BA means business
British Airways will ply the lucrative London-New York route with a new all-Business Class aircraft in September. Gary Noakes asks why BA should succeed when so many others have failed
Despite a cancelled press call in July, the first British Airways flight from London City airport to New York is set to depart this September. Under the flight number BA001, previously used by Concorde, a daily service - except on Saturdays - begins on September 29, moving to double daily a fortnight later.
For BA, the new flight is not just an innovation - it is a big financial commitment. In order to operate from London City's short runway, two specially configured Airbus A318s have been manufactured, costing about US$120 million. The aircraft, which normally carry about 109 people, are the largest that can be flown from London City and will seat 32 passengers in fully flat beds. Because of payload restrictions, they will operate via Shannon from the UK to re-fuel but go non-stop from the US to London.
At Shannon, passengers and their luggage will be de-planed and clear US immigration and customs, which is either a big selling point, given the lengthy queues at JFK, or something that will put prospective travellers off.
In both London and New York, BA will offer passengers a 15-minute check-in. Another bonus is that flights can be combined with BA's Heathrow services, enabling executives to get from the City or Canary Wharf to London City very easily and, on their return, fly on one of BA's 11 daily services back to Heathrow if their home is close by.
BA agreed the London City plans in December 2007, when the stock market was riding high and as Maxjet stopped flying after two years of struggling. Its Stansted-based rival, Eos, collapsed in April 2008 and Silverjet, which flew from Luton, followed in June 2008.
This may not be a bad omen for BA. It can argue convincingly that these three airlines had none of its brand recognition, network or corporate contracts, and that they flew from non-business airports with small fleets that led to reliability problems and with frequent flyer schemes not as attractive as its own. Maxjet and Silverjet operated wide-body Boeing 767s with 100 seats to fill. Eos, which used a 220-seat Boeing 757 fitted with just 48 flat beds, was as high-end a product as BA's, with fares to match.
London City argues that neither Luton nor Stansted, which American Airlines tried unsuccessfully to serve in 2007/8, appeal to the business traveller. "From Canary Wharf you can get here by car in 10 minutes and do the 15-minute check-in, which means it's 25 minutes from desk to seat. It's the same time-saving that we provide short-haul business passengers," says a London City airport spokeswoman.
BA obviously agrees. "This is targeted at extreme frequent flyers, people that are on that plane every week," says Chris Stubbs, BA's customer experience manager, in charge of the project. "They are looking for convenience to maximise their time. Our morning arrival in London is just after 7am. You can be at your desk by 8am. Travelling from New York, you can arrive in the morning, be in a meeting by eight and return on our 4pm flight."
There is, however, an extra charge for this convenience. On its London City service, BA's lead-in Business fare is £4,912, rising to £5,625 for a fully flexible ticket. A rough comparison of fares quoted in July for midweek travel in October showed a London City fare of just over £5,000, around £1,400 more than one from Heathrow.
A similar comparison showed Business rates to JFK from Heathrow with American Airlines at around £2,800, while Delta's was around £2,100. Both these carriers have upgraded their Business cabins on the London route and, while they do not offer the luxury of a 15-minute check-in, the price will certainly appeal to corporate buyers.
This makes some sceptical about the new service's prospects. "If they try to charge a premium we will not use it and we'll wait to see what reaction that prompts - we'd love to use it but we're not going to pay through the nose," says a travel manager from a major Canary Wharf financial company.
Trying to charge a premium may not be wise given the shape of the economy. BA lost £401 million in 2008/9, compared to a profit of £922 million the previous year, and behind that loss is a sharp fall in business travellers. In June, total passenger numbers fell year on year by 3.8 per cent, but premium numbers plummeted 14.9 per cent.
BA can take consolation that, in its words, seat factors have been stable for "more than three months", but at its annual general meeting this summer, chief executive Willie Walsh admitted: "There has been a structural shift in our premium markets. Fewer business travellers will choose the premium cabins, and those who do will pay less."
Stubbs, though, is adamant that the target customer base of "very senior executives" will want the new service, which is being marketed as Club World London City to distinguish it from the regular business product. One of its benefits is that aircraft are fitted with the OnAir text and mobile service, which, if desired, gives internet access via a mobile connection. Passengers also get a telephone and email 'concierge' service while a dedicated gate lounge at London City is being considered.
However, this may not be enough for some who believe the hassle of the refuelling stop may offset any other benefits. "Our concerns are with the Shannon stop," says Mark Cuschieri, travel management director at City-based investment bank UBS. "They're saying that time you spend there is time you save at JFK. I'm sure that's the case, but would we pay a premium for that? No."
For Cuschieri, the real advantage of the service is inbound to London. "The speed of the flight back and the fact that it's direct is fantastic. It brings them straight into the City."
Cuschieri says UBS's travel costings included time and ground transportation pricing and that London City had significant advantages, even for companies not based at Canary Wharf. "We have to weigh up the benefits," he says. "Is the premium being paid mitigated by the savings we are making in terms of ground transport and productivity?"
Other travel managers will be making similar judgments and there is no doubt that the first year of the new service will be testing. Back to the unnamed Canary Wharf travel manager, whose company bought nearly 650 sectors to New York in the first five months of this year - almost all on BA, but only half the total of 12 months ago.
"Two years ago, London City-New York would have done very, very well," he says. "But at the moment, the line here is that you buy the lowest logical fare on the day."
During the recession, that may mean buyers shun the more expensive route in favour of Heathrow, and while there is definitely enthusiasm for London City, BA may have to re-think the extra it plans to charge.
If it does all go wrong, BA can just re-configure the aircraft and put them into the mainline fleet. For Stubbs, however, this is out of the question: "It is a big capital investment - we are in this for the long-term."