British Airways: Responding To Low-Cost Airlines: Case Study
British Airways: Responding To Low-Cost Airlines: Case Study
British Airways: Responding To Low-Cost Airlines: Case Study
Ever since its creation nearly a century ago, the commercial airline industry
has been prone to abrupt ups and downs. Yet, few of these periods of
change have promised to transform air travel as thoroughly as the wave of
increased competition, new entrants and aggressive price cutting now
sweeping through the airline business in both Europe and America. A slew
of new low-cost airlines is attacking big incumbent carriers, some of whom
will probably not survive.
In the spring of 2006 Willie Walsh, the recently appointed CEO of British Airways plc (BA)
and his senior management team faced choices about how to respond to the growing threat of
low-cost short-haul carriers who continued to capture market share in British Airway‟s markets
in Europe, and domestically in the United Kingdom. While this problem had existed for many
years following the liberalization of the European domestic airline market in 1990‟s, BA‟s
previous attempts at finding an appropriate strategy to respond to profitable low-cost start ups
such as Ryanair and easyJet had not been successful .
BA‟s options with respect to low-cost carriers seemed clear. Following 911, the option
of getting out of short haul routes altogether to focus on its much more profitable long-haul
routes had been debated. Robert Boyle who was the BA General Manager Network
Development at
that time states that the decision was to stay in short-haul for financial, practical and
______________________________________________________________________ ______
©2006 William D. Taylor John Molson School of Business October 2006.
This case has been prepared for class discussion rather than to illustrate either effective or
ineffective handling of an administrative situation.
competitive reasons:
We looked at the closure of our entire Gatwick operations; we looked at a
retreat to long haul - the so-called “BOAC option”; we looked at further
significant downsizing of the business and associated „slashing of the route
network‟, as the press would describe it, over and beyond the 20 per cent
reduction in capacity which we had already set in train. Finally, given the
shift in the market with considerable down-trading from premium,
particularly in the short haul business, we looked at whether the time was
right to move away from a two-class operation in our short haul business -
or at least for a portion of it such as Gatwick. Each of these four options
were evaluated in some detail but were rejected. Why did we reject them?
There are three principal criteria on which we judged whether any of these,
or indeed other options, should be taken forward. First and most obviously,
financial impact - not just whether the changes would contribute to meeting
our 10 per cent operating margin target, but also what impact they would
have on the imperative to reduce debt. Critically important also was
deliverability. It would have been pointless to come here today and give you
a plan which we did not feel was deliverable in practice. Thirdly, a solution in
our view had to leave the business stronger competitively at the end of the
process rather than weaker.1
In 2006, however, the continued success of low-cost carriers, such as easyJet and
Ryanair, demanded that BA take another look at its strategy in the short-haul segment. The
summer of 2005 was a milestone of sorts in that easyJet and Ryanair announced that their
monthly passenger numbers were greater than BA‟s, although BA questioned the way these
figures were calculated. In early March 2006, Ryanair announced a 22% growth in passengers
for February over February 2005 and that for the 12 months ending February 28 it carrier 34.3
million passengers. The threat from low-cost carriers was stronger than ever, and BA needed to
decide whether it should remain in the short-haul segment, or concentrate on its more
lucrative international routes.
The selection of Willie Walsh to head BA was seen by many as a very good choice given
the challenges the airline faced with low-cost carriers. Woods, aged 43, had built his
reputation transitioning Aer Lingus, which many regarded as a conservative, stateowned flag -
carrier prior to his tenure as CEO, into successful and profitable carrier with a much lower cost
structure.
Low-Cost Airlines
A major driving force in the world airline industry is the growth of new business models.
While many budget airlines have come and gone, Southwest Airlines has grown to be the
fourth largest airline in the U.S. Other airlines in this segment that have expanded rapidly
include JetBlue, Frontier, and AirTran (formerly ValuJet). In the last six years, low-cost airlines
have expanded capacity by over 40%, and currently these carriers have many orders for new
planes. Despite this impressive growth, many argue that discount airlines now represent a
mature business concept in the United States.
The first response of network carriers in the United States to these new carriers has been
to create their own offshoots: for example, Song by Delta, Lite by Continental, Ted by United. A
second stage response has been to try to compete against low-cost carriers by lowering their
own cost structures as best they can and matching fares on selected routes. Along with this
strategy has been the recognition that low-cost carriers can provide feed to larger carrier‟s
profitable long haul flights.
The low-cost airline segment now has many variations including charter airlines that have
become low-cost scheduled carriers in the holiday market, and regional carriers that have
transformed their model. An important development in American lowcost airlines is that the
leading discount airlines are moving upmarket. As the Economist has noted as low-cost carriers
make this move upmarket they begin to compete and clash with network carriers that are
moving downmarket.
An assumption made by most airline analysts is that a low-cost business model will not
work for scheduled long-haul flights. Service is more important on flights that last many hours
and the cost advantages of quick turnarounds are less given the long amount of time these
flights are in the air. This may be changing as demonstrated by the example of Emirates Airline
flying out of Dubai with a very low cost structure. With the coming of even larger aircraft for
long haul flights, such as the Airbus 380, the possibility of low-cost, long-haul carriers
successfully gaining market share exists.
easyJet: Starting with only two leased Boeing 737‟s in 1985 at Luton Airport near London,
easyJet has also grown very rapidly. Created by Greek Cypriot businessman, Stelios Haji-
loannou, it too has borrowed from the Southwest model by flying only one type of aircraft
Boeing 737‟s. Recently, it has added Airbus 319‟s to its fleet. The growth of easyJet truly has
been remarkable. In 1999, it flew about 3 million passengers while today it has over 30 million
passengers. In 2005, easyJet had revenues of over 1.3 million British pounds.
Competition in the low-cost carrier market in Europe is brutal. The influx of new entrants
and the over-capacity that exists (along with aggressive pricing that has led to price wars) have
created intense competition. Airline analysts predict that a shakeout in the European segment
is inevitable, and that the segment is also likely to see movements into new markets. Also,
many foresee a dilution of the low-cost carrier business model as some carriers try to
differentiate their offerings by flying to more expensive airports and adding some new services
such as in-flight gambling and movies (for a charge). On the other hand, the low-cost market is
at a much earlier stage of its development in Europe. It is estimated that in the United States
850 jets fly low-cost routes while in the European Union, with twice the population, only 350
low-cost jets are flying.
British Airways
The origin of British Airways can be traced back to 1919 and the period just after
WWI. Of its many predecessor companies, the most notable was BOAC (British Overseas
Airlines Corporation) which was formed in 1939. BOAC was at the forefront of the transition to
jet aircraft and had the distinction of making one of the first overseas jet flights to
Johannesburg in 1952 and being the first airline to offer transatlantic jet flights in 1958. The
airline acquired its first Boeing 747 in 1970 and had very rapid growth during the 1970‟s. In
1976, BOAC and BEA (British European Airlines) were brought together as British Airways (BA).
In that year, BA with Air France also launched the world‟s first supersonic passenger service.
Privatization
In 1980, under the Margaret Thatcher, the British government began the long road to
privatize BA by appointing Sir John King, who later became Lord King. It took until 1987 for this
process to be finalized. Although BA initiated a campaign to be known as “the World‟s
Favourite Airline” in 1983, during the 1980‟s survival was the major goal of the airline.
Following privatization, the airline used its new found strategic autonomy to takeover British
Caledonian in July, 1987 with the consequence and BA now flew out of Gatwick Airport as well
as its historic hub at Heathrow Airport.
Under Sir Colin Marshall, who served as CEO, and later as Chairman, British Airways during
its first 10 years as a private company was quite successful. From 1987 until 1996 it became
one of the world‟s most profitable airlines with profits before taxation climbing to a high of £
728 million in 1996. The key to BA‟s strategies during these years was the development of an
extensive global route network and the establishment of BA as one of the premier brands in the
world. Integral to this strategy was the creation of BA‟s Club World business class product as
part of the overall intent of making British Airways the world‟s favourite airline. Costs were
also streamlined and the airline reduced its number of employees. During this period BA made
several acquisitions and formed equity alliances with other carriers to gain access to feeder
markets. In 1992, Deutsche BA was established as a German subsidiary and in 1993 BA
purchased 25 % of US Air to have access to the critical US domestic market. This US Air stake
was later sold when BA formed a partnership with American Airlines. It also purchased a 25%
share of Qantas in the Asian/Pacific market. Along with other carriers BA formed the
Oneworld Alliance in 1998.
In 1999 and 2000, BA‟s profitability declined sharply, and in March 2000 the Board
replaced CEO Bob Ayling, who had been appointed CEO in 1996, with Rod
Eddington. Eddington undertook a number of measures to improve BA‟s performance. He
vigorously pursued a strategy of lowering BA‟s cost structure, invested in an internal e-business
infrastructure and took the airline through the 911 crisis, SARS, the Iraq War, and a period of
rapidly rising fuel prices.
Over the years certain elements of BA‟s strategy have remained constant. One element
that has not changed is that BA has always supported its most profitable segment which is the
premium long-haul business which its global route structure makes possible. What has also
been constant is the protection of BA‟s privileged access to Heathrow Airport -- one of the
world‟s busiest and most important airports. As the former flag-carrier for the United
Kingdom, BA has grandfather rights with respect to landing rights and slots at Heathrow. A
major part of BA‟s strategy had been to concentrate on its service offerings in all product
segments. Another element of BA‟s strategy is its fleet which, for the most part, utilized
Boeing Aircraft at least up until the late 1990‟s. With the exception of aircraft inherited when
acquisitions were made, BA has stayed with Boeing aircraft although its current fleet now
includes about 50 Airbus A319‟s and A320‟s. Exhibit 3 presents BA‟s fleet as of December
2005. The airline has always had a cargo business which in the last few years contributed just
under £ 500 million of revenue.
In an interview in Air Transport World in August 2005, outgoing CEO Rod
Eddington expressed satisfaction that BA was in better shape than when he took over in 2000.
Through restructuring and a rebuilding of its service product, BA has returned to profitability,
and its debt has been reduced from £6.5 billion to £ 3 billion (See Exhibit 4). In 2004-2005
British Airways had about 49,500 employees with 86% of these employees based in the United
Kingdom. The airline was entirely owned by private investors and 50% of its employees owned
stock in the company. In September 2005, BA entered a new era with their new CEO Willie
Walsh.
Willie Walsh
Willie Walsh has spent his entire career in aviation. Walsh joined Aer Lingus at 17 as a
pilot trainee. A business administration graduate of Trinity College, Dublin he rose through the
operations ranks to become chief pilot, and eventually switched to the commercial side when
he took on the task of turning around, Futura, Aer Lingus‟s problem Spanish charter subsidiary,
in the late 1990‟s. He returned to Aer Lingus as Chief Operating Officer in 2000 and became
CEO in 2001 one month after the 911 tragedy.
After taking over at Aer Lingus, Walsh lived up to his reputation of being a very focused
leader who is intent on achieving what he wants. He was direct in declaring that his goal of
having the airline be like a successful, no frills carrier. He cut costs by about 30 %, and he laid
off one third of the Aer Lingus‟s employees. Walsh also took other actions consistent with a
low-cost approach: he eliminated business class on short flights, reduced aircraft cleaning
expenditures, and stopped catering service on shorthaul routes. The results for some industry
analysts were like a miracle. Aer Lingus which many had thought would go bankrupt similar to
Sabena and Swissair, both smaller European flag carriers, returned to profitability. The new
Aer Lingus achieved an operating profit of 63.8 million Euros in 2002 after suffering a 35.3
million Euro loss in 2001. In 2003, the group had an 83 million Euro profit. When the
appointment of Willie Walsh was announced the Chairman of BA, Mark Broughton, commented
that in hiring Walsh BA had captured “the very best person for the job!” The market seemed
to agree that Walsh‟s expertise in low-cost airline management would help BA. The day of the
announcement that he would be the new CEO of the airline, BA‟s shares closed up 1.63%
higher.
BA’s Short Haul Strategy
The history of BA‟s short-haul route offerings essentially begins in 1974 when
BOAC and BEA (a short-haul carrier) were merged. Similar to BOAC, BEA (British European
Airlines) had been formed by the British Government in 1946. By 1974 BEA was the largest
domestic carrier in the United Kingdom and also offered flights to Europe and North Africa.
Over the years, the BA domestic and European network expanded as BA made acqusitions and
responded to growing demand for air transportation in its markets.
At the same time franchise agreements were made to provide service in certain markets
and to provide feed BA‟s long-haul flights. BA‟s franchise agreement with CityFlyer is a good
example of how these agreements worked, CityFlyer aircraft would be painted in full BA livery
and its interiors and cabin layout conformed to BA's contemporary, standard two-class
European product. Staff wear BA uniforms and all flights are operated with BA flight numbers.
British Airways took over CityFlyer's marketing and handled all reservations. In other words,
CityFlyer prresented itself and traded as British Airways. By 1999, British Airways had ten
franchise partner agreements.
The fragmented and emergent nature of this BA‟s short-haul network is revealed in
Exhibit 5 which shows the timeline of the major events and decisions that were made over the
years. The importance of short-haul revenues to BA are revealed in Exhibit 6 indicating that
by 1996 40 % of BA revenues by destination came from the UK and Europe, although only 4 %
of its large 728 million £ operating profit (Exhibit 7) was generated from these routes.
The first major strategic move to respond to low-cost carriers was taken by BA in
1998 when it set up a no frills carrier named Go. This stand-alone subsidiary was set up to
compete in the low-cost, no-frills market which was starting to grow very quickly. Operating
from Stanstead Airport the new airline used leased Boeing 737‟s to fly first to Milan and Rome
and then Copenhagen. During the late 1990‟s BA also undertook a program to take a billion
pounds of opertaing costs out of its entire network including European and UK operations.
Along with these moves was a strategy to reorganize and restructure Euorpean and UK services
to reduce fragmentation. In the UK, this involved strategic investments to take control of
CityFlyer Express based at Gatwick and sale of BA‟s French subsidiary Air Liberté. More moves
to reduce fragmentation in the UK regional network took place in 2001-2002 with the merging
of British Regional
Airlines Group, Brymon Airways, Manx Airlines and British Airways Regional to form
CitiExpress. The benefit was that BA for the first time had a single business unit for all ot its UK
operations. In 2003 BA aggressively responded to no-frills carriers by cutting fares on 180
short-haul routes. In the last five years, BA‟s strategy in the low-cost segment has been to
protect its core business class market while learning from its lowcost rivals by offering deals on
certain flights. Andrew Crawley, BA General Manger for Western Europe, has explained this
approach:
What is our response? We will strengthen and maintain our offering to the
business market. It is a critical market for us. Club Europe and full fare
economy passengers are highly profitable for British Airways, so we will
strengthen and maintain our positioning on that.
We will move short-haul economy closer to the “no frills” model by keeping
what we think is good about what we currently offer and using some
learnings from what they have on offer too at the moment. Finally, cost
efficiency improvements across the whole business -and some of the
numbers that Rod showed this morning demonstrate some of the initiatives
that will improve our unit cost across the whole business - but specifically
on the short-haul piece will bring our unit cost down to enable us to
compete profitably.2
The basic assumption about the strategic importance for BA of its short-haul business
was clear under Rod Eddington‟s leadership during the 2000 to 2005 period: Our short-haul
network is an intrinsic part of our overall network: its important to have a short-haul offering
to match to our long-haul offering- feeder represents a quarter and a third of our short-haul
network. It will be many years before you will be able to fly from Newcastle to Hong Kong,
from Edinburgh to Singapore. Also having a strong network offering to our customers large
and small is
very important; we still have far and away the most comprehensive network
in and out of London. It is a key part of our ability to compete. But, those
points in our network have to contribute to our network profitability.
Those supporting BA‟s current approach to short-haul services could point to the
progress that the airline had made to reorganize and improve its network offerings. BA
Connect had been formed to combine regional operations in one business unit to coordinate
competitive strategy in short haul and significant improvements had been made in BA‟s cost
structure and unprofitable units and routes had been eliminated Eddington noted in 2005
before Walsh took over:
We have the right sort of exposure to short-haul. Short-haul capacity is now
less than 20% of total ASK4. I worry about the performance of shorthaul
performance financially. It is much improved. It's no longer burning a £300
million hole in our pocket. Last year we lost £60 million short-haul. But that
included Deutsche BA write-off and some write-offs on aeroplanes, which
we disposed of.
So the short-haul business is no longer the value destroyer that it was. But
it's an essential path of our network. And we substantially reduced our
exposure to short-haul. It's one of the reasons why we've come through the
last 4 or 5 years, in the face of the trick from the no-frills carriers. That, and
the fact that we've got a much better competitive response on the map. It
wasn't just aero planes we invested in. We invested in infrastructure before.
And that this is essential infrastructure, but it costs money.5
Important as well was BA‟s value proposition in its short-haul services. Many of BA‟s
clients were business people and it was believed that BA offered significant value over low-cost
carriers with respect to seat selection, network connections, meals and lounge access. The
value of these benefits varied across BA‟s short-haul segments: UK regional, London operations
and European short-haul routes.
BA had resources to compete. Its profit for 2005-2006 of over 700 million pounds was
substantially larger than the earnings of easyJet or Ryanair. Many of the smaller European low
cost carriers were under-financed and, while they could create temporary problems with
disruptive pricing, they did not have the resources for the long-term. BA has an advertising
budget of approximately 60 million pounds which could be used to communicate the superior
value of BA‟s services and to push the BA brand. Senior managers of BA were aware that
BA‟s customers take longer trips than customers of low-cost carriers. Ryanair passengers fly on
average 750 km versus 3,000 km for BA customers. This could change in the future as low-cost
3 Rod Eddington, CEO British Airways, Interview with Air Transport World, Aug 2005, Vol.
42, p. 24.
4 ASK (Available Seat Kilometers)
5 Rod Eddington, CEO British Airways, Conference call transcript British Airways Investor
BA 114.00
easyJet 61.70
Ryanair 40.77
The expansion of the European Union in 2004 to include 10 more countries including
Poland, Hungary and the Czech Republic presented excellent opportunities for BA as
investments and projects grew in these new EU countries. At the same time, BA management
was well aware that low-cost carriers were targeting these same new markets.
Critics of BA‟s strategy argue that BA must be able to increase the number of passengers
and have tight cost control if their strategy of attacking low-cost carriers
“head to head” is to be effective. They wonder if this is possible in an airline where business
class and premium customers are the dominant focus. A review of operating costs and
margins (See Exhibit 8) shows that BA trails leading low-cost carriers with respect to operating
margin.
Both easyJet and Ryanair claim that 40 % of their customers are business customers.
Recent moves by easyJet, in particular, show that low-cost carriers will be trying to attract
business customers. Major low-cost carriers are purchasing new aircraft and they have solid cash
balances to support any price wars. Their strategies are clear and focused: as Ryanair sales
manager, Sinead Finn states. “The lowest fare wins- when you offer the lowest fares, there‟s no
one else to worry about”.6
With respect to customer service, industry statistics indicate that Ryanair and easyJet
have a better record than BA concerning on time arrivals and lost baggage. Recent
performance indicators show that BA trails both low-cost carriers in both categories. Exhibit 9
presents these measures and shows BA is on time only 74% of the time, and that it loses 17.7
bags per 1000 bags handled – a relatively poor performance. As Walsh and his senior team
reviewed their options in the short-haul business, other issues were also of concern. BA faces
significant challenges in labour negotiations with its unions in 2006 and BA had some very
major pension funding issues to address. Similar to all airlines, BA was concerned about high oil
prices, and it would need to replace its long-haul fleet in the near future as well. In March of
2008 BA was scheduled move into Terminal 5 at Heathrow. This new facility which will cost £
4.2 billion would offer state-of-the-art facilities and the capacity to handle 30 million customers
per year. It represented a great opportunity but also a threat if the transition was not handled
in an efficient way. Competition from other full service network carriers, notably the Star
Alliance Group and Skyteam were also of a major concern. Given these threats and stalled
negotiations over transatlantic open skies, some believed that BA should divest its short-haul
6Sinnad Finn, BA vs. budget airlines: Ba.com uppance for no-frills? 2005, Marketing
Week, June 23: pg.28
business and concentrate on its long-haul competitive position where it had a competitive
advantage. If on the other hand it stays in the shorthaul business, it must decide how it will
compete with the low-cost carriers.
References
A cool hand on BA‟s control‟s, Knight Ridder Business News, 2006, July 2.
Analysts Report Ryanair, Davy European Transport and Leisure, March 28, 2006. BA vs.
budget airlines: Ba.com uppance for no-frills? 2005, Marketing Week, June 23: pg.28.
British Airways, Annual Reports, 1996-2006.
British Airways, Transcript of Annual Investors Conference, 2006, 2005, 2003, 2202. Bucyk,
Cathy, 2005, British Airways Chief Executive Rod Eddington, Air Transport World, August: pg.
24.
EasyJet Annual Report and Accounts, 2005.
EasyJet targets BA passengers, Travel Trace Gazette, 2006, June 16, p. 8.
Industrious Times at British Airways and Ryanair, Strategic Direction, 2004, April p. 4.
Low-cost Europe, Airfinance Journal, Dec. 2002/Jan. 2003, p. 22.
Low-cost Airlines: Turbulent skies, 2004, The Economist, July 8.
Ryanair Annual Report and Accounts, 2006.
Stewart, Robb, 2006, BA Strategy: Wrong for the Long Haul?, Barron‟s, April 24: pg.
M16.
Taking change on board, Marketing Week, 2006, May 4, p. 28.
Webb, T. and Aris, B. United changes its tune with new low-cost airline, Sunday Business, 2003,
Nov. 9, p1.
Exhibit 1
Market Share of Low-cost Airlines
Selected Western European Countries July 2004 to
February 2006
Ryanair Fleet
As of March 31, 2006
86 Boeing 737-800
Average Age – 2.4 years
7 March 2006, exchange rates: One British Pound £ = 1.743 USD Dollars $,
One Euro € = 1.20 USD Dollars $
32 Boeing 737-700
Average Age -2.4 years
Exhibit 3
British Airways Fleet
As at March 31, 2006
Exhibit 4
British Airways
Key Statistics 1997-2006
To March 31
Group 2006 2005 2005 2004 2003 2002 2001 2000 1999 1998 1997
results to IFFG IFFG
Turnover £m 8,515 7,772 7,813 7,560 7,688 8,340 9,278 8,940 8,892 8,642 8,359
(Revenue)
Operating £m 705 556 540 405 295 (110) 380 84 442 504 546
profit
Profit £m 620 513 415 230 135 (200) 150 5 275 580 640
before tax
Attributable £m 451 377 251 130 72 (142) 67 (21) 206 460 553
profit year
Net assets £m 2,074 1,397 2,684 2,397 2,274 2,207 2,325 3,340 3,355 3,321 2,984
Basic EPS p 40.4 35.2 23.4 12.1 6.7 (13.2) 6.2 (2.0) 19.5 44.7 55.7
per share
Key
statistics
Operating % 8.3 7.2 6.9 5.4 3.8 (1.3) 4.1 0.9 5.0 5.8 6.5
margin
Net % 44.2 67.7 42.7 54.1 60.7 66.0 64.5 63.9 62.2 58.1 57.0
debt/total
capital ratio
Group
operating
statistics
Passengers ‘000 35,634 35.717 35,717 36,103 38,019 40,004 44,482 46,578 46,049 40,995 38,180
carried
Revenue m 111,859 107,892 107,892 103,092 100,212 106,270 123,197 117,463 118,310 106,739 102,304
passenger
kilometers
Revenue m 16,105 15.731 15,731 14,771 14,213 14,632 16,987 17,215 16,831 15,406 14,336
tonne
kilometers
Available m 23,106 22,565 22,565 21,859 21,328 22,848 25,196 25,840 25,114 22,403 20,542
tonne
kilometers
Passenger % 75.6 74.8 74.8 73.0 71.9 70.4 71.4 69.8 70.7 71.3 73.2
load factor
Notes: British Airways changed to the IFRS (International Financial Reporting Standards) reporting basis for the year ended
March 31, 006. Statistics for the year ended March 31, 2005 have been presented on both a GAAP and IFFG basis.
m=millions, p=pence
Source: British Airways, Annual Reports, Various Years.
Exhibit 5
Timeline
British Airways Short-haul Decisions
Exhibit 6
British Airways
2005 2004 2003 2002 2001 2000 1999 1998 1997 1996
Europe 5,097 4,940 4,903 5,402 6,054 5,898 5,936 5,632 5,458 5,029
The Americas 1,383 1,347 1,482 1,549 1,745 1,655 1,672 1,610 1,485 1415
Africa, 751 717 733 789 783 687 624 618 617 546
Mid-East,
India
Far East/ 582 556 570 600 696 700 660 782 799 770
Australia/Asia
Total Turnover 7,813 7,560 7,688 8,340 9,278 8,940 8,892 8,642 8,359 7,760
European Turnover (Revenue) by Area of Original Sale
1996-2005 Millions £
2005 2004 2003 2002 2001 2000 1999 1998 1997 1996
UK 3,922 3,731 3,634 4,101 4,632 4,062 4,043 4,098 3,581 3,240
Contin.Europe 1,175 1,209 1,269 1,301 1,422 1,836 1,893 1,534 1,877 1,789
Total 5,097 4,940 4,903 5,402 6,054 5,898 5,936 5.632 5,458 5,029
2005 2004 2003 2002 2001 2000 1999 1998 1997 1996
Europe 2,470 2,639 2,838 3,208 3,388 3,400 3,409 3,214 3,168 3,109
The Americas 2,884 2,767 2,763 2,863 3,450 3,253 3,272 3,073 2,861 2,449
Africa, 1,412 1,253 1,201 1,262 1,304 1,220 1,133 1,118 1,134 1,074
Mid-East,
India
Far East/ 1,047 901 886 1,007 1,136 1,067 1,078 1,237 1,196 1,128
Australia/Asia
Total Turnover 7,813 7,560 7,688 8,340 9,278 8,940 8,892 8,642 8,359 7,760
Exhibit 7
British Airways
Operating Profit by Area of Destination
2005 2004 2003 2002 2001 2000 1999 1998 1997 1996
Europe (26) (60) (117) (244) (172) (310) (166) (127) (36) 26
The Americas 347 294 223 144 470 308 166 395 316 315
Africa, 224 210 168 91 92 62 124 125 137 220
Mid-East,
India
Far East/ (5) (30) 21 (101) (10) 24 33 111 129 167
Australia/Asia
Total Turnover 540 405 295 (110) 380 84 442 504 546 728
Source: British Airways Annual Report, 2005-2006.
Exhibit 8
Operating Margins Selected Airlines
2005
Southwest 72 7
Exhibit 9
Customer Service Statistics Selected Airlines
2005
Source: AEA, Analysts Report Ryanair, Davy European Transport and Leisure, March 28, 2006