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Last Updated: Wednesday, 9 June, 2004, 09:30 GMT 10:30 UK
Flying Scared
Concorde is flying again - but the world travel industry is in turmoil. The Money Programme investigates the future of the airline industry.

Today Concorde is back in service for the first time in fifteen months. But it will take more than this to help beleaguered British Airways.

Simultaneously Sabena - one of the world's oldest airlines - has stopped flying. Following the attacks in America, the flag carriers are in crisis.

It is eight weeks since the devastating attacks on New York and the consequences for business are becoming clear. It is far worse than they first thought.

deep crisis

As Chris Avery, Analyst for JP Morgan Chase says: "There's no question that the industry is entering the deepest crisis it's ever faced since the start of the jet age. It's difficult to see how the industry is going to survive if it continues to incur the kinds of losses that we're just starting to see reported."

And in the latest of those reports, British Airways' quarterly results spell out the scale of the problem. BA profits are down over 97% on this time last year. Over 7,000 staff have already been laid off.

Airlines like BA have suffered because they rely on the transatlantic market. Since September 11th that market has been in trauma.

In the immediate aftermath, of all businesses, airlines suffered the most. After all it was commercial passenger aircraft that were used as weapons of mass murder and destruction. Many people are now quite simply refusing to fly.

gloom spreading

That fear and uncertainty has kept Americans off planes and spread gloom throughout the airline industry - and not just in the USA.

Yet, at the same time, budget carriers such as Ryanair and Jet Blue in the US are booming.

Since September 11th Ryanair has come up with an astonishing campaign. As Michael O'Leary, Chief Executive of Ryanair points out: "Unlike almost every other airline in Europe, Ryanair responded the following week by introducing our largest ever seat sale. We put a million seats on sale throughout the UK at 9.99 one way and we've been deluged in the rush."

Latest results show both Ryanair's passenger numbers and profits up by nearly 40%. The constant lure of low prices is winning new customers by the day. Low cost carriers now fly one in five of British passengers.

Ryanair strategy

Michael O'Leary uses clear and simple financial principles: "At heart, it's all about selling low fares and then desperately, we work all the time to make sure that the costs are lower than the fares."

The shock being dealt to British Airlines is dwarfed by the havoc being reeked on another UK industry which is three times as big: tourism. Already reeling from the effects of foot and mouth and a looming recession, the tourism industry here is fearful of a catastrophic slump that could last for years.

If anywhere is feeling the pinch right now its Bath in the West Country. It's a major contributor to our 64 billion tourist trade which supports 2 million jobs.

As a visitor attraction, Bath proudly sits near the top of the UK Premier League. The tourist industry here is worth nearly two hundred million pounds to the City. When you think of Bath inevitably you think of the past: splendid Georgian architecture and classical Roman antiquities, but the present is all about American tourists and right now, there aren't any.

Lynn Moorhouse is vice president of the Bath chamber of commerce. She's desperate to help her fellow Bath businesses, she travelled to New York to find out what will get Americans over to Bath again.

crash survivor

For Lynn, flying has been a nightmare for nearly thirty years. In 1974 she and her young family survived the first ever crash involving a jumbo jet.

"It took me five years before I got back in a plane again. I think one of the reasons I want to go to New York is to show people you can get on a plane, you can fly, you can overcome those fears."

While in New York Lynn saw the huge marketing campaign launched by the British Tourist Authority to get Americans back to the UK. The initiative called UK with NY - is to remind the US of the attractions of going over the pond.

Five million pounds is being spent on this marketing campaign to target the million plus Americans who normally visit the UK for autumn and Christmas. But it's a tall order.

As Lynn Moorhouse says, "You look around you and you see people going about their business and when you, but when you really start talking to them you actually realise how unsettled they actually feel."

record losses

Since September 11th the major US carriers have been posting record losses - in one case of more than a billion pounds in just three months. The American government has stepped in with a massive 15 billion dollar aid package.

Since receiving the bailout most of the US Airlines have started discounting their fares. One is offering a return fare across the Atlantic for as little as 160. This has led to suspicions in Europe - where there is no bailout -that they are financing these cut price deals with bailout cash.

At the moment British Airways is taking a diplomatic line on this delicate issue. As Martin George. Director of Marketing, British Airways says "What an airline like British Airways is looking for is a level playing field. We have to compete with the US carriers, we have to compete with other European carriers. We don't want hand-outs, we don't want state aid, but we do want a level playing field."

shake-up ahead

Today Concorde started flying again while many airlines are close to stopping flights for ever. The world travel industry is in turmoil. The events of Sept 11th are triggering the biggest shake up ever in the history of the airline business.

This programme was first transmitted on Wednesday 7th November 2001.




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