01 February 2010

BA Looses 1 Billion Pounds. Red Ink Continues

BA is reported to be losing more than $2 Million per day. When most other players seem to have got their costs under control and started on the road to recovery - BA is not having a good time yet. it is slated to report losses in the most recent quarter of 151 million pounds.

BA is already a very lean carrier. However it has all the issues of a legacy carrier infrastructure that results in costs being too high. For the airline to survive it needs some radical thinking. Here is where I believe that strategy of bigger is better tends to fall apart.

Case in point - their merger with Iberia. IB is a smaller airline and it has higher labour costs. They have totally incompatible long haul fleets (IB is A340s and Boeing 777s and 747s.). Their products are also pretty dissimilar. Thus the benefits of synergy that come from scale will take a long time to impact the bottom line. BA needs a new plan now. Oh yes and how about that pension overhang. On the recent flight from Madrid to London on BA connecting - I had to go through a frankly awful connecting process that took longer than one hour. If this is supposed to be the way IB and BA are to cooperate - they have a very long way to go. (At least till April 2011 when the C concourse opens up at T5).

Thus in my humble opinion - BA needs to look a lot closer to home and fixing its internal issues before venturing out into the wide world. Is it time for Willie to go?


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