BA facing long haul to recovery

BA has cut 25 percent of its workforce since September 11

LONDON, England -- British Airways' Chief Executive Rod Eddington has vowed to transform the company into a "simpler, leaner, more focused airline."

The announcement on Wednesday to cut 5,800 jobs -- which, on top of the 7,000 announced in the wake of September 11, brings job losses at BA to almost 25 percent of the workforce -- confirmed the worst fears of employees, unions and analysts.

It was Eddington himself, in a recorded telephone message for staff, who stated the obvious: the airline is in "crisis."

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While the impact of the September 11 terror attacks and their affect on customer confidence in flying cannot be underestimated, Eddington sought to blame BA's troubles on a changing business environment.

Nevertheless, transatlantic routes -- the mainstay of BA's business -- have been hard hit, while low-cost airlines have moved in on its short-haul routes.

Eddington said: "The world in which we operate in is a much more competitive one and it's more competitive because the no-frills carries have become a real force in the short-haul network and our main competitors are much stronger.

"We need to make changes in order to compete and become more robust."

If he knows what condition the company is in, he has also identified the strategy needed to survive.

"We are going to take some key learnings from the no-frills carriers -- much greater online bookings, higher aircraft utilisation -- so we can close the price differential and make money," he said.

The cuts at BA are in stark contrast to the current condition of the no-frills airlines.

Only last week, British low-cost airlines easyJet and Go, and Ireland-based Ryanair, all announced substantial jumps in passenger numbers.

Both Ryanair and easyJet have also announced plans to order up to 175 new aircraft between them and are expanding services.

The biggest blow for BA is that Go -- which has added 23.4 percent more capacity in the past 12 months -- was part of BA until it was sold off for £110 million ($155m) in June 2001.

The secret to the success of these smaller airlines is that many of their bookings are taken online, allowing them to make huge savings on cost.

Ryanair, for example, recently said about 92 percent of its tickets are sold via its Web site.

Part of BAs future strategy is to restructure its European short haul business to provide a competitive response to these no-frills carriers, which will only be good news for customers.

It has said it is to change its short haul pricing structure from June, giving business travellers and holiday makers lower fares, greater flexibility and more choice.

It also plans to cut its global distribution costs to save £100 million.

While passengers will benefit, some travel agents could suffer as BA makes greater use of the internet.

It says it will "reduce payments to travel agents in the UK for short haul bookings…resulting in British Airways lowest fares being available on the Internet."

The Association of British Travel Agents said that while it was "disappointed" by the BA announcement, it said that 80 percent of BA's bookings still came through travel agents.

Eddington told staff the company was facing "crisis"

A spokeswoman said: "We were pretty prepared for this type of action by BA and knew that it had to take drastic action.

"We are disappointed that there are some changes to payments to our members, but there the £10 ($15) flat fee for booking a BA flight remains."

British Airways, like other North Atlantic carriers, also suffered by a sharp drop in business following September 11.

"Some of the challenges that we are addressing today predate the 11th of September, there is no doubt about that. 11th September has radically changed the external environment for us, but some of the problems we are addressing today predate that," Eddington told the BBC.

BA has tried, but so far failed, to forge alliances with another airline to boost revenues and cut costs.

Last month BA and American Airlines rejected a U.S. Transportation Department ruling that would have allowed an alliance between them if they gave up 224 takeoff and landing slots for travel between U.S. cities and London's Heathrow Airport.

BA has also been linked with KLM Royal Dutch Airlines.

Eddington is adamant that BA will continue to be a full-service, network carrier.

He said: "We will not become a no frills airline nor will we launch one. We will compete profitably and intelligently alongside them by adopting what they do well -- online bookings, high aircraft utilisation and pricing simplicity.

"We will mix it with what we do well -- providing a great network with frequent flights from convenient airports, as well as delivering world class customer service."