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Corporate clients of British Airways should expect to pay
more in the year ahead owing to fewer seats in lower fare buckets and reduced
negotiated discounts, a senior executive told BTN.
"We are beginning to see more alignment between supply
and demand, so we are trying to increase our yield in the corporate market so
we can plot our route back to profitability," said Richard Tams, BA's head
of U.K. and Ireland sales and marketing. "Given that demand is growing,
that is going to have the effect of less availability of lower fares. We are
also negotiating for lower discounts moving forward. It doesn't mean fewer
deals, but we are aiming to make them more commercially sustainable."
BA had an operating loss of £72 million in the three months
ending June 30, mainly as a result of strike action and the volcanic ash
crisis. The carrier this week reported revenue passenger kilometers rose by 1.3
percent in September year over year, with particular strength in premium
traffic, which increased 4.3 percent.
Tams also told BTN
that BA has restructured its corporate sales strategy during 2010, shifting
account managers away from clients with best-on-day buying policies.
"What we have found with a number of companies over the
last couple of years is that they have become much more transactional and that
we are only as good as our last fare," said Tams. "We are refocusing
our sales efforts on companies which want strategic relationships with us, and
we will work with the transactional clients in a different way. A number of our
largest clients know we aren't necessarily the cheapest on the market, but they
may be more interested in things like the service they get on the ground and
the quality of the management information we provide."
BA is in the process of restructuring its sales strategy
further now that it has started a transatlantic joint venture with American
Airlines and Iberia, and with a merger with Iberia set for the end of the year.
Though the joint venture partners have started conversations with some existing corporate clients about merging separate contracts, the
final offering and approach for the corporate market remains in progress.
"We do have a group of people working on the proposal
that we're going to bring forth," Iberia general manager of the U.S. and
Canada Jose Maria Alvarado said. "We have to keep in mind that the antitrust
immunity was granted only a few weeks ago, in July of this year, so up to now
we have not been able to discuss exactly what that joint proposition will look
like in any great detail, but we are working in earnest, and we do expect to
have a much more integrated account management experience in the early part of
Asked whether the joint venture will compel clients to contract
with all its members, as has been reported about the other two joint ventures,
Tams said this would not happen. "We will be driven by what the customer
wants, not by forcing them to do something they don't want."
Tams rejected the fundamental objections that consolidation
pushes up prices because it reduces competition and that the transatlantic
market is becoming a series of monopolies, including Star Alliance dominating
U.S.-Germany service and Oneworld dominating U.K.-Germany service. He cited
Delta, which entered the U.S.-London Heathrow market, BA's backyard, in 2008
and recently announced a major expansion in service there. "If you ask
Delta if it intends to lie down and let us take the entire U.K.-U.S. market, it
will take a very different view," Tams said.
On the Heathrow-Dallas/Fort Worth route, currently a 100
percent AA/BA monopoly, and other AA/BA-dominated routes: "There is
nothing preventing anyone entering these markets," Tams said.
AA announced in July it is pulling off Frankfurt-Chicago, an
Atlantic Plus-Plus stronghold between United and Lufthansa's home hubs. Tams
said this is exactly the kind of route where a rival joint venture can take on
the incumbents to provide some competition.
"There are all sorts of ways to route traffic from Frankfurt
to Chicago. Lots of passengers on it are hubbing into other parts of the U.S.
The JV gives us an opportunity to compete on some routes as three airlines
where one could not do it alone. There will be a number of new routes for
us," Tams said.
BTN's Jay Boehmer
contributed to this report.