Champagne Goes Flat at BA; CITY COMMENT

Article excerpt


RUNNING an airline is never a picnic - even without the Gate Gourmet factor.

Carriers all over the world are having to face up to sudden jet fuel shortages - courtesy of Katrina - surging energy costs and the bird flu scare which at its worst could turn out to be another Sars.

With perils like this British Airways could have done without 1980s-style industrial problems.

Just how hard August's dispute is hurting BA is evident from the passenger and cargo numbers.

BA's biggest selling point as a global carrier is its premium service, especially across the Atlantic.

It is here that much marketing effort is expended.

Premium traffic took the biggest hit in August, slumping 4.7pc. Club and first-class passengers with flexible tickets, who missed their smoked salmon and champagne, are most likely to switch carriers and are hard to win back.

All the time that the quarrel between the Texas Pacific offshoot-Gate Gourmet and the unions persists, premium passengers - investment bankers and the like - will be taking their business elsewhere.

The knock-on effect across the airline is also evident from the less glamorous cargo side of BA.

While it was busy trying to put stranded passengers back in the sky, cargo traffic plummeted by more than 10pc.

What is most worrying to BA's commercial clients is the knowledge of how fragile the union situation has become at Heathrow.

Baggage handlers appeared willing last month to jump off their carts at the first smell of cordite, sending a warning shot across the bows for the upcoming negotiations on Terminal Five operations.

Hot meals may have been restored on long-haul flights but stability has not.

There is something deeply troubling about Gate Gourmet, its alleged financial problems and its corporate behaviour. It exemplifies private equity companies - with their ruthless cost-cutting mentality - at their worst.

As if this were not enough, BA - although relatively well hedged on fuel prices - has to start thinking about the next surcharge in addition to the [pounds sterling]48 fee on long-haul return flights.

That is not going to do much for bolstering the much advertised autumn sale.

New chief executive Willie Walsh will have more than a few Munros to negotiate, like former incumbent Bob Ayling. …