Price War in Business Class Fares - British Airways

The most profitable of all airfares in the travel industry, are the trans-Atlantic business-class fares. That’s the reason competition is getting steeper by the minute, forcing fares to vary significantly. Moreover, fare (or fair…) pricing is expected to become even more complicated as competition continues to grow and demand holds up.

Now, we have all noticed in the last couple of weeks, that British Airways is on fire – making one announcement after the other. The latest news from coming from its board of directors is that there are plans to start a new, business class-only route. The new route will operate twice ad day starting from the following year and will be flying between either Newark (New Jersey) or Kennedy (New York) and London City Airport.

The fleet will consist of Airbus A318 planes, which normally can accommodate up to 110 passengers, but have only 32 seats that covert into flat beds – an once-upon-a-time luxury that is rapidly becoming a must-have-feature, especially when it comes to long-haul business class flights. Now, it is a good time to mention that, what is most remarkable about this plan is that British Airways already flies eight times per day between London Heathrow airport and Kennedy – New York airport. Plus an extra three times a day between Heathrow airport and Newark!

The obvious advantage of this all-business-class route is the location. London City Airport, which have not had any trans-Atlantic routes operating from its terminal so far, is 10 kilometres (or 6 miles), from the renowned financial district, City of London, and only 5(!) kilometres from Canary Wharf, London’s second most important financial centre (which is still growing by the way...).

The downside of this is the pricing. The competition in the business-class airfares has been intensifying ever since Eos, Silverjet and MaxJet (which after two years of operation has become defunct in December 2007) – three start-up-business-class carriers – started offering business-class flights between New York and London at prices considerably lower than the well-established major carriers.

Now, the ‘business’ facts are the following:

• As I mentioned earlier in the article, while the competition has grown strong, demand in business-class seats has not followed the exact same direction.
• Analysts believe that the price-war in business-class cabins over the Atlantic has just begun and is likely to shake the foundations of the existing fares, once and for all.
• A lot more pricing options are expected to become available over the next few months.

So, to go back to where I started, British Airways new business-class service is going to have pretty much the same fares as its existing business-class service, called Club World, with flights operating between London Heathrow airport and New York.

“You can assume it’s going to be within the absolutely same neighbourhood,” said Woody Harford, the senior vice president for North American commercial operations of British Airways, in recent interview.

Of course London City airport is indeed in a nice neighbourhood, and close to work. But when it comes to cutting down on ridiculously high amounts of travel expenses – which is something that the financial industry which homes in the two financial districts that London City airport tries to target, will definitely take a close tomorrow, if it hasn’t done already! – I think that ‘other’ neighbourhoods might look as nice, if not nicer.

Examples of ‘other’ neighbourhoods’ business-class flight prices.

2 days notice, New York – London Heathrow– New York

British Airways: $10,658.37

American Airlines: $8,611.40

EOS: $8,617.84

Furthermore, on Silverjet, which has business-class flights operating between London Luton Airport and Newark, the price fare is $3,260 – down to almost 1/3 of the British Airways’ current fare.

So, what is it that feels them with hope? British Airways is obviously counting on its brand recognition – it is been voted, after all, Britain’s most favourite airline... again! But then again, I don’t think all of its cards are on the table yet, as only weeks ago, it announced plans to launch a new business-class-only airline, called OpenSkies. This, in turn, means that they might try to enter the low-cost-business-class airfares through a side door. A ‘cover’, maybe? It could be, that British Airways is concerned about any consequences on the company status if fares were priced more aggressively.