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British Airways Adds Subsidiary to Restructure Short-Haul Operations
The recovery of the aviation industry from the effects of the pandemic is contingent on multiple factors including government restrictions on travel, vaccination rates and individual airlines’ abilities to adapt to the new environment. This week the Wall Street Journal reported that British Airways’ parent company International Airlines Group (IAG) was planning to restructure the U.K. carrier’s business model to compete in the leisure market from London’s Gatwick Airport. The airline relies predominantly on long-haul traffic from Heathrow Airport, and the majority of its fleet has a premium-heavy seating configuration to focus on business travelers and frequent flyers.
Focusing on British Airways’ previous short-haul operation from London Gatwick, the WSJ reported that a new subsidiary airline would be created to compete against local low-cost carriers Easyjet and Ryanair. In an internal communication to staff, the airline advised, “This was previously a highly competitive market, but for us to run a sustainable airline in the current environment, we need a competitive operating model. Because of that, we are proposing a new operating subsidiary to run alongside our existing long-haul Gatwick operation, to serve short-haul routes to/from Gatwick from summer 2022.”
Further reports on IAG’s plans for British Airways cite the ending of the U.K. government’s “furlough scheme” on Sept. 30 as a major concern for management. The scheme has allowed businesses to retain staff with the government providing wage subsidies that have been reduced as the pandemic has continued. The airline acknowledged the benefit the furlough scheme has provided but cautioned that the end of the scheme will result in a steep rise in payroll costs and advised, “We know that our schedule and our operating costs for the rest of this year will not line up.”
British Airways also cited the U.K. government’s oft-criticized traffic light system with countries added and removed to different categories of restrictions for returning U.K. citizens as a factor in the subsidiary strategy. According to BBC News, the e-mail to staff said, “We hoped that our industry would be back on its feet this year, and that the journey to pre-pandemic levels of flying would be well underway. But the cautious approach of governments to the easing of global travel restrictions has undermined customer confidence, and recovery remains far behind where we need it to be.”
Negotiations are underway with the respective union groups affected by the new strategy with the concern being raised that new contracts may see terms that are unfavorable for workers compared to existing agreements. However, a statement from the British Airline Pilots’ Association (BALPA) expressed cautious optimism on the strategy.
“BALPA cautiously welcomes this decision to restart BA short-haul operations at LGW (London Gatwick) and create a number of much-needed new pilot jobs. BALPA and BA are in the final stages of negotiations over the revised pay and conditions for Gatwick-based BA pilots and we hope to bring these talks to a conclusion shortly,” BALPA Acting General Secretary Martin Chalk said in a statement this week.
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