MARK PILLING LONDON A month after the collapse of merger talks with KLM, British Airways is getting on with the task of restoring its business to "proper levels of profitability".

The search for a European partner is temporarily on the back-burner as the carrier re-focuses on a more radical strategy for its loss-making London Gatwick hub, as well as a network re-alignment that includes chopping some long-haul routes. These changes will allow BA to reduce its 57-strong Boeing 747-400 fleet by four.

BA's winter timetable will see available seat kilometres reduced by 9% at Heathrow and by 15% at Gatwick compared to summer 2000. As of now, the summer 2001 schedule will follow closely the preceding winter's.

The merger talks with KLM had distracted management from implementing the strategic overhaul. "BA can now concentrate full-time on executing its plans and fixing the business," says Chris Avery, analyst at JP Morgan.

"There is no imperative for a fresh European alliance, the imperative is to cut the losses in BA short-haul," he adds.

BA lost £310 million ($450 million) on its European operations last year. The airline wants to roll-out a revised strategy for Gatwick from winter 2001, on top of already announced changes, with an overall aim of avoiding the duplication of services at Gatwick and Heathrow.

Overall, BA is expected to need to trim its workforce by 4,000, with 1,500 people already cut through natural wastage, says Mike Powell of Dresdner Kleinwort Benson.

The most sweeping cuts are expected at Gatwick, although BA says the airport is "strategically crucial" to the group, and that it will maintain a significant presence there.

On the long-haul side, one of the major changes is the suspension of services between Heathrow and Kuala Lumpur from summer next year. Several routes will be transferred to Heathrow from Gatwick, with all Miami flights and the Rio de Janeiro service to operate from BA's main hub. The daily Gatwick 747 service to Phoenix and on to San Diego will be "de-linked", with both destinations served by direct daily 777 flights. BA has 37 777s in operation, and nine more on order.

Says chief executive Rod Eddington: "The network and fleet strategies I inherited when I arrived at BA are exactly right - but they do not go far enough fast enough. We must address poorly performing routes and assets that are not adding value."

On the partnership front, BA's priority is to strengthen its oneworld ties. In particular, there will need to be some re-working done on the relationship with American Airlines, says Avery. One of the issues in the BA/KLM talks was the possibility of BA ditching American in favour of KLM's transatlantic partner, Northwest Airlines.

Source: Airline Business