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BA Announce Huge Price Cuts

Facing mounting competition, Europes largest airline cuts fees for domestic routes...

British Airways began a fightback against the no-frills, low-cost budget airlines yesterday by slashing its domestic fares by up to seventy percent, in the latest attempt by chief executive Rod Eddington to revive the company's fortunes.

The UK?s biggest airline abandoned its long standing premium pricing policy by offering return fares of GBP69 from London to Edinburgh, Manchester, Newcastle and Glasgow. A return flight to Aberdeen will fall to GBP79.

There will no longer be a penalty for travellers who avoid staying a Saturday night and restrictions on advance purchases will be abolished on domestic flights in and out of London.

British Airways' head of UK & Ireland sales, Tiffany Hall, said the airline wanted to "compete profitably and intelligently against the no-frills carriers". The airline will offer a GBP5 discount for bookings on its website, to cut out the GBP25 commission typically taken by travel agents.

But the change drew derision from the low cost airlines such as EasyJet and Go, who questioned whether the fares were any more than marketing gimmicks.

As with all airlines, BA intends to increase the price of tickets as each flight fills up. The airline refused to say how many seats would be sold at rock-bottom prices, except to say that there would be "very good availability".

A spokesman for EasyJet said he was "startlingly unimpressed and unworried" by the announcement. He said: "Dare I say it, there could be some smoke and mirrors here. We don't know what the top prices on these flights will be - they could even be higher than before."
Under former chief executive Bob Ayling,

BA refused to compete directly with no-frills carriers, insisting that it wanted to concentrate on business customers. The company set up Go as a low-cost offshoot.

Rod Eddington, who took over as chief executive in 2000, was widely criticised for selling Go in a GBP110m deal last year. BA has struggled to hang on to business passengers, as many multinationals cut costs by sending their staff on budget airlines.

Faced with losses of GBP2m a day and ballooning debts, Mr Eddington has been slimming down BA's operations. The airline has announced 13,000 job cuts since September and has abandoned a number of unprofitable routes.

BA said yesterday's budget fares were only the beginning. Discount prices to continental destinations are likely to be available by the summer. The airline will stick with its "full service" which includes free food and drinks, although it admitted recently that it was examining whether passengers would prefer sandwiches to hot meals.

Ryanair yesterday demonstrated the popularity of its low cost model by announcing that its monthly passenger numbers had exceeded a million for only the second time in its history. The Irish airline carried 1.01 million people in March, up 48% on last year, and has taken 10,000 advance bookings for a new route between Stansted and Newquay.

Industry experts say that BA will struggle to make profits from cut price fares without wider changes to its structure.

Dominic Edridge, an aviation analyst at Commerzbank, said: "The most important thing is not getting bums on seats but making a profit out of those bums on seats."

BA is hampered by its complicated network, which requires planes to make dozens of different connections at different times. In contrast, Ryanair and EasyJet have "point to point" structures, leaving customers to worry about connecting flights.

BA also runs a plethora of different types of aircraft, which means higher costs in fuel, parts and maintenance.