Chief Executive Keith Williams says is to be integrated into BA “as soon as possible.”
A first tranche of BMI flights is to be sold through BA from May 23, with a second tranche to follow in June. Williams says it is important for BA to get commercial control and use its own revenue management. The revenue performance of BMI “has been deteriorating because of the uncertainty about ownership,” according to Williams. Some of its Heathrow flights have been operating at 50% load factors, which he describes as “appalling”.
The takeover of BMI will drag down full year operating profit by €240 million, including €90 million in non-recurring items.
BMI’s aircraft are to move under the BA air operator’s certificate one by one. That process is to be completed by the end of this year. BA is “not interested in flying the twolong term,” Williams says. The first is being repainted this month.
IAG sees a €300 million improvement potential for BMI, one third each coming from revenue enhancements, network effects and cost cuts. That is to be achieved by 2015.
BA expects to introduce 18 new routes using the BMI slot portfolio in the winter timetable. Three of them are to U.K. and Ireland destinations, six short-haul and nine medium- and long-haul services. BA will also add capacity on eight existing routes.
The longer term goal is to significantly expand long-haul operations. Around one third of the total BMI slot portfolio is to be used for additional long-haul services, but International Airlines Group (IAG) CEO Willie Walsh warns that there needs to be a network balance with short-haul, because new long-haul flying typically needs more short-haul feed than long-established routes.
IAG, the holding company of British Airways and, expects to reach only a breakeven result this year. The massive drop from a €485 million operating profit last year is linked to three main factors: the deteriorating performance of Iberia, high fuel costs and the integration of BMI.
IAG posted a €249 million operating loss in the first quarter, significantly worse than the €102 million a year earlier. That result comes in spite of a 7.8% increase in revenues to €3.8 billion. IAG in total also saw passenger unit revenues improve by 8.5% with capacity almost flat at 0.6%.
The trend is similar at- and . All three big European airline groups have launched restructuring programs – at IAG it is focused on making Iberia profitable.
The results of both operating airlines worsened in the first quarter. But Iberia contributed the largest chunk of the operating loss (€170 million), while BA came in at a GBP62 million loss. Iberia’s result “reflects the weakness of the Spanish domestic market and industrial action by pilots,” Walsh says. The pilot strike alone cost €25 million.
IAG also spent €281 million or 25% more on fuel.
Walsh warns that planned user charge increases at Madrid Barajas airport will lead to a reduction of capacity by all airlines. “It would be quite foolish by the Spanish government” to go ahead with the plans, he believes, particularly given Spain’s dependence on price-sensitive tourism.
He expects the results of the binding arbitration between Iberia and the SEPLA pilot union to be published within the next two weeks. That ruling will result into a new collective bargaining agreement and “will bring to an end” the dispute between the two sides.