London Air Travel

Virgin Atlantic Unveils Radical Restructuring

Virgin Atlantic has outlined plans for a radical restructuring as it seeks to secure Government support.

Virgin Atlantic Boeing 747 Aircraft (Image Credit: Virgin Atlantic)

Virgin Atlantic has unveiled plans for a radical restructuring as it seeks to secure Government support for a state backed loan.

The airline is in consultation with its trade unions on job cuts of up to 3,150 staff, which is almost a third of its workforce.

Virgin Leaves London Gatwick

Virgin will consolidate its London operations at London Heathrow for the foreseeable future.

The airline has already temporarily transferred operations from Gatwick, where it used to operate routes such as Antigua, Barbados, Grenada, Montego Bay and Orlando, to Heathrow.

The airline had already planned to transfer its service to Havana to Heathrow in June. St Lucia was also due to be suspended in June.

Virgin was due to reinstate a service New York JFK at Gatwick this summer, which will now not happen. Passengers with bookings from Gatwick will be contacted in the coming days with their new flight details.

Virgin plans to lease its slots at Gatwick to enable a return to the airport. Though, with Norwegian also temporarily leaving the airport until 2021 and uncertainty over BA’s presence at the airport, it will be difficult to find airlines willing to operate them.

The departure of Virgin Atlantic from Gatwick is symbolic as it was of course where it launched its first flight to Newark in 1984.

At Heathrow, where the airline has temporarily transferred flights to Terminal 2, Virgin has suspended Newark and cancelled plans to launch Sao Paulo. At present, a planned winter seasonal service to Cape Town is still due to go ahead.

Fleet

Virgin Atlantic will immediately retire its last seven remaining Boeing 747 aircraft.

It will also retire four Airbus A330-200 aircraft by early 2022. Virgin accelerated the retirement of its last three Airbus A340 aircraft earlier this year.

Virgin has not made any comment on plans for the delivery of its remaining Airbus A350-1000 aircraft, which were all due to be delivered by 2021.

The airline remains in discussions with the UK government about state support which could include a loan and a credit guarantee to prevent credit companies from withholding funds. Virgin is also in discussion with third party investors to secure additional finance. Delta, which owns 49% of the airline, says it is unable to provide any financial support.

According to leaked comments from the Treasury, it did not consider Virgin Atlantic’s business plans for the next 2-5 years to be realistic. These deep capacity cuts, along with some form of contribution from its two shareholders, should assist in making a case for state support.

Qantas Postpones Launch Of Non-Stop Sydney Flights

Qantas has postponed plans to order Airbus A350-1000 aircraft capable of flying non-stop from London to the East Coast of Australia.

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Qantas Airbus A350-1000 Aircraft CGI Image (Image Credit: Airbus / Qantas)

Qantas has postponed indefinitely plans to order aircraft capable of flying from London Heathrow to Sydney non-stop.

Project Sunrise was the name given to one of the most hyped aircraft tenders by an airline in history.

After receiving bids from Airbus and Boeing Qantas had selected an ultra long-range variant of the Airbus A350-1000 as its preferred aircraft. Qantas was due to confirm its order with Airbus by the end of April 2020 to secure delivery of aircraft by 2023.

Qantas Project Sunrise (Image Credit: Qantas Airways)

This project has now been postponed indefinitely. That is not to say it won’t ultimately happen. Qantas viewed the ability to operate non-stop flights between Europe and Australia as a significant source of competitive advantage. Its rivals in Asia and the Middle East do not have the traffic rights and European airlines do not have the inclination to operate a small sub-fleet of ultra long-haul aircraft. Like all airlines, Qantas simply doesn’t know how long it will take for demand to recover and what restrictions will be remain on international travel.

London Air Travel’s Monday Briefing – 4 May 2020

Welcome to London Air Travel’s weekly briefing on air travel around the world, as published every Monday at 06:00 BST.

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Welcome to London Air Travel’s Monday Briefing for the week beginning Monday 4 May 2020.

The “Future Size and Shape” of British Airways

After the events of 11 September 2001, BA was faced with financial losses, a heavily indebted balance sheet and the rising threat of low cost airlines. Then CEO Rod Eddington assembled a group of senior managers to plan the “future size and shape” of the airline.

Nothing was off the table. BA looked at exiting short-haul altogether and effectively reverting to a BOAC long-haul only model. It also considered closing down at London Gatwick.

What followed set the course of the airline for the rest of the decade.

Many unprofitable routes were cut. Short-haul routes were downgraded from Boeing 757 and 767 to Airbus A320 series aircraft. A long process of removing legacy complexity began.

Whilst BA pulled back from withdrawing from Gatwick altogether, it abandoned a plan to operate Gatwick as a second London hub. Many routes were transferred to Heathrow. The airport was “de-hubbed” with a focus on point-to-point leisure traffic and a vastly reduced and simplified fleet.

A similar exercise is now underway at BA. Though, this time it is being led by its “brand agnostic” parent company IAG.

BA CEO Alex Cruz stunned staff last week by announcing a consultation which may lead to up to 12,000 of the airline’s 40,000 odd employees being made redundant. The airline is also seeking substantial changes to working practices, including the merger of its three Heathrow cabin crew fleets.

BA and State Support

In an e-mail to staff Alex Cruz said “There  is no Government bailout standing by for BA”.

Much will focus in the coming weeks on what is meant by this.

BA has already taken advantage of the UK government’s payroll support scheme for 22,626 furloughed employees.

Iberia and Vueling have secured loans from a consortium of banks for €750 million and €260 million respectively, guaranteed by the Spanish government. These come with relatively limited conditions.

No redundancies have yet been announced at Iberia or Vueling. Aer Lingus is consulting with unions on job cuts of up to 900 of its 4,500 employees.

Questioned are being asked by BA’s employees, trade unions and some politicians why it hasn’t obtained a loan under the UK’s Covid Corporate Financing Facility to mitigate the need for redundancies as easyJet and Wizz Air have done. Some are even calling for the separation of BA from IAG.

IAG will dismiss much of this as “noise” – there were similar sentiments at Iberia when IAG forced through a painful restructuring in 2012.

There is an unquestionably an element of “never waste a crisis” to this. After leaving BA for IAG Willie Walsh has never hidden the fact that his restructuring of the airline was work in progress. BA accepting a state-backed loan would also make it easier for Virgin Atlantic to demand one to preserve competition at Heathrow.

A situation IAG is likely to be at pains to avoid is for governments to grant loans either secured against, or in exchange for, shares in IAG airlines. This Swiss government is to do the former for SWISS. Lufthansa is in negotiations with the German government for a federal bailout of around €10 billion. A government stake of around 20% and a seat on its supervisory board are likely pre-conditions. Fundamental to the model of IAG is it having full control of its airlines and being able to make “rational” investment decisions. Having to assuage individual government shareholders would fatally undermine this model.

IAG is due to give an update to investors and analysts this coming Thursday morning. Whilst IAG always declines to give a running commentary whilst negotiations with trade unions are underway, it should at least give an update on planned capacity for the coming months.

Will BA Leave Gatwick?

Back to BA at Gatwick, will it leave the airport?

Probably not. One consequence of BA’s retreat 20 years ago was that it gave easyJet free rein to go from next to nothing to occupying half of the slots at the airport. Iberia, LEVEL and Vueling do not have anywhere near the brand recognition in the UK to replace BA at Gatwick.

That said, BA did however look at transferring all long-haul flights from Gatwick to London Heathrow a while ago, but could not reach an agreement with the airport on landing fees. With its own slots to fill at Heathrow and potentially lucrative slots from departing airlines to snap up, BA may look at this again.

Heathrow Airport Closes Terminals Three & Four

All airlines operating from Terminals 3 & 4 have transferred flights to Terminal 2 by Sunday 3 May.

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Heathrow Terminal 2 (Image Credit: Heathrow)

Heathrow has consolidated all passenger flights at Terminals 2 and 5 from Sunday 3 May.

Over the past few weeks airlines have been progressively transferring flights from Terminals 3 and 4 to Terminal 2.

Terminal 3 has already closed. Terminal 4 will close to passenger flights on Sunday 3 May.

Heathrow Airport has advised that the last airlines to transfer flights from Terminal 4 to Terminal 2 will do so on Sunday 3 May. These are Air France, Air Malta, Alitalia, El Al, Etihad Airways, Kenya Airways, KLM, Kuwait Airways, Korean Air and Malaysia Airlines.

This means that all airlines other than BA and Iberia are now operating from Terminal 2.

Rail services to Terminal 4 will also be suspended from Sunday 8 May.

No date has been given for the reopening of Terminals 3 and 4. Airline schedules are likely to be substantially reduced well into 2021. Some airlines may also leave Heathrow permanently.

It’s plausible that this may prompt a reorganisation of airlines at Heathrow. Terminal 4 at least, which is not an easy terminal to operate from due to its location, could be mothballed for some time, if not permanently closed.

American Airlines’ London Heathrow Flight Plan

American Airlines tentatively plans to reinstate flights at London Heathrow from early June 2020.

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American Airlines Aircraft at London Heathrow (Image Credit: Heathrow)

American Airlines has set out amended plans to reinstate its network from London Heathrow.

At present, American is operating a very limited schedule from London Heathrow to Dallas / Fort Worth and Miami. The airline has also temporarily relocated to Heathrow Terminal 2 for the foreseeable future.

American plans to reinstate routes from London Heathrow as follows:

Chicago O’Hare – Thursday 4 June 2020 (initially five times weekly)
New York JFK – Sunday 7 June 2020 (initially twice weekly)
Charlotte – Tuesday 7 July 2020
Los Angeles – Tuesday 7 July 2020
Philadelphia – Tuesday 7 July 2020
Raleigh-Durham – Tuesday 7 July 2020
Phoenix – Wednesday 7 October 2020
Boston – Sunday 25 October 2020

These plans have changed and are subject to further changes.

BA Extends Exec Club “Reward Flight Saver” To New York

British Airways is now offering long-haul economy Avios redemptions to New York JFK with a flat cash fee of £100.

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New York Skyline (Image Credit: London Air Travel)

This is one to file under “Not sure how long this has been running, but only just noticed it”.

British Airways’ “Reward Flight Savers” have long been a popular means for members of the Executive Club to redeem Avios on short-haul flights.

Prior to their introduction, redeeming Avios on short-haul flights was considered practically worthless. This was because the taxes and fees were so high, you might as well just purchase a cash ticket with the benefit of earning Avios instead of spending it.

Under a Reward Flight Saver a passenger redeeming Avios on a short-haul flights simply pays a flat cash fee from £1 upwards with any taxes, fees and surcharges borne by BA.

It instantly transformed a short-haul redemption flight from one of the worst to one of the best uses of Avios.

Long-haul economy redemptions have been considered similarly poor value because again, taxes fees and surcharges represent an increasingly high proportion of the overall ticket price.

As you can see from the screen shot below, an off-peak economy long-haul redemption from London Heathrow to Boston costs a minimum of £226.35 in taxes and surcharges and 26,000 in Avios. A cash ticket for the same flights with checked luggage would cost around £385 and earn Avios.

British Airways Economy Redemption London Heathrow – Boston

Reward Flight Savers To New York JFK

BA has now extended the Reward Flight Saver concept to long-haul economy flights.

At present, it only applies to BA operated flights to New York JFK. It is also only available to UK based members of the Executive Club.

British Airways Prepares To Restructure Post COVID-19

BA has begun to consult with its trade unions on a redundancy exercise which may affect up to 12,000 BA employees.

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British Airways Coat Of Arms (Image Credit: British Airways)

International Airlines Group, the parent company of British Airways, and Aer Lingus, Iberia, LEVEL and Vueling has released its preliminary first quarter results for 2020.

Total revenue in the first quarter fell 13% to €4.6 billion compared to €5.3 billion last year. IAG reported a loss before exceptional items of €535 million compared to a profit of €135 million last year.

IAG has also taken an exceptional charge of €1.3 billion. This is due the ineffectiveness of fuel and foreign currency hedges for 2020 due to over-hedging. Put simply, this means IAG has not been able to benefit from significant falls in fuel prices in recent weeks.

IAG airlines have reduced capacity by nearly 95% in April and May. The group has not announced any capacity plans for June which are subject to both the easing of country lockdowns and the lifting of travel restrictions.

Industry views on how long it will take for demand to return to 2019 levels vary widely.

Most optimistic is Michael O’Leary who believes that, with significant discounting, demand will recover quite quickly. Many airlines believe it will take around 3 years for demand to recover and demand will remain subdued well in 2021.

IAG has said today that it expects it to take several years for demand to return to 2019 levels.

British Airways Restructuring

British Airways has begun a consultation with its trade unions on a redundancy exercise.

This may affect up to 12,000 BA employees. To put this into context, BA has approximately 40,000 employees. 22,626 employees were furloughed in April.

Whilst this will clearly have a significant impact on the livelihoods of many BA staff, the number of 12,000 is a likely worst case scenario to open negotiations with BA’s trade unions. It is likely that this will be achieved through voluntary redundancy as much as possible which is a “red line” for trade unions.

BA is also likely to be receptive to other cost savings suggestions, particularly productivity improvements.

It also points to a significant reduction in capacity in the coming years and, in turn, many changes to BA’s airports, route network and fleet.

British Airways Extends Coronavirus Rebooking Policy

All passengers due to travel with British Airways up to 31 July 2020 can exchange their ticket for a voucher for travel up to 30 April 2022.

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BA Airbus A319 aircraft at London Heathrow (Image Credit: British Airways)

British Airways has today, Tuesday 28 April 2020, extended its flexible rebooking policy for all passengers due to fly with the airline in the coming months.

Passengers who were due to travel up to Sunday 31 May 2020 and were not able to travel had the option to exchange the value of their booking for a voucher for future travel.

This has now been extended to all passengers who were due to travel up to Friday 31 July 2020. BA’s new rebooking policy is likely to be a precursor to a substantial schedule reduction in June and July.

Passengers due to fly up to Thursday 31 December 2020 who had booked under BA’s “book with confidence” policy from Tuesday 3 March 2020 also have the flexibility to change the date or destination of their booking.

Voucher Extensions

In addition, all new and existing vouchers can now be used as payment for a new booking for travel up to and including 30 April 2022.

Previously, vouchers had to be used within 12 months of the original travel dates.

Refunds

If your flight is cancelled you are entitled to a full refund.

However, you will need to call BA directly to secure this cannot be done online. Note BA will not allow vouchers to be subsequently converted into cash refunds.

The above is only intended to be a short summary of BA’s policy.

For the latest information on Coronavirus please see this page on ba.com.

Please review this very carefully, including the terms and conditions for flight and holiday bookings, before making any changes to your bookings. These policies are also subject to change at short notice.

BA is currently operating an extremely limited schedule from London Heathrow Terminal 5.

Schedules currently indicate that flights at London City and London Gatwick will resume from Friday 22 May 2020. This is subject to change. It is expected that schedules will resume very gradually throughout the year and into 2021.

London Air Travel’s Monday Briefing – 27 April 2020

Welcome to London Air Travel’s weekly briefing on air travel around the world, as published every Monday at 06:00 BST.

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Welcome to London Air Travel’s Monday Briefing for the week beginning 27 April 2020.

Virgin Atlantic Scrambles To Secure Investment

It has been a weekend of claim and counter-claim in respect of Virgin Atlantic.

The Sunday Telegraph reported that Virgin had abandoned any hope of securing government support. It was now racing to secure new private sector investment against a deadline of the end of May.

This was promptly denied by Virgin. It insisted the option of government support remains on the table.

Investment bank Houlihan Lokey has approached over 100 potential investors on behalf of Virgin Atlantic. These are said to include private equity groups, sovereign wealth funds and hedge funds.

More than 50 parties have asked for further information. They have a week to express further interest.

Virgin has also insisted that the airline is not for sale outright. This is not the first time Virgin has explored a sale. Deutsche Bank were commissioned to carry out a “strategic review” in 2010. Although Sir Richard has always maintained he would never sell the airline. “I wouldn’t ever sell my shares as it’s too much my baby” he said in 2012.

It is plausible that Virgin will be able to obtain some new finance. This will not come from Delta which has confirmed it can’t support the airline. It has also reportedly applied for a business interruption loan.

There remains considerable public hostility, at least online, to state support for Virgin Atlantic.

Much of this has focused on Sir Richard Branson’s tax status and his residence in Necker Island. In truth, Sir Richard has long used tax minimisation measures. As have some of Virgin’s competitors, but not as transparently as living on a private island in the Caribbean. In more buoyant economic times most, apart from Private Eye magazine and the author Tom Bower, have been willing to turn a blind eye to it.

Not only does this show a remarkable fall in Sir Richard Branson’s pubic persona, but also his lack of political access. It’s a far cry from Cherie Blair was reported to have uttered “We must do something for you” to Sir Richard at a Downing Street reception.

IAG has been relatively quiet over the past couple of weeks. Whilst the personal animosity between Sir Richard and Willie Walsh is well known, it’s worth remembering that the Competition & Markets Authority is still reviewing BA’s joint business with American Airlines. The failure of Virgin Atlantic could mean they are forced to end it.

London Airport Operations

In terms of London airport operations and route developments:

Air New Zealand has permanently suspended London Heathrow – Los Angeles. The route was due to end in October 2020, and its temporary suspension is now permanent.

Delta has temporarily suspended routes from London Heathrow to Portland and Salt Lake City for the summer season.

United Airlines has temporarily suspended routes from London Heathrow to Denver, Houston and Los Angeles for the summer season.

Heathrow airport has confirmed that Terminal 3 has closed to passenger flights. All airlines have temporarily relocated to Terminal 2. The remaining airport moves from Terminal 4 such as Air France, Alitalia and KLM are expected to be complete in early May.

On the question of temperature checks on arriving passengers, Heathrow insists that it is bound by UK Government rules on passenger checks. Should Government policy change, Heathrow says it can move quickly.

A History Of British Airways Advertising – Part 10

A look at British Airways’ advertising over the past 50 years as BA turns to story-telling on social media and marks its centenary year.

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"To Fly. To Serve. Today. Tomorrow." — “To Fly. To Serve. Today. Tomorrow.” (Bartle Bogle Hegarty for British Airways)

Welcome to the tenth and final part of our look at some of the most influential and noteworthy BA advertising of the past 50 years.

In our final part, we’re well into the era of social media platforms such as Twitter, Instagram and YouTube.

These platforms have are a double-edged sword for airlines. They enable airlines to reach a mass audience without buying expensive advertising space, but they have to be shared with the public at large. Airlines are at the mercy of instantaneous and reactive judgements by audiences.

“Today, Tomorrow”

This advert from 2013 was an extension of BA’s brand relaunch “To Fly. To Serve.” but with a much more contemporary feel.

The advert debuted ahead of the launch of the Boeing 787 Dreamliner and Airbus A380 at London Heathrow. It features a passenger travelling through Terminal 5 to board a Boeing 787 Dreamliner.

The advert uses a “micro to macro” style of filming, featuring close up shots of the details of flying, panning to wide shots of the aircraft in motion.

The film is directed by Martin Krejci, with cinematography from Anthony Dod Mantle and features the soundtrack “Experience” (Starkey Remix), by Ludovico Einaudi.

“The Magic Of Flying”

“Look Up” was a campaign developed by the interactive agency OgilvyOne in 2013.

Interactive billboards in Chiswick and Piccadilly Circus would respond as a BA aircraft flew over it. OgilvyOne had installed antennae on nearby buildings which could identify overflying aircraft. Using custom-made software it would identify which of those aircraft were operated by BA.

A child would then point to the aircraft in the sky and the billboard would display its actual flight number and origin, highlighting the breadth of destinations served by BA.

As well as generating a significant number of visits to the BA website and impressions on social media, the campaign won multiple industry awards.

“Red Bus”

The marketing of airlines to overseas visitors can often descend into cliched stereotypes.

Here’s a short film that looks at the start like it’s about to do that, but doesn’t.

Rooftop Cinema Club

Not strictly an advert, but a highly effective trailer shown before screenings at the Rooftop Cinema Club.