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British Airways to Take On Low-Cost Rivals at Gatwick With New Budget Subsidiary

British Airways to Take On Low-Cost Rivals at Gatwick With New Budget Subsidiary

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British Airways told employees on Thursday that it intends to start up a new budget subsidiary based at Gatwick Airport that could take on low-cost rivals like EasyJet, Ryanair and Wizz. The subsidiary would operate at significantly lower costs than BA’s present operation and allow the airline to go head to head with competitors fighting for highly price-conscious consumers.

The pandemic exposed just how vulnerable British Airways was at Gatwick and for a while, the airline considered abandoning the leisure-focused West Sussex airport entirely. More than 18-months into the pandemic, all short-haul services continue to operate out of Heathrow.

BA’s operation at Gatwick remains limited to just a select few long-haul leisure routes and schedules could be cut even further as travel demand ebbs away through the long winter months.

British Airways wants to compete with low-cost rivals and keep its foot in the door at Gatwick but current operating costs, set against the continuing effects of the pandemic, make that untenable in the opinion of senior BA executives.

To get around this conundrum, British Airways is proposing starting a new subsidiary out of Gatwick which would operate with lower costs.

Explaining the idea to staff in an internal memo, BA’s management team said:

“As you know, we haven’t been operating short-haul flights at Gatwick during the pandemic. This was previously a highly competitive market, but for us to run a sustainable airline in the current environment, we need a competitive operating model. 

Because of that, we are proposing a new operating subsidiary to run alongside our existing long-haul Gatwick operation, to serve short-haul routes to/from Gatwick from summer 2022. 

This will help us to be both agile and competitive, allowing us to build a sustainable short-haul presence at Gatwick over time.”

Not that any final decisions have yet been made. The memo continued:

“As of today, we don’t have the answers, but we want to be upfront about the complexity we’re dealing with, and working through with your trade union representatives. We will keep you posted as things develop.”

Lower operating costs would be mainly driven through hiring pilots and cabin crew on cheap contracts and subcontracting nearly all other services to the lowest bidder.

Despite this, the BALPA pilots union cautiously welcomed the subsidiary Acting General Secretary Martin Chalk saying the new airline would “create a number of much needed new pilot jobs”.

This isn’t something new and British Airways already operates a wholly-owned subsidiary known as CityFlyer for short regional services.

Low-cost subsidiaries are also common across Europe. Iberia owns Iberia Express, a short-haul carrier with cheaper staff that operates flights on behalf of Iberia. Lufthansa owns budget subsidiary Eurowings and Eurowings Discover.

No final decisions have yet been made but British Airways looks to be targeting staff wages as it struggles to keep a foothold at Gatwick Airport.

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