British Airways has a nostalgia problem

British Airways passengers may yearn for silver service in the skies. They are getting a free bottle of water and a packet of crisps.

Newish boss Sean Doyle has pledged to restore the airline’s reputation for premium customer service. It’s a sensible strategy. BA has pursued it more or less successfully for decades. The problem Doyle faces is that compared with what passengers want, what BA can deliver can only end in disappointment.

It isn’t all about the sandwiches, but it is a bit about them. When then-CEO Willie Walsh gave short-haul free food the chop in 2009, it was seen as the triumph of cost-cutting over customer service standards. The sacrosanct was sacrificed for a saving of only £ 22mn. Later boss Alex Cruz did it all again in 2016.

There have been plenty of other causes for complaint. There was the 2017 IT outage that stranded passengers. The “national disgrace” that was the shambolic opening of Terminal 5. BA’s less than generous legroom on short-haul flights. The fact that its eight-across business class set-up meant you had to clamber over a stranger to answer a night-time call of nature, and its seats were increasingly shabby to boot.

So if Walsh and Cruz were cost-cutters, Doyle is the customer champion. Thanks to him, free water and snacks are back on the BA menu. He listed other improvements too in a Sunday-morning missive to executive club customers, not all of which were sops: table ordering in lounges, a new baggage tracking system and upgrades to the customer call centers to cut waiting times.

Maybe those changes do count as premium in an era when short-haul luggage is a luxury. Still they lack the grandeur that the airline’s operatic ads have encouraged potential passengers to imagine over the years, but which would require the budget of a Gulf carrier to implement.

British Airways recognizes like everyone else that in economy class, you compete on price first and foremost, not frills. That is what achieved industry-leading operating margins of around 15 per cent pre-pandemic. Frugality on that front is what will preserve future returns for the shareholders who spent € 2.75bn supporting parent IAG’s 2020 rights issue.

That said, BA’s premium product has fallen behind. It can no longer afford to be complacent that prime Heathrow slots will do the hard work, with business class customers from New York’s JFK sucking up a substandard product provided they land in London by 7am. Now the pandemic has upended the industry, BA needs to tempt passengers to travel at all.

Business class – and the profits it brings – is being propped up by leisure travelers. That trend may fade once cash-rich tourists have splurged their excess lockdown savings, but one that will not be a premium economy. The swollen ranks of the world’s mass affluent will continue to pay up for a little extra legroom, a slightly more exclusive cabin, and a price tag that spends some of the kids’ inheritance, but not all of it. For IAG, the appeal is obvious. HSBC analyst Andrew Lobbenberg estimated last year its premium economy profit margins per square meter of floor space were around 35 per cent – higher than business and more than double economy.

The trouble is that such travelers are likely to be less slot-sensitive, so their on-board experience actually matters. Doyle can thank Cruz for a seat improvement program already under way. But Cruz’s other legacy is a problem: staff are understandably fed up with an employer that threatened to fire and rehire them on less generous terms. The morale deficit shows, as does the sense cabin crew are overstretched. Unless Doyle can reverse that, BA’s premium appeal will suffer.

One of the Saatchi admen behind BA’s aspirational campaigns of the 1980s and 1990s reckoned the carrier was an analogue for the state of Britain. BA’s business class of the time embodied the late-80s swagger of the City, he said. A nostalgia for the British Airways of that era is understandable, but a return to it is unachievable at a sufficiently attractive return to investors. Neither call centers nor crisps will restore its status as the world’s favorite airline. But then, BA would be doing well if it was merely Britain’s favorite.

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