Monday, 5 December 2011

British Airways bid for BMI aims to plug Asia gaps

British Airways scrapped long-haul flights from Manchester in 2008, opting to route through Heathrow
British Airways scrapped long-haul flights from Manchester in 2008, opting to route through Heathrow

British Airways will probably target Korea, Malaysia and other high-growth Asian markets as it examines how to make the best use of operating slots at London’s Heathrow airport on offer with the takeover of BMI.

BA’s parent, International Consolidated Airlines Group, last month reached an accord to buy BMI from Deutsche Lufthansa. IAG allocates one-third the number of seats to Asia that it does to the US, leaving it trailing European rivals in tapping travel to some of the world’s fastest-growing economies.

British Airways will also have the capacity available to exploit new inter-continental routes as the London-based company takes delivery of 12 Airbus SAS A380 superjumbos and 24 Boeing Co. 787 Dreamliners starting in 2013. BMI generally serves less lucrative, short-haul destinations using smaller planes.

“There isn’t that much that BMI does out of London that IAG doesn’t do already, or would want to do,” said Chris Logan, an analyst at Echelon Research & Advisory in London. “IAG will cut a lot of BMI’s existing routes and use the slots for long- haul to Asia and perhaps a few additional US destinations.”

British Airways has had limited scope for growth because of a lack of operating positions at Heathrow, Europe’s busiest airport, which operates at 99 percent of capacity and won’t be allowed to add a third runway, according to UK Prime Minister David Cameron.

Buying UK-based BMI will add 8.5 percent of total slots to the 44.5 percent that BA and Spain’s Iberia- with which it merged in January to form IAG - already control.

“We’re still moving forward” with the acquisition and currently doing due diligence on BMI, said Laura Goodes, a spokeswoman for IAG.

Prime targets for BA are likely to include Incheon, the biggest hub in South Korea, a country the carrier has never served, and Kuala Lumpur, which it exited in 2001 to focus Southeast Asian operations on Bangkok and Singapore, according to John Grant, a London-based consultant at UBM Aviation.

“British Airways needs to be back in that part of the world,” Grant said. “It’s the perfect time because they’ve got new orders for aircraft coming in. It really is the missing piece of the jigsaw.”

Air France-KLM Group, Europe’s biggest airline, offers 13 weekly flights to Korea and Lufthansa four. The French company also provides seven services to Kuala Lumpur, operated by the Dutch KLM unit. Kuala Lumpur will also probably feature high on BA’s wish list because Malaysian Airline System is set to join the Oneworld alliance that IAG leads, Grant said.

British Airways also currently operates only 26 weekly flights to China, versus 73 at Air France and 47 at Lufthansa. Madrid-based Iberia doesn’t operate any Asian flights, its chief strength being on routes to Latin America.

To maximize the attraction of services to London, British Airways flights need to leave Asia late at night, allowing passengers to sleep on the plane and head straight into morning meetings after arriving at Heathrow, UBM Aviation’s Grant said.

Gulf carriers including Dubai-based Emirates, the biggest airline by international traffic, Qatar Airways and Etihad of Abu Dhabi represent a major threat to any expansion in Asia as they seek to funnel transfer traffic through their hubs on fast-expanding fleets of widebody planes, Echelon’s Logan said.

“It seems like a good idea to expand to Asia, but delivery schedules at Middle Eastern carriers are so aggressive that there’s a risk in the medium term,” he said. “It’s surprisingly easy for airlines to mess up an attractive market by all throwing supply at it at the same time.”

Travellers shouldn’t expect new connections immediately as routes can take as many as two years to set up, Grant said.

Source: arabianbusiness

1 comment:

  1. eToro is the #1 forex broker for beginning and pro traders.