Plans for restructuring Gatwick announced

British Airways today (December 6) announces the results of its Gatwick review. The overall aims are to improve profitability and ensure the group, as Gatwick’s leading operator, has a viable long-term future at the airport, providing customers, particularly in the Gatwick catchment area, with services designed more specifically around their needs.

Today’s announcement builds on the company’s established network and fleet strategies. It follows changes already announced for introduction next year. The measures announced today will be implemented over the next two years.

It marks a shift from previous attempts to build Gatwick as a transfer hub, competing with Heathrow and other hubs in Europe. Key elements include:

· Significantly reducing longhaul operations
· The current 43 longhaul destinations will be reduced to around 25. Services to half a dozen destinations with no prospect of achieving suitable levels of profitability will be suspended, and another ten or so destinations will transfer to Heathrow, where there are prospects for substantially improving their profitability.
· The remaining Gatwick longhaul routes will be served by a longhaul fleet rationalised from the current 33 Boeing 747s, 777s and 767s, to around 20 Boeing 777s.

· Refocussing Gatwick’s shorthaul business
· The main emphasis will be on serving the needs of London and South East England, particularly the Gatwick catchment area, but while there will be less emphasis on providing transfer passenger feed to longhaul services, connections will still remain an important part of the Gatwick business.
· A small number of poorly performing shorthaul routes will go.
· Shorthaul aircraft movements at Gatwick are expected to remain substantially similar to today’s levels, but improved utilisation will lead to some reduction from the current 56 shorthaul aircraft. Precise details are still to be finalised.

· Introducing a simplified structure for the group’s Gatwick activities
· To improve the group’s operational flexibility and financial performance, the group intends to bring the operations and management of its two Gatwick shorthaul subsidiaries European Operations at Gatwick (EOG) and CityFlyer Express more closely together under the overall British Airways management structure.
· All British Airways services from Gatwick will operate under the British Airways brand name.

· Consolidating operations at the North Terminal
· Subject to final agreement with Gatwick Airport Ltd, CityFlyer Express’s activities will move from the South Terminal to sit alongside the rest of the group’s activities at the North Terminal, in spring 2002.
· Freight and mail activities will be consolidated at British Airways’ Gatwick Cargocentre.

Added to other route, network, fleet, and product changes already announced, the measures detailed today bring the total group capacity reduction by 2003 to around 20 per cent compared with last year (1999-2000).

In terms of jobs, the effect of today’s changes will be an overall phased reduction of around a thousand across British Airways’ 63,000 group workforce over the next couple of years. The group aims to achieve this through natural staff turnover with, where this is insufficient, voluntary severance, early retirement and transfer and retraining opportunities.

Announcing the new Gatwick plan today, Rod Eddington, British Airways’ Chief Executive, said: "When I arrived at British Airways I said the company had the right overall strategy - but it did not go far enough fast enough. We have made a number of changes since then which are already bearing fruit. Today we detail our plans for improving our performance at Gatwick.

"Gatwick is a key airport in our home market, and our activities there must operate on sound financial footing. Despite the very best efforts of our team there, this has not previously been possible to achieve. The steps we are announcing today should improve our group profitability and ensure British Airways has a long-term viable future as Gatwick’s leading airline.

"While the end result will be a smaller British Airways operation at Gatwick than today - although this will partially be offset by expansion at Heathrow - Gatwick will remain strategically crucial to the British Airways group. The airline will still be the biggest carrier at Gatwick, and Gatwick will be by far British Airways’ biggest base away from Heathrow."

Notes


The route and fleet changes will be phased in each flying season. For commercial reasons, details of what the changes will mean for individual destinations will be finalised and announced in line with the airline’s usual timetable for detailing seasonal schedule changes.

Longhaul

The first of the longhaul transfers announced today will be Nairobi, Dar es Salaam and Seychelles, which will move from Gatwick to Heathrow in October next year.

The Heathrow-based longhaul fleet will be increased to take account of the route transfers.

Around two-thirds of the Gatwick 777s will operate in a three-class configuration, offering Club World, World Traveller Plus and World Traveller, on routes where First class demand is low. The rest of this fleet will still offer First class.

Currently arrangements exist under which some of British Airways’ Gatwick longhaul leisure routes are flown by cabin crews provided by JMC (under the "AML" arrangement), operating on three 777s with a higher density seating configuration than the rest of the fleet. Negotiations are proceeding with the objective of allowing these arrangements to expire by summer 2002 after which all British Airways longhaul services will be flown by crew on British Airways contracts, and these three aircraft will be reconfigured to the standard British Airways configuration.

Shorthaul

There are many shorthaul destinations which British Airways cannot serve from Heathrow because of slot and other infrastructure constraints. The airline remains committed to serving a broad range of shorthaul destinations and Gatwick has a key role to play in offering customers quality services to these destinations.

Some shorthaul destinations can support parallel British Airways services from both Heathrow and Gatwick, but in future schedules and capacity on these Gatwick-based routes will be geared towards serving passengers for whom Gatwick is their most convenient London airport. The shorthaul network served by British Airways group from Gatwick will be maintained at broadly the same number of destinations as today - 53.

The airline has no plans to withdraw or reduce services to any regional destination in the British Isles currently served from Gatwick. Gatwick will still offer great transfer connections to and from these markets, catering for the vast majority of the connection needs of these markets.

Although there will be less emphasis on connecting traffic, the airline still expects to carry significant numbers of passengers who will transfer at Gatwick, and will continue to offer high quality services for passengers, particularly from the UK regions, using the airport to make flight connections.

In line with the airline’s previously announced fleet strategy, capacity will be reduced by using smaller aircraft, with each offering, on average, around 10 per cent fewer seats. This reflects the reduced volume of connecting passengers and should improve load factors.

Bringing the operations and management of EOG and CityFlyer Express more closely together is subject to reaching agreement with the unions on cost levels for the new business.

Gatwick shorthaul services operated under the British Airways brand by its franchisees BASE, Brymon, British Regional Airlines, Deutsche BA and GBAirways are unaffected by today’s announcements.

Capacity

The overall effect of these changes, added to steps already announced or implemented, will be around a 10 per cent reduction in shorthaul capacity at Gatwick. The transfer of destinations to Heathrow and route suspensions will mean a large reduction in longhaul capacity at Gatwick, giving an overall Gatwick network capacity reduction of 40 per cent in summer 2003 against summer 1999. With capacity measured in available seat kilometres, the impact on actual passengers numbers is expected to be substantially smaller. Flying hours will be reduced by around a quarter. Aircraft movements will be similar to today.

The move of more longhaul flying to Heathrow will increase capacity there by a little more than 5 per cent.

Taken together, the result will be a trimming in overall British Airways group capacity of 2 per cent, in addition to capacity reductions already announced.