2 min read.Updated: 23 Sep 2021, 10:21 PM ISTBENJAMIN KATZ, The Wall Street Journal
Carrier had proposed new unit at London Gatwick Airport to lower costs and better compete with discounters
British Airways abandoned a plan to create a new short-haul subsidiary after failing to win support from its pilots for the venture, which the airline had hoped would offer a way to offset pandemic-induced declines in long-haul traffic.
The defeat is a blow for the airline, which wanted to create a new, cash-generative operation based at London Gatwick Airport in time for next summer. British Airways has for years battled to make its operations at the airport profitable and the new subsidiary would have allowed the company to renegotiate pilot and operating costs.
The airline, the biggest unit of International Consolidated Airlines Group SA, said Thursday it was walking away from the plans after its pilot union withdrew a ballot on whether to support the proposal. The union said it was unable to reach an agreement with the carrier on revised terms of conditions that was acceptable to its members.
“After many years of losing money on European flights from the airport, we were clear that coming out of the pandemic, we needed a plan to make Gatwick profitable and competitive," the airline said in a statement. It added that it would now suspend its short-haul operations at the airport, with the exception of a small number of domestic services.
British Airways had already shifted its international flights to its main base at London Heathrow Airport since the start of the pandemic.
Long-haul carriers like British Airways typically rely on short-haul flying to connect passengers to longer, more profitable, international services. But in response to the pandemic, airlines have been trying to find ways to offset the major declines in long-haul travel, which is expected to be the last travel segment to recover.
Aside from cutting costs to better compete with discount carriers, the carrier’s proposed new unit would have allowed it to capitalize on the withdrawal of rivals from Gatwick, including holiday specialist Thomas Cook, which collapsed in late 2019, and the curtailing of Norwegian Air Shuttle ASA’s operations outside of Scandinavia.
“A competitive Gatwick short haul operation next summer would have been good for our business as we try to recover and pay back the debts that the pandemic has necessitated," Jason Mahoney, British Airways’ chief operating officer, wrote in a letter to staff seen by The Wall Street Journal. “It’s not what we wanted but it’s important that we face up to difficult issues so that we can protect the long-term sustainability of the company."
The withdrawal of the plans comes days after the U.S. surprised the aviation industry by committing to lifting its restrictions on European and British citizens entering the country. IAG shares have risen since the White House’s announcement on Monday, with bookings at trans-Atlantic operators surging in response.
British Airways said this week it had seen a 2,000% spike in searches for flights and vacations ahead of Thanksgiving, and a 900% increase in searches for the Christmas travel period.
This story has been published from a wire agency feed without modifications to the text