British Airways at centre of current financial crisis
Tuesday, September 23, 2008: In the midst of our current financial crisis, it appears that British Airways is one of the carriers suffering the most, not only seeing a dip in premium traffic but also recording its lowest one-day share fall since 9/11.<br>
The Centre for Asia Pacific Aviation (CAPA) in a new report pointed at British Airways as the carrier in the “epicentre” of the economic crisis, and points out the 30% drop in share value last Thursday.
“BA is in many ways at the epicentre of the crisis in Europe, as the London financial services hub takes a pounding from the financial market turmoil,” says CAPA.
“Worldwide premium demand fell 1% in Jul-08, following a -0.4% fall in Jun-08... [And] the EU-US open skies agreement, and resulting influx of competition at Heathrow (particularly from cash-starved US carriers) has resulted in sharply lower fares on the Atlantic – where BA historically earns 50% of its profits.”
But CAPA notes that this may not be all bad for the British national carrier, with its recent woes highlighted in the press, BA will be able to push through more restructuring of the company, such as capacity cuts and staff reductions if they so choose.
Also with the current economic instability and the teetering nature of some carriers, a merger to bail out Alitalia may be more easily passed.
CAPA notes, “For BA – and the rest of the airline industry – this crisis represents the best chance in decades for radical restructure and reform, to put the global industry on a much surer footing. The process however, will be an extremely painful one.”