British Airways' New Short-Haul Goals

British Airways (BA) will launch new domestic and short-haul international connections from its London Heathrow hub to Leeds Bradford, Rotterdam and Zagreb, its parent, International Consolidated Airlines Group (IAG) revealed late last week.  The announcement was made as the holding company revealed its First Quarter results and left many people surprised, but there are a number of reasons why these markets and have been selected and why, with the exception of the already confirmed resumption of flights to Seoul, South Korea, BA is initially looking to expand into local markets with its expanded slot pool at London Heathrow.

The recent purchase of bmi British Midland International has opened a number of doors for BA and it is already transferring a number of bmi flights into its own schedule.  As IAG Chief Executive Willie Walsh acknowledges, the deal to acquire its UK rival enables BA to “manage its wider Heathrow slot portfolio more effectively”.  Alongside the new Seoul Incheon route, which commences in December 2012, BA will “increase frequencies to existing key destinations,” according to Walsh, as well as launch the three new routes.

If you were questioned on BA’s proposed network expansion from London Heathrow it would be unlikely that Leeds Bradford, Rotterdam and Zagreb would be among the first four destinations you selected.  Seoul Incheon was a logical growth move given the increasing trade and investment between the two countries which will ensure good yields in all four aircraft cabins onboard the Boeing 777-300ERs which will serve the route. 

Before we look at the dynamics of the new short-haul markets it must be remembered that launching a new long-haul route takes a lot of planning, management and investment and most importantly… time.  The bmi deal was only closed last month and BA would be reluctant to expand into a number of new long-haul markets at a rapid pace.  There is also the question of aircraft availability and with new long-haul equipment due to arrive in 2013, then would be the sensible time to expand into other intercontinental markets, rather than disrupting an established schedule.  As we revealed at the time of the bmi acquisition there are a myriad of possibilities for BA following the tactical patching of the airlines’ short-haul networks.  We highlighted the top ten medium- and long-haul destinations from London Heathrow by O&D demand that are not currently served by BA from the hub airport, a list headed by Seoul Incheon - other destinations known to be on BA’s radar from that list include the Pakistani cities of Islamabad and Lahore (click here to read ‘IAG Receives Green Light for bmi Purchase’). 

The selection of Leeds Bradford, Rotterdam and Zagreb as new destinations may simply be a short-term arrangement to safeguard slots at London Heathrow while BA awaits the arrival of new aircraft that are better equipped for long-haul missions.  Only time will tell us if this is the case, but there are relatively strong traffic flows on each route to justify their entry into the ‘Heathrow Hub’.

The London Heathrow – Leeds Bradford service marks the return of a former bmi route that was previously served up until March 2009 when increasing competition from an enhanced domestic rail product between London and Yorkshire resulted in its closure.  The bmi decision was at the time influenced by its need to use its limited London Heathrow slots to serve more lucrative European and North Africa routes.  In the final full year of operation (2008), around 126,069 passengers flew on this route, according to UK Civil Aviation Authority (CAA) data.

It is the connecting traffic that will make this route work for BA.  The competition with the railways is intense and attracting corporate travellers between Leeds and London away from the train will be difficult.  There will be a small market that will use the air service, however BA will more likely be targeting Yorkshire-based passengers that flying to destinations across the world to destinations not currently available from Leeds Bradford. 

With BA’s much larger network than that which bmi offered at the time it flew the route the proportion of transfer traffic is expected to be even higher when the service resumes and will stimulate the market further.  Leeds Bradford will actually be the second ‘new’ domestic destination for BA as the purchase of bmi sees the return of the UK national carrier to the Belfast market from London Heathrow too.

The Dutch city of Rotterdam was also previously regularly served from London Heathrow but was another destination to lose out to the slot restrictions at the UK gateway.  The route was previously operated by KLM Royal Dutch Airlines and its regional partners (NLM Airlines up until March 1991 and KLM cityhopper from January 1993 until December 2006, although BASE Regional Airlines also served the route from April 2000 to May 2001) but all services were suspended at the end of 2006 as the slots were used to support the wider strategy of the SkyTeam alliance at the London airport.

Since the closure of the London Heathrow route, links to Rotterdam have been retained by CityJet (a wholly-owned subsidiary of KLM’s sister carrier Air France) from London City.  In 2011, an estimated 120,000 O&D passengers travelled on the route between London City and Rotterdam.  Transavia Airlines which had operated a low-cost service to Rotterdam from London Stansted since March 2004, transferred its route to London Luton between October 2008 and November 2009 and then London Gatwick between November 2009 and October 2010, when the service was suspended.

The third new destination revealed by BA last week was the Croatian capital Zagreb and this represents the only one of the three short-haul markets where BA will face direct competition from London Heathrow.  It is also a destination that the airline has served as recently as September 2003 – the conclusion of a six and a half year operation from London Gatwick that was launched in February 1997.  The historical JAT Airways route between Zagreb and London Heathrow was taken over by Croatia Airlines in June 1992 and is now operated on at least a daily schedule.

In 2011 an estimated 54,000 O&D passengers travelled between London Heathrow and Zagreb, although there is a strong demand from the wider London market: easyJet also offers flights from London Gatwick and Croatia Airlines has expanded its own schedule to offer flights from Gatwick, complementing its activities at the hub airport.

Away from London Heathrow, BA is to also introduce services on another domestic UK route through its London City-based regional operation BA CityFlyer.  The airline will later this month introduce a daily weekday service from London City to Ronaldsway from May 28, a route that up until recently has been flown by Irish carrier Aer Arann.  The new flight marks the return of BA to the Isle of Man market, which it last served from London Gatwick in March 2007. 

The flight will initially be operated with a 76-seat Embraer 170, but from June 25 a wet-leased Saab 2000 turboprop will replace the jet aircraft and frequencies will be increased to three flights every weekday and a weekend service will also be added.  The 50-seat Saab 2000 is being sourced from UK carrier Eastern Airways and will be painted in full BA livery with crew wearing BA uniform.

The capacity to support the May launch of this flight has been made available by the cancellation of BA CityFlyer’s existing link between London City and Copenhagen which has not performed up to its expected potential.  Its twice daily service is due to end on May 24, but talks are now taking place for BA to retain its brand on the route through its franchise partner Sun Air, which could resurrect the route in September using its own Dornier 328Jets, which seat 32 passengers.  Sun Air already serves London City from the Danish city of Billund.

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