THE HUBRIS OF BRITISH AIRWAYS

On a blog entry posted November 15, 2007, I discussed a story about British Airways flying empty airliners on trans-Atlantic routes. My words then were:

“BA thinks that from its high position in the airline industry it can get away with practically any kind of behavior. This conclusion is not based only on the empty flights episode. A few months ago BA was fined with hundreds of million of dollars by both the British and the American authorities because of antitrust activities – fixing flight fares with other airlines. That episode, too, have shown a kind of corporate policy that basically says: we are above all the others; the rules do not apply to us; we can do as we wish because we are the famous, rich and successful British Airways.”

Less than six months later we all can see the grim consequences of BA’s hubris. Last Thursday (March 27) was the first operating day of London Heathrow’s new terminal 5, a state of the art terminal dedicated to BA, the biggest airline in this airport. The festive day turned in no time to be a disastrous one, when practically most of the systems in the facility broke. BA had to cancel dozens of flights at its most important hub in the world, while thousands of lost luggages piled up in the terminal, apart from their owners. While this entry is being posted, the chaos at Heathrow is still going on.

The mere notion that in the year 2008, in a country such as the U.K., in an airline such as BA, in an airport such as LHR, the take off of a new facility, after years of building and testing, could get so faulty is quite astonishing. But that is exactly what happened. And the main reason, in my opinion, is the hubris and arrogance of BA, the same as I described it in November.

BA’s attitude is bad not just because of its self conception as “the best”, but because they basically think: even if we screw things up, we’ll manage to escape the outcome. The sad truth is, they’re right.

A REAL CRISIS IN THE AIRLINE INDUSTRY

Airlines are known to be whiners. They always complain about how little money they make and how much money they spend. It is true, though, that the margin of profit in this industry is way smaller than, say, in the software industry or in the entertainment industry.

But now it seems that a real crisis is threatening airlines all around the world. For the last 2-3 years oil prices have been on the rise, and now, when a barrel of crude oil hits $110, the panic is showing. Of course, oil prices effects not only commercial aviation. There isn’t one aspect of our life that is not being affected by energy prices. But the airlines are showing signs of severe stress.

U.S. airlines are the first to show those signs, as we can see in this reporting. While European and Asian carriers are bathing in endless cash, U.S. carriers seem to struggle for every penny. One of the biggest problems for the airlines of America is that their fleets are much older than the world average, resulting in higher fuel expenses for every kilometer. When Delta says it may ground planes and cancel flights, one can imagine it refers to some antiques such as the DC-9s in its disposal, which are burning much more jet fuel than a new generation 737 or A320.

No airline faces grimmer prospect than American. It has the oldest fleet, and it is unclear how it can survive in the medium and long terms when it hasn’t ordered any new planes for years. Even if a miracle will happen, and American ordered dozens of new 777s and 787s today, paying for them with some gold treasure found in the Pacific, it still won’t get any of the planes in the next 8-10 years, due to the enormous backlog at Boeing. The problem is, not even this “optimistic” vision is relevant for American.

MORE ON THE GRIM REALITY OF THE U.S. AIRLINES

My previous post, as well as many other ones during last year, was dedicated to the grim situation of the U.S. airlines. Besides Continental Airlines, which, as I pointed out in the February 22nd entry, is busy renewing its fleet and delivering a better product to the customers, all the other major U.S airlines are struggling to survive, let alone developing for the future.

My “obsession” with this topic proves to be more than a psychological disturbance. In a recent article in Newsweek, called “Why U.S. Airlines Can’t Compete”, Adam Kushner draws a very negative picture of the U.S. airline industry, comparing it to the once mighty American steel industry, which tried to survive by lobbying for governmental aid and tariffs. When you look across the pond, says Kushner, you can’t help but feeling jealous at the superb condition of European and Asian airlines like Air France, Lufthansa, Singapore and many others.

The struggling airlines of America are sure to be a good story for the next few years, but the question is, which one of them remains to be a part of its end?