British Airways May Kill Avios, Will Invest Another $200m In Club World, Has 72 Aircraft On The Way & More

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British Airways had an investor day last week (on November 3rd) at which Willie Walsh managed not to say anything blindingly crass (unlike last year) and Alex “low-cost” Cruz didn’t announce that the airline would start charging for in-cabin air so, by British Airways standards, it went well.

Well…I guess it didn’t go that well as the share price took a bit of a hit as soon as the information started to flow….

….but computers didn’t crash and no one went on strike so, like I said, by BA standards all was good.

During the investor day and in the days since we’ve been getting dribs and drabs of information that give us a little bit of a better idea where British Airways is heading (or hopes to head) and what we can possibly expect in the next few years.

None of this information comes with very much detail (some of it is from the investor day and some from the World Travel Mart currently taking place in London) but, nevertheless, I thought I’d share it here so that you can see what’s being said.

More Cash For Club World

The airline announced a further £200m investment in its Club World product on top of the existing £400m commitment and this sounded promising until it was revealed that a lot of that was simply the cost of replacing worn out seats with more 1990’s style seating and adding seats to existing aircraft orders.

British Airways A380 Club World

5 Year £4.5bn Investment Program

That’s a big number. £4.5bn is around $5.85bn so I was very interested to see how this was to be spent.

Mr low-cost has said that he wanted to create “a British Airways for everyone” (i.e an airline that’s neither one thing nor the other) and said that the airline would restore the second meal on long-haul flights (currently you only get a single meal and a snack on flights of over 10 hrs in length).

Apparently some of the £4.5bn will go on improving the snacks offered on the shorter long haul flights (don’t all cheer at once) and some of it will go on refurbishing the interiors of 128 existing aircraft.

The bulk of the cash (presumably the cash that isn’t spent on snacks) will go on buying 72 new aircraft including A350s, the new 787-10s and A320/A321 neo aircraft.

British Airways 787-9 – image courtesy of British Airways

What’s left will be spent on refurbishing the lounges at JFK, Rome and Aberdeen, installing “the best wi-fi in the sky” and ensuring that passengers have power at ever seat on every aircraft.

That last one is actually a very good idea – it’s ridiculous that you can board a BA plane in the second decade of the 21st century and have to face a 10+ hour flight without power.

Avios Will Move To Dynamic Pricing

Flying Blue announced that it would be introducing its own version of Dynamic Pricing in its program update yesterday and it looks like BA/Avios is going to follow suit.

Dynamic award pricing essentially means that the cost of an award (the number of Avios required) will be closely liked to the cost of a cash fare on the same flight.

This is going to be a big, big hit to a lot of short-haul travelers as it could kill the one true Avios sweet spot that we have.

Right now the best use of Avios is on short-haul routes where the number of Avios required to fly is fixed and low but where the cash cost of the flight can be very high – if we move to a model where the number of Avios is linked to the cost of the fare then suddenly we won’t have the chance to book one-way awards between the West Coast Hawaii for 15,000 Avios when the cash fare is over $400….we’ll probably need over double that number of Avios.

This could kill off the Avios program once and for all as there would be little hope of any aspirational or great value redemptions.

British Airways Has “No Divine Right To Flourish”

That’s a quote from Mr low-cost who also told the audience at the World Travel Mart that “British Airways is facing a combination of competitive forces more challenging than at any point in our history“.

When he went on to elaborate on the threats to BA he listed among them the premium offerings of the Middle Eastern carriers….and that’s interesting.

The bar in a Qatar Airways A380 Business Class Cabin

If the Middle Eastern carriers’ premium offerings are such a threat why is British Airways taking so long to do something about its pathetic Club World seats?

Why is British Airways fitting new Club World seats in its A350s that Alex Cruz has already said aren’t worth retrofitting to the rest of the fleet because….and these are his words…they don’t “appear to be sufficiently revolutionary”?

Seriously, I’d like to know.

If I was an IAG shareholder I’d be demanding to know why, if Mr Cruz thinks the Middle Eastern carriers’ premium products are such a serious threat to my future dividends, British Airways is still flying around with 20-year-old equipment up front and spending cash on new seats that aren’t up to standard.

Amusingly Mr Cruz also cited the newly found health of the US carriers as a threat to BA too….despite the fact that his airline profit shares with American Airlines on all transatlantic routes – BA has total control of Heathrow, profit shares with the biggest airline in the world and Cruz is still worried about United and Delta.

Bottom Line

There’s actually more waffle from BA that I could go one about at this point but none of it is all that meaningful – Cruz bleated on about how he wants to “embrace change while staying true to [BA’s] values”, how he wants BA to be “the airline of choice for everyone and how BA “must have an offer that’s attractive to everyone”.

Basically it was a lot of meaningless words, not a lot of substance and nothing for passengers to get hopeful about.

The biggest issues here are the introduction of Dynamic Pricing for awards (that could end up killing Avios completely), the fact that there still doesn’t appear to be any solid plan to drag the BA premium hard product into the 21st century and the fact that there wasn’t even a hint of any truly good news for passengers….but at least Willie Walsh didn’t have a Gordon Gekko moment this time around.