Is British Airways’ New Low-Cost Subsidiary Ready For Take-Off?

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Last Updated: 21 Feb 2024

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If you are old enough, cast your mind back to the late nineties and you may remember a British Airways budget airline offshoot called Go. Its cheerily designed planes flew from Stansted to a host of European cities for less than five years before the operation was bought out, first by its senior management, then by rival easyJet, which soon absorbed it into its network.

So, the recent news that BA would be launching a low-cost subsidiary from Gatwick raised plenty of questions about whether, this time around, things would be done differently. The answer, it seemed, was yes with plans reaching an advanced stage. BA confirmed its intention to operate the new subsidiary under the British Airways brand and the signs looked hopeful that the new venture would let you earn and redeem Avios for British Airways reward flights.

Plans for the new low-cost seemed to have run out of runways last month, when the main union representing British Airways pilots, BALPA, announced that it could not support the contractual terms being offered for its members to join the new low-cost operation. In response, BA suspended most of its existing short-haul operations at Gatwick. Flights to European destinations were either taken off sale or transferred to Heathrow, with the exception of a few domestic flights feeding into long-haul routes.

 However, failure to reach an agreement had potentially negative implications for all parties. 

 

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BA was left sitting on a significant number of Gatwick take-off slots which it would either have to sell or lose. Whilst Gatwick slots command a premium, sources close to BA made it clear that the airline wanted to avoid a repeat of the Go situation, which helped easyJet become a major competitor. 

BALPA faced the risk that IAG, BA’s parent company, might pursue a new approach at Gatwick through another of its subsidiaries, cutting its members out altogether. Even if it didn’t, fewer flights would be bad news for those in the “holding pool” of pilots, used by BA for Gatwick departures.

 

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So, whilst many reporters had written off all hope for the new subsidiary, BA and the union kept talking behind the scenes. Then, on 4th October 2021, a BA spokesperson confirmed that a new draft agreement had been reached with BALPA. A week later, the union’s members voted to approve the proposal and British Airways announced that it would resume planning for a full-service, short-haul subsidiary, flying from Gatwick. 

BALPA General Secretary, Martin Chalk said: “We understand BA is continuing its discussions with other stakeholders with a view to relaunching operations next summer. We expect BA to reach a final decision shortly.”

With the union onboard it now seems likely that, after a short delay, BA’s new low-cost subsidiary is clear for take-off in 2022.

 

Why does BA want to launch this subsidiary?

By its own admission, BA’s short-haul operations from Gatwick have been unprofitable for years. The airline then pulled its domestic and short-haul services from the airport entirely in April 2020 in order to consolidate its operations at its main base, Heathrow, during the pandemic.

There were concerns that these short-haul services would not return to Gatwick, or that the airline may drop the airport entirely, so the new venture is good news for travellers who live in the South East.

In changing its business model for short-haul flights from the airport, BA hopes to rein in operating costs and to compete with budget airlines in what it calls the ‘extremely competitive’ Gatwick environment. This means it will go head-to-head with rival EasyJet.

In 2019 easyJet was the largest airline at the airport, operating just over 40% of the departure seats. In fact, back in 2008, it bolstered its position when it took over and dissolved GB Airways, which once operated budget-conscious flights from Gatwick as a British Airways franchise.

BA was in second place at Gatwick in 2019 with just shy of 17% of the capacity but that was pre-pandemic and Ryanair and Wizz Air are also known to be eyeing expansion at the airport. BA has already said it expects competition to be ‘even tougher’ as travel returns to pre-Covid levels.

While BA goes through the process of union consultations with staff over revised pay and conditions, it will not reveal much detail about its plans for its new-look short-haul operation. However, the budget offshoot is expected to start flying next spring in time for the 2022 summer peak.

 

How ‘no frills’ will it be?

From what we understand, the new airline will keep full British Airways branding and operate its fleet of Airbus A320 aircraft. BA claims passengers will ‘continue to benefit from the same full standard of service that they currently receive’ but be able to enjoy ‘competitive fares’.

 

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This seems to rule out a Go-style budget offshoot. It could even suggest that the airline may keep its Club Europe (business class) on the subsidiary as a point of difference from its competitors. BA has a similar arrangement at London City Airport, where its flights are operated by a wholly-owned subsidiary, BA CityFlyer.

BA’s long-haul routes from Gatwick will remain served by its existing full-service model.

It is very likely that the airline is cutting costs for its new subsidiary by renegotiating contracts with staff and suppliers. Typically budget airlines also reduce overheads by operating on fast turnarounds, adding more seats (thereby reducing legroom) and charging for food and drinks. They also usually charge for checked bags and for hand luggage over a certain size.

Currently, on BA’s full-service short-haul flights you can have two pieces of hand baggage for free but pay for any checked baggage if you are travelling on its ‘Basic’ fares – the cheapest of its three short-haul price tiers.

Though details are still sketchy, aviation experts predict that the new set-up will be similar to that of BA’s sister airline Iberia Express, which is a subsidiary of Spanish national carrier Iberia. BA and Iberia are both owned by the International Airlines Group (IAG).

Iberia Express has a business class and economy, it offers in-flight entertainment for free via passengers’ own devices (if they are Iberia Club Express members) but charges them for food. The economy seat pitch is typically smaller than on Iberia, at 28 inches. Seat selection and checked luggage are free in both business and economy, except for passengers on the lowest of its six fare structures.

 

Where will it fly?

BA has indicated its new subsidiary will concentrate on European and domestic routes using the slots it already holds at Gatwick. As it negotiates its way out of the travel slump caused by the pandemic, it is unlikely that BA will keep operating all of the short-haul routes that it did in pre-Covid times and it's expected to reduce the number of aircraft used for short-haul routes from 25 in 2019 to nearer 17 for next year.

Provisional schedules suggest BA will operate 30 short-haul destinations from Gatwick for summer 2022. Looking at the routes on which BA deployed the most capacity from Gatwick in 2019, OAG (Official Airline Guide) flight data shows the leading short-haul destinations were Jersey, Malaga, Glasgow, Venice, Edinburgh, Amsterdam, Faro and Nice.

 

Will it only fly from Gatwick?

The new agreement with BALPA is for a low-cost subsidiary operating from London Gatwick Airport. However, as previously reported by Reward Flight Finder, BA’s CityFlyer subsidiary has experimented with an expanded summer schedule from Southampton Airport this summer. BA CityFlyer has also confirmed a new route from Southampton to Salzburg that will operate through the ski season.

Southampton Airport charges airlines far lower fees than Gatwick. It has also recently received approval to extend its runway, allowing Airbus A320 and Boeing 737 aircraft to safely take off and land.  If CityFlyer flights from Southampton prove popular it is not inconceivable that BA could consider the airport as a second base for its new low-cost subsidiary in the future.

 

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How will it affect the way we earn and redeem BA Avios?

British Airways tells Reward Flight Finder it cannot confirm details about how BA Avios may be affected while union negotiations over the new venture are ongoing, but says that the new service would have the same ‘look and feel’ as its existing short-haul product.

If BA’s new subsidiary does, as analysts expect, follow the Iberia Express model this will be good news, because if you are an Iberia Plus cardholder, you can earn Avios on Iberia Express in the same way as you do on its parent Iberia. Passengers on any of the budget airline’s six fare structures can earn Avios when they fly. And you can use Iberia Plus Avios to pay for a reward flight operated by the Iberia Group or any airline in the OneWorld Alliance. BA’s CityFlyer subsidiary is also involved in the Avios scheme.

 

With BA’s union agreement in place and planning already advanced, it shouldn’t be long until Reward Flight Finder can let you know more about what BA's low-cost subsidiary will mean for British Airways reward flights from London Gatwick Airport.

 

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British Airways (31)

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