at
Luton
Luton () is a town and unitary authority with borough status, in Bedfordshire, England. At the 2011 census, the Luton built-up area subdivision had a population of 211,228 and its built-up area, including the adjacent towns of Dunstable an ...
and
Stansted
London Stansted Airport is a tertiary international airport serving London, England, United Kingdom. It is located near Stansted Mountfitchet, Essex, England, northeast of Central London.
London Stansted serves over 160 destinations acro ...
respectively in recent years has somewhat diminished Heathrow's advantage in terms of its catchment area, as far as short to medium haul flights are concerned. Like Heathrow, these airports are located north of the Thames where most of the people in London and the Southeast live and their catchment areas, particularly Luton's, overlap with it.
=BA's failed attempt at a "virtual" merger with American Airlines
=
During the summer of 1996 BA announced that it was planning to enter into a new code- and revenue- as well as profit-sharing alliance with
American Airlines
American Airlines is a major airlines of the United States, major US-based airline headquartered in Fort Worth, Texas, within the Dallas–Fort Worth metroplex. It is the Largest airlines in the world, largest airline in the world when measured ...
.
The planned alliance was the most ambitious and far-reaching commercial airline alliance attempted at the time. It was also dependent on being granted anti-trust immunity by the
British Government
ga, Rialtas a Shoilse gd, Riaghaltas a Mhòrachd
, image = HM Government logo.svg
, image_size = 220px
, image2 = Royal Coat of Arms of the United Kingdom (HM Government).svg
, image_size2 = 180px
, caption = Royal Arms
, date_es ...
and the
United States Department of Justice
The United States Department of Justice (DOJ), also known as the Justice Department, is a federal executive department of the United States government tasked with the enforcement of federal law and administration of justice in the United State ...
as well as the
European Commission
The European Commission (EC) is the executive of the European Union (EU). It operates as a cabinet government, with 27 members of the Commission (informally known as "Commissioners") headed by a President. It includes an administrative body o ...
's Competition Directorate. This mega alliance was meant to replace the much more limited code-share agreement BA had with
US Airways
US Airways (formerly USAir) was a major United States airline that operated from 1937 until its merger with American Airlines in 2015. It was originally founded in History of aviation in Pittsburgh, Pittsburgh as a mail delivery airline called ...
since the beginning of 1993, which was not dependent on anti-trust immunity.
The new alliance envisaged merging the
transatlantic
Transatlantic, Trans-Atlantic or TransAtlantic may refer to:
Film
* Transatlantic Pictures, a film production company from 1948 to 1950
* Transatlantic Enterprises, an American production company in the late 1970s
* ''Transatlantic'' (1931 film), ...
operations of both airlines by combining all their commercial activities into a joint company, thus making it a "virtual" merger. One of the new alliance's most outstanding features was a plan for an hourly shuttle service between
London Heathrow
Heathrow Airport (), called ''London Airport'' until 1966 and now known as London Heathrow , is a major international airport in London, England. It is the largest of the six international airports in the London airport system (the others bei ...
and
New York John F Kennedy, the world's busiest and most profitable intercontinental air route.
This meant that BA, which at the time only controlled about 38% of all take-off and landing slots at Heathrow, needed to secure additional prime time slots at Heathrow in order to be able to launch the hourly JFK shuttle. In those days secondary slot trading, where airlines buy and sell take-off and landing slots at congested airports, was still in its infancy and there was uncertainty concerning the legality of this activity.
In anticipation of gaining all necessary approvals for the proposed alliance — including anti-trust immunity, BA decided to reserve the required slots at Heathrow by moving all long-haul services to
East
East or Orient is one of the four cardinal directions or points of the compass. It is the opposite direction from west and is the direction from which the Sun rises on the Earth.
Etymology
As in other languages, the word is formed from the fa ...
,
Central
Central is an adjective usually referring to being in the center of some place or (mathematical) object.
Central may also refer to:
Directions and generalised locations
* Central Africa, a region in the centre of Africa continent, also known as ...
and
Southern Africa
Southern Africa is the southernmost subregion of the African continent, south of the Congo and Tanzania. The physical location is the large part of Africa to the south of the extensive Congo River basin. Southern Africa is home to a number of ...
(other than those to
South Africa
South Africa, officially the Republic of South Africa (RSA), is the southernmost country in Africa. It is bounded to the south by of coastline that stretch along the South Atlantic and Indian Oceans; to the north by the neighbouring countri ...
itself) as well as to
Latin America
Latin America or
* french: Amérique Latine, link=no
* ht, Amerik Latin, link=no
* pt, América Latina, link=no, name=a, sometimes referred to as LatAm is a large cultural region in the Americas where Romance languages — languages derived f ...
to Gatwick over the 1996 summer timetable period as well as the 1996/7 winter timetable period. BA chose to transfer these routes to Gatwick because they generated lower traffic volumes and were therefore less profitable than its routes to
North America
North America is a continent in the Northern Hemisphere and almost entirely within the Western Hemisphere. It is bordered to the north by the Arctic Ocean, to the east by the Atlantic Ocean, to the southeast by South America and the Car ...
, the
Middle East
The Middle East ( ar, الشرق الأوسط, ISO 233: ) is a geopolitical region commonly encompassing Arabian Peninsula, Arabia (including the Arabian Peninsula and Bahrain), Anatolia, Asia Minor (Asian part of Turkey except Hatay Pro ...
, the
Indian sub-continent
The Indian subcontinent is a physiographical region in Southern Asia. It is situated on the Indian Plate, projecting southwards into the Indian Ocean from the Himalayas. Geopolitically, it includes the countries of Bangladesh, Bhutan, India ...
as well as the
Far East
The ''Far East'' was a European term to refer to the geographical regions that includes East and Southeast Asia as well as the Russian Far East to a lesser extent. South Asia is sometimes also included for economic and cultural reasons.
The ter ...
. They also carried relatively few transfer passengers. This meant that the risk of losing these passengers to a competitor because of Gatwick's smaller number of connections compared with Heathrow was fairly low.
BA furthermore decided to transfer a number of barely profitable or wholly loss-making, short haul routes to secondary destinations in the
UK and
Eastern Europe
Eastern Europe is a subregion of the Europe, European continent. As a largely ambiguous term, it has a wide range of geopolitical, geographical, ethnic, cultural, and socio-economic connotations. The vast majority of the region is covered by Russ ...
to Gatwick because BA could use these slots far more profitably to operate additional transatlantic services from Heathrow under this alliance.
With the benefit of hindsight, BA had underestimated the strength of the gathering opposition to its planned "virtual" merger with American Airlines. It had also underestimated its opponents' political clout with the regulatory authorities in the UK and the
US as well as the
European Union
The European Union (EU) is a supranational political and economic union of member states that are located primarily in Europe. The union has a total area of and an estimated total population of about 447million. The EU has often been des ...
.
At the time Sir Richard Branson publicly referred to this mega alliance as the "alliance from hell". He feared that it was part of a new BA strategy to drive Virgin Atlantic, BA's main UK-based transatlantic competitor, out of business. He therefore wanted to have it stopped at any cost.
BA's US-based transatlantic rivals, especially those that were denied access to Heathrow under the stringent
Bermuda II
Bermuda II was a bilateral air transport agreement between the governments of the United Kingdom and the United States signed on 23 July 1977 as a renegotiation of the original 1946 Bermuda air services agreement. A new open skies agreement was ...
regulatory regime, wanted approval of this alliance to be made dependent upon the successful negotiation of a new UK-US "
Open Skies
The freedoms of the air are a set of commercial aviation rights granting a country's airlines the privilege to enter and land in another country's airspace. They were formulated as a result of disagreements over the extent of aviation liberalis ...
" air services agreement that would supersede Bermuda II and remove all access restrictions to Heathrow.
Eventually, the alliance was effectively killed off when regulators on both sides of the
Atlantic
The Atlantic Ocean is the second-largest of the world's five oceans, with an area of about . It covers approximately 20% of Earth's surface and about 29% of its water surface area. It is known to separate the " Old World" of Africa, Europe an ...
demanded that BA should hand over hundreds of slots at Heathrow and that anti-trust immunity should be withheld for the Heathrow—JFK "flagship" route.
At the same time, BA's senior management had become so preoccupied with this alliance that it did not pay any attention to the fundamental changes that were beginning to re-shape the airline industry at the time. These changes were going to have a profound effect on the commercial environment in which BA was operating. They included the inexorable rise of the low-cost, "no frills" airlines, first and foremost
EasyJet
EasyJet plc (styled as easyJet) is a British multinational low-cost airline group headquartered at London Luton Airport. It operates domestic and international scheduled services on 927 routes in more than 34 countries via its affiliate airli ...
and
Ryanair
Ryanair is an Irish ultra low-cost carrier founded in 1984. It is headquartered in Swords, Dublin, Ireland and has its primary operational bases at Dublin and London Stansted airports. It forms the largest part of the Ryanair Holdings family ...
, in BA's own backyard as well as the growing competitive threat posed by the government-assisted recovery of
Lufthansa
Deutsche Lufthansa AG (), commonly shortened to Lufthansa, is the flag carrier of Germany. When combined with its subsidiaries, it is the second- largest airline in Europe in terms of passengers carried. Lufthansa is one of the five founding m ...
and
Air France
Air France (; formally ''Société Air France, S.A.''), stylised as AIRFRANCE, is the flag carrier of France headquartered in Tremblay-en-France. It is a subsidiary of the Air France–KLM Group and a founding member of the SkyTeam global air ...
, BA's main European full-service, network airline rivals, both of which had been in no position to challenge BA commercially in the early to mid-1990s as they were effectively bankrupt at that time.
For all these reasons the grandiose BA-AA alliance ultimately turned out to be a very costly distraction for BA's management and was the main contributing factor that led to
Robert Ayling
Robert John Ayling (born 3 August 1946), also known as Bob Ayling, is a British retired lawyer and businessman who has worked with a variety of high-profile companies and organisations. From 1996 to 2000, he was the CEO of British Airways. He al ...
's downfall who happened to be the BA chief executive during that period.
=Project Jupiter
=
Project "Jupiter" was BA's internal working title for the strategy it had devised to turn the struggling Gatwick operation into a fully fledged hub.
The airline reckoned that this would enable it to turn around the poor overall financial performance of its operation at the airport after years of heavy losses.
BA decided to give its operation there the economies of scale as well as the
scope
Scope or scopes may refer to:
People with the surname
* Jamie Scope (born 1986), English footballer
* John T. Scopes (1900–1970), central figure in the Scopes Trial regarding the teaching of evolution
Arts, media, and entertainment
* Cinem ...
, in terms of flight connections, it considered necessary to attract enough travellers who were prepared to pay fares that were sufficiently high-yield to achieve sustained profitability.
The aim was to make Gatwick the second biggest hub-and-spoke operation on BA's network as well as one of the biggest outside the US.
Within three years from the launch of Project "Jupiter", the BA mainline operation more than doubled the number of long haul aircraft at Gatwick and increased the number of short haul aircraft at the airport by more than half. In addition, the airline's franchisees, notably CityFlyer Express and
GB Airways
GB Airways was a British airline; prior to its sale, it was headquartered in "The Beehive," a former terminal building, at City Place Gatwick, London Gatwick Airport in Crawley, West Sussex, England.
The airline was originally created as ' ...
, increased their Gatwick-based fleets as well. During that period the number of BA passengers passing through Gatwick also doubled.
The role BA had assigned its franchisees generally and CityFlyer in particular to make Project "Jupiter" work was to provide feeder services that were expected to be profitable in their own right and enable transfer passengers to connect at ease with BA's long haul services at Gatwick, thereby improving those services' load factors and increasing their profitability. Unlike some of the
North America
North America is a continent in the Northern Hemisphere and almost entirely within the Western Hemisphere. It is bordered to the north by the Arctic Ocean, to the east by the Atlantic Ocean, to the southeast by South America and the Car ...
n commuter carriers that operate under franchise agreements on the same routes as their mainline partners using smaller aircraft at less busy times, BA's franchisees only operated on routes the company's mainline short haul operation could not serve profitably from Gatwick itself due to its higher cost base.
By the turn of the millennium, BA, the firm's franchisees as well as its subsidiaries and partners in the
Oneworld
Oneworld (stylised as oneworld; Computer reservations system, CRS: *O) is an airline alliance founded on 1 February 1999. The alliance's stated objective is to be the first choice airline alliance for the world's frequent international traveller ...
global airline alliance together controlled about 40% of all take-off and landing slots at Gatwick and used a fleet of more than 100 aircraft to serve around 120 destinations worldwide from the airport, more than any other airline from any airport in the UK. Together they carried 8m passengers through Gatwick annually. This accounted for almost 30% of the total number of passengers passing through the airport each year during that period. 45% of the passengers travelling with BA and its affiliated carriers through Gatwick were changing flights there. At the time, CityFlyer Express and the other BA franchisees as well as its subsidiaries and partner airlines at Gatwick accounted for 1,000 of these passengers each day.
Ultimately, BA's attempt to make its Gatwick operation profitable by building it up into a full-scale hub-and-spoke operation failed.
When
Rod Eddington
Sir Roderick Ian Eddington AO FTSE (born 2 January 1950) is an Australian businessman.
He was first appointed to the board of News Corporation in 1999, still serves on News Corp board and also serves on the board of another of Rupert Murdoch' ...
took over as BA's chief executive in 2000, he initiated a root-and-branch review of the airline's worldwide operation with the aim of improving profitability after it had incurred its first net loss since privatisation during the 1999/2000 financial year.
This included a review of the loss-making Gatwick operation.
At the time Eddington stated that BA's Gatwick operation alone had incurred a loss of £40mn before allocating overheads, in spite of having £4.5
bn of assets at the airport, and that it was destroying shareholder value. (Industry sources estimated that during the aforesaid period the total loss for the airline's entire Gatwick operation was £200mn after allocating all overheads.)
[''BA News'', British Airways plc, Harmondsworth, Middlesex, 20 October 2000][''Gatwick Life, (BA axes ten planes''), Life Newspapers, Horley, Surrey, 9 October 2003]
Eddington attributed this loss to Gatwick's failure to attract sufficient high-yield traffic.
He furthermore stated that Gatwick's loss was entirely accounted for by its mainline short haul operation whose schedules were primarily designed to feed BA's long haul services at the airport. Eddington was of the opinion that this was the wrong way around because there were not enough early morning departures and late-evening arrivals that could have attracted a greater number of locally based business and leisure passengers requiring same-day-return facilities. Also, the long haul route network BA operated from Gatwick at the time strangely resembled the long haul route structure British Caledonian had inherited from British United at the time of its inception three decades earlier. Moreover, in his opinion, the physical constraints imposed on BA's Gatwick operation by the airport's single runway and two terminals meant that the airline could not offer truly competitive schedules, in terms of frequencies and conveniently timed connections. In addition, Eddington also felt that Gatwick's operation was far too fragmented, in terms of what he called the airport's "bewildering array" of operators and their equipment, which substantially increased costs. At the time, in addition to BA's mainline operation, which accounted for the bulk of the airline's scheduled services at Gatwick, all of its UK-based franchisees (with the exception of
British Mediterranean and
Loganair
Loganair is a Scottish regional airline based at Glasgow Airport near Paisley, Scotland. It is the largest regional airline in the UK by passenger numbers and fleet size.
In addition to its main base at Glasgow, it has hubs at Aberdeen, Edinb ...
) as well as the company's subsidiaries and partners provided scheduled services at the airport as well, in some cases with a single aircraft on one route only, operating all aircraft types in their combined inventory except
Concorde
The Aérospatiale/BAC Concorde () is a retired Franco-British supersonic airliner jointly developed and manufactured by Sud Aviation (later Aérospatiale) and the British Aircraft Corporation (BAC).
Studies started in 1954, and France an ...
and some of the smaller commuter planes.
Independent analysts were also of the opinion that the long haul routes BA chose to transfer from Heathrow to Gatwick mainly served what many people considered secondary destinations in Africa and Latin America. These were generally not the type of destinations to which business people, including those living in Gatwick's catchment area, were travelling. On the other hand, popular destinations for business and leisure travel, such as New York,
Los Angeles
Los Angeles ( ; es, Los Ángeles, link=no , ), often referred to by its initials L.A., is the largest city in the state of California and the second most populous city in the United States after New York City, as well as one of the world' ...
,
Chicago
(''City in a Garden''); I Will
, image_map =
, map_caption = Interactive Map of Chicago
, coordinates =
, coordinates_footnotes =
, subdivision_type = Country
, subdivision_name ...
,
Hong Kong
Hong Kong ( (US) or (UK); , ), officially the Hong Kong Special Administrative Region of the People's Republic of China ( abbr. Hong Kong SAR or HKSAR), is a city and special administrative region of China on the eastern Pearl River Delt ...
or
Singapore
Singapore (), officially the Republic of Singapore, is a sovereign island country and city-state in maritime Southeast Asia. It lies about one degree of latitude () north of the equator, off the southern tip of the Malay Peninsula, borde ...
were either under-served or not served at all. For instance, at the time BA operated Gatwick's only daily service to New York JFK and there were no direct services from the airport to any of the other aforementioned destinations.
[''The Sunday Business (Go must go''), The Business Publishing Ltd., London, 15/16 October 2000]
These analysts furthermore pointed to the extent and speed of BA's growth in employment at the airport during that time as a major cause of the huge loss incurred by that operation. Within a relatively short time span of only three years, the airline had increased its headcount at Gatwick alone to 8,500. This was more than the entire 7,700-strong worldwide workforce of British Caledonian at its peak during the early part of the summer in 1986. BA had effectively created a miniature version of its Heathrow-based organisational hierarchy at Gatwick, thereby multiplying its overheads and increasing its cost base at the latter airport.
In October 2000 BA publicly announced its decision to de-hub Gatwick and to turn it into a regional Southeast airport primarily serving leisure-orientated point-to-point routes where most of the demand originated in the Gatwick catchment area.
This was part of a new strategy designed to provide services from Gatwick only if there was sufficient demand in the local catchment area and to do it at a cost the local revenue environment could support.
It was also part of a strategy to deny the low-cost airlines generally and EasyJet in particular the physical space, in terms of airport slots, to continue expanding unabated in the Southeast. The aim of this secondary strategy was to prevent these carriers from posing an ever-greater threat to BA's high-cost, mainline short haul operation at Heathrow, which suffered annual losses to the tune of several hundred million pounds during that period.
BA therefore decided to move all predominantly business-orientated long haul routes (other than those that had to stay at Gatwick due to bilateral constraints, such as its non-stop services to
Atlanta
Atlanta ( ) is the capital and most populous city of the U.S. state of Georgia. It is the seat of Fulton County, the most populous county in Georgia, but its territory falls in both Fulton and DeKalb counties. With a population of 498,715 ...
, Dallas and Houston) back to Heathrow. The airline also decided to withdraw all loss-making services from the airport and to simplify its Gatwick-based fleet by reducing the number of aircraft stationed there and operating only two different aircraft types from the airport. Henceforth, all short to medium haul services from Gatwick were to be exclusively operated with Boeing 737s, while
Boeing 777
The Boeing 777, commonly referred to as the Triple Seven, is an American long-range wide-body airliner developed and manufactured by Boeing Commercial Airplanes. It is the world's largest twinjet.
The 777 was designed to bridge the gap bet ...
s were to be the only aircraft to ply the long haul routes from the airport.
This was accompanied by a reduction in BA's headcount at Gatwick to 3,000 as well as the introduction of a common cabin crew pool for both its short and long haul operations at the airport and a number of other cost-cutting measures.
[''Skyport, ('Gatwick op must make a profit', says BA''), Gatwick edition, Hounslow, 16 September 2005]
British Airways' short haul reorganisation
Under the franchise agreement it had concluded with BA before being taken over in 1999, CityFlyer Express initially operated as an independent business unit within British Airways serving a number of short haul European and UK regional routes from Gatwick that were completely separate from the services BA's mainline operation provided from the airport.
However, following BA's decision to abandon its hub-and-spoke strategy at Gatwick in October 2000, CityFlyer was subsumed into British Airways' mainline operation at Gatwick in 2001, thereby ceasing to exist as a separate entity.
There were two reasons for fully integrating CityFlyer into BA's mainline short haul operation at Gatwick.
The first of these was operational. Although CityFlyer remained a profitable business in its own right following its acquisition by BA and industry analysts familiar with the company expected it to generate a profit of at least £7mn during BA's 2000/1 financial year, BA found that franchising overall had not been the financial success it had hoped. There were too many franchisees whose administrative and sales support actually cost the airline more than the additional revenue resulting from franchise fees and the connecting traffic its franchise partners generated. Therefore, as far as the bigger picture was concerned, BA's senior management felt that the franchise agreements with its various franchisees, all of which were profitable in their own right, had benefited the franchisees more than itself.
[''The Sunday Business (BA closes a profitmaker''), The Business Publishing Ltd., London, 22/23 October 2000]
The second reason was related to maintaining good industrial relations between management and the workforce, especially those working for the mainline short haul operation at Gatwick. These workers had always regarded the concept of franchising generally and CityFlyer Express in particular as a
Trojan horse
The Trojan Horse was a wooden horse said to have been used by the Greeks during the Trojan War to enter the city of Troy and win the war. The Trojan Horse is not mentioned in Homer's ''Iliad'', with the poem ending before the war is concluded, ...
. They feared that BA's long-term strategy was to hand over its entire, heavily loss-making, mainline short haul operation to profitable franchisees such as CityFlyer, thereby threatening many jobs and the terms of employment of the remaining mainline employees. They also feared that BA would eventually resemble a "virtual" airline.
Therefore, BA's senior management decided that it was prudent to reduce the number of franchise agreements and to make use of franchisees only if it gave BA a presence in markets it did not already serve itself and where there was no prospect of providing such a service profitably through its mainline operation.
Following the integration of CityFlyer Express into BA's mainline short haul operation at Gatwick, all former CityFlyer employees other than flight crew and engineers working on the jet fleet were made redundant.
The ex-CityFlyer flight crew and engineers whom BA continued to employ were transferred along with their equipment to BA's regional bases in Birmingham and Manchester.
BA's subsequent decision to retire the former CityFlyer turboprop fleet, resulted in the withdrawal of the airline's services from Gatwick to Antwerp, Guernsey and Rotterdam.
In addition, the fact that the integration of low-cost CityFlyer Express into the high-cost BA mainline short haul operation at Gatwick inevitably meant that formerly profitable CityFlyer routes were now burdened with the expensive BA mainline overheads, necessitated the withdrawal of additional BA short haul services from Gatwick over the course of a few years, including CityFlyer's routes to
Cologne
Cologne ( ; german: Köln ; ksh, Kölle ) is the largest city of the German western States of Germany, state of North Rhine-Westphalia (NRW) and the List of cities in Germany by population, fourth-most populous city of Germany with 1.1 m ...
and Düsseldorf.
At the same time,
British Regional Airlines, another British Airways franchise operator based on the
Isle of Man
)
, anthem = "O Land of Our Birth"
, image = Isle of Man by Sentinel-2.jpg
, image_map = Europe-Isle_of_Man.svg
, mapsize =
, map_alt = Location of the Isle of Man in Europe
, map_caption = Location of the Isle of Man (green)
in Europe ...
, was acquired by British Airways as well and in 2002 was merged with British Airways' wholly owned regional subsidiary
Brymon Airways
Brymon Airways is a British former airline with its head office in the Brymon House on the property of Plymouth City Airport in Plymouth, Devon."World Airline Directory." ''Flight International''. 24–30 March 199961 "Brymon House, Plymouth Cit ...
to form
British Airways Citiexpress
BA Connect was a wholly-owned subsidiary airline of British Airways. It was headquartered in Didsbury, Manchester, England, it operated a network of domestic and European services from a number of airports in the United Kingdom on behalf of Bri ...
, which would assume the operation of domestic and European services from UK regional airports.
On 1 February 2006, British Airways Citiexpress was renamed
BA Connect
BA Connect was a wholly-owned subsidiary airline of British Airways. It was headquartered in Didsbury, Manchester, England, it operated a network of domestic and European services from a number of airports in the United Kingdom on behalf of Bri ...
.
See also
*
List of defunct airlines of the United Kingdom
This is a list of defunct airlines of the United Kingdom.
See also
* List of airlines of the United Kingdom
* List of airports in the United Kingdom and the British Crown Dependencies
References
*
*
{{List of defunct airlines ...
Facts of interest
* Brad Burgess was instrumental in setting up Connectair. He had been managing director of Air Europe Express and CityFlyer Express, and subsequently he was chairman of
Astraeus
In Greek mythology, Astraeus () or Astraios (Ancient Greek: Ἀστραῖος means "starry"') was an astrological deity. Some also associate him with the winds, as he is the father of the four Anemoi (wind deities), by his wife, Eos.
Etymolog ...
.
* Flight numbers in the 7000 and 8000 range used to be allocated to CityFlyer Express-operated British Airways franchise flights. Following CityFlyer's integration into the British Airways mainline operation at Gatwick, the latter's scheduled services from the airport to
Amsterdam
Amsterdam ( , , , lit. ''The Dam on the River Amstel'') is the Capital of the Netherlands, capital and Municipalities of the Netherlands, most populous city of the Netherlands, with The Hague being the seat of government. It has a population ...
Schiphol
Amsterdam Airport Schiphol , known informally as Schiphol Airport ( nl, Luchthaven Schiphol, ), is the main international airport of the Netherlands. It is located southwest of Amsterdam, in the municipality of Haarlemmermeer in the province ...
,
Bordeaux
Bordeaux ( , ; Gascon oc, Bordèu ; eu, Bordele; it, Bordò; es, Burdeos) is a port city on the river Garonne in the Gironde department, Southwestern France. It is the capital of the Nouvelle-Aquitaine region, as well as the prefectur ...
, Dublin, Jersey,
Luxembourg
Luxembourg ( ; lb, Lëtzebuerg ; french: link=no, Luxembourg; german: link=no, Luxemburg), officially the Grand Duchy of Luxembourg, ; french: link=no, Grand-Duché de Luxembourg ; german: link=no, Großherzogtum Luxemburg is a small lan ...
,
Nice
Nice ( , ; Niçard: , classical norm, or , nonstandard, ; it, Nizza ; lij, Nissa; grc, Νίκαια; la, Nicaea) is the prefecture of the Alpes-Maritimes department in France. The Nice agglomeration extends far beyond the administrative c ...
and
Toulouse
Toulouse ( , ; oc, Tolosa ) is the prefecture of the French department of Haute-Garonne and of the larger region of Occitania. The city is on the banks of the River Garonne, from the Mediterranean Sea, from the Atlantic Ocean and from Par ...
still used flight numbers in these ranges, thus identifying them as former CityFlyer Express routes.
Notes and citations
;Notes
;Citations
References
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External links
Competition Commission report into merger
{{International Airlines Group
Airlines established in 1992
Airlines disestablished in 2006
British Airways
Companies based in Crawley
Defunct airlines of the United Kingdom
3i Group companies
1992 establishments in England
2006 disestablishments in England