British Airways is reportedly in talks with unions to create a new short-haul airline at London Gatwick. Gatwick airport has been telling BA to use or lose their slots and BA sees less use for them than they once did. An announcement from British Airways is expected to be imminent, making use of these slots and having this new carrier rehire crews at lower wages.
BA is owned by airline conglomerate IAG, which also owns Aer Lingus, Iberia, and Vueling as well as long haul low cost carrier LEVEL. At one point the future for long haul low cost, especially entering the pandemic and after several similar operations had failed, was in doubt. But transatlantic flying out of Barcelona looks to continue – American Airlines has even re-instituted codeshares.
Now they’re looking at the idea of a separate London-based short haul carrier. CNBC’s Carl Quintanilla says “The ‘90s are back.”
In-house ‘airline within an airline’ low cost carriers began sprouting up in the 90s but was hardly limited to that era, for instance:
- Continental Lite (1993-1995)
- US Airways MetroJet (1998-2001)
- Shuttle By United (renamed United Shuttle, 1994-2001)
- Delta Song (2003-2006, actually a better product than mainline)
- United Ted (2004 – 2009, the letters represent ‘the end of United)
None of these efforts survived. With separate carriers the major airlines build in inefficiencies, like having separate crews that can’t be scheduled across carriers. They create customer confusion – especially when multiple brands may even operate the same routes. They become distractions for the company and require duplicative capabilities.
Singapore Airlines realized that its separate SilkAir and TigerAir brands no longer made sense, too, so it’s not just a U.S. phenomenon. And in Singapore’s case separate brands at least had the rationale of offering differentiated products without diluting the strong brand value of mainline, in the face of unique markets (short haul, low cost competitor).
It almost always seems better to solve the structural problems of the mainline carrier than to start a new airline. That seems harder ex ante but given the track record of ‘creating new airlines’ and walking away from economies of scale in the process the airline within an airline model hardly seems the uniquely better option.
Indeed, British Airways has already altered its short haul product to be more like a low cost leisure carrier, with less seat pitch than Ryanair (even in business class). They’ve reduced their labor costs through a series of contracts, B scales, and labor actions over the past dozen years – a process which accelerated during the pandemic.
Perhaps they’ll be among the outliers (along with the likes of Jetstar) which this does not fail. It might work akin to the BA subsidiary flying from London City airport. Their IAG umbrella perhaps has excess management capacity and a capability in managing more airlines. But it’s not an obvious play.
(HT: @crucker)
Using US carriers as examples of why airline within airlines don’t work doesn’t explain that they are used within Europe and elsewhere precisely because labor relations are different in other parts of the world.
It was a given that BA couldn’t afford to allow a LCC or ULCC set up another large operation after the fall of Norwegian. Markets like London are still enough of a single market to allow a large low cost carrier to operate including internationally at one airport in a city while focusing hub operations at another airport.
I haven’t seen but I expect that BA will connect passengers between its various brands at LGW which will make it easier to add long haul flights while feeding lower yielding connecting traffice over LGW instead of LHR.
Is there a reason why this new airline couldn’t be called LEVEL, Vueling or Aer Lingus? Because we really don’t need another frequent flyer program with Avios. One is enough and we already have four (and at least one doesn’t provide any customer service).
This is all about the slots. BA would rather bleed red on another foolhardy low cost carrier gambit than surrender the Gatwick slots and watch as Virgin and others gobble them up.
“It almost always seems better to solve the structural problems of the mainline carrier than to start a new airline.”
Check.
“walking away from economies of scale in the process the airline within an airline model hardly seems the uniquely better option”
Check.
Well said, Gary. In the meantime, Europe would be getting its 100th or so “budget” carrier, which at the end, after add-on fees, no-substitute flight cancelations, etc etc, represents no added value on the market to consumers at all.
@Douglas VS have already pulled out of LGW sometime ago. In fact they did it before BA started its mass culling of flights from there.
@Nate Level and Vueling aren’t popular brands amongst UK travellers and BAs own data and research suggests they’re onto a losing fight already if they go that route. Aer Lingus is Ireland’s flag carrier and I’m not sure they’d appreciate being termed as an LCC lol.
There are some hilarious suggestions being punted around for the new BA brand on other blogs but I’ll leave those for y’all to find.
To give you some context from someone who actually knows the airport, BA’s operations there, is a BA FF and grew up around the place: LGW has always been seen as ‘the poor cousin’ to LHR in BAs eyes both across senior management and its staff. It’s primarily for leisure travel and obviously business travel is more lucrative to the airlines so it’s always played a very distant 2nd fiddle in precedings. Staff ( aside from a few remaining who were grandfathered in) are on different pay and conditions already and have been for some years now. Tbh if any survived the staffing cull of last year I’d be surprised as they’d be the ones coming up on retirement and BA would’ve ensured the pay off for them was attractive enough to be rid of them as they’re expensive staff to keep around. BA aren’t even the prime carrier to LGW. They lost that to easyJet quite a few years ago and even got booted out the North Terminal, a terminal literally built for them back in the day to the point that the buildings main dark blue colour matches BAs, to make space for EZY a few years ago in exchange for the airport paying and building them one of the nicest lounges in the network.
Personally I’m wondering when airlines are going to work out that the reason for their survival at the moment ( aside from Gov paychecks) is actually the leisure market and that business travel is highly unlikely to ever return to previous levels now companies have gotten the data to tell them staff actually remain efficient in a home based setting but that’s another conversation totally.
@Clayton
If you google “Aer Lingus” and “Low Cost Carrier”, you’ll find plenty of articles. Here are some:
https://www.forbes.com/sites/willhorton1/2020/08/31/british-airways-new-low-cost-strategy-isaer-lingus/
https://www.independent.co.uk/travel/news-and-advice/aer-lingus-flights-manchester-new-york-cost-b1781999.html
I appreciate your concern that the Irish flag carrier is an LCC, but that is already how the media perceives it. Also, its a bit difficult to call yourself the flag carrier when you are owned by a British-Spanish airline group.
I also appreciate that Vueling and Level may not resonate with the British as it is too continental. But IAG should have considered that when branding. Also, the British have no problem taking Ryanair, so branding doesn’t matter that much if the fare is right.
I’ve only flown out of LGW once, and was pleasantly surprised at the easy of getting in/out. Helped that my hotel was near the terminus in London.
Don’t forget Air France’s Joon!