Page last updated at 09:35 GMT, Friday, 22 May 2009 10:35 UK

Business class is BA's big headache

BA's Willie Walsh samples a business class bed
BA's Willie Walsh has tried to attract high-paying business travellers

Tom Symonds
By Tom Symonds
Transport correspondent, BBC News

British Airways' pre-tax loss of £401m for the year to 31 March has been widely attributed to a weak pound and higher costs.

But one of BA's biggest problems is the loss of 13% of the airline's real earners - business passengers.

Some have told me they are deliberately booking economy flights, expecting they will get an upgrade to the empty seats at the front of the plane.

The airline is doing all it can to keep them flying - including, in recent months, a buy-one-get-one-free offer.

Perhaps the airline has left itself more exposed to the downturn by concentrating on those that turn left when they get on the plane rather than right.

But it has been a sound strategy until now, and will probably remain one when this slump eases. It's much harder for British Airways to take on the likes of easyJet and Ryanair when it comes to offering cheap economy seats.

Having said that, one problem the airline faces is that easyJet, in particular, is deliberately punting for business passengers forced to travel on a budget.

Fuelling losses

The other big problem is an old one. BA's fuel bills have soared by 44.5% in the last year.

It could have been worse. After all, oil is cheaper now than it was a year ago, and British Airways still has hedging deals to fix its price.

The real problem is that the world's airlines buy their fuel in dollars, and the exchange rate against the pound is not good for BA.

British Airways is still unsure when it will receive some of the more fuel-efficient planes it has ordered. Despite Boeing's plans to fly its new 787 Dreamliner next month, the BA order is delayed.

Chief executive Willie Walsh says he has been more blunt than any airline executive in, as he put it, "calling" the current crisis.

Some airlines have tried to play down the impact. Not Mr Walsh. He sees no sign of a recovery in the near future.

Cost-cutting

So is this what you might call a "game-changing" recession for airlines?

Absolutely, says the BA boss, who is intent on changing further the way British Airways does things, to make the things it does cheaper to do.

There are discussions ongoing with pilots, cabin crew and baggage handlers. The airline is examining its routes to see which can be cut.

Capacity was reduced by 3.1% in winter 2008, and there'll be further reductions of about 4% this winter.

Industrial relations have been a big problem in the past for BA. But Mr Walsh is more confident now.

"You can't argue with figures like these," he says, implying that the workforce is not going to stand in the way of changes to working practices. The powerful aviation unions are not being as flexible, he says.



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