By Colin Baker
There are plenty of tough jobs in the aviation world, but being head of BA CitiExpress, the regional arm of British Airways, is up there among the best of them.
With virtually all the carrier’s flights point-to-point services from UK regional airports, it is very much in the maelstrom of the European low-cost airline battle, but with a cost base that essentially leaves it with one hand tied behind its back.
It is probably a good thing then that BA CitiExpress chief executive David Evans has a cool head and a steady hand, because his new boss, BA chief executive Willie Walsh, has told him his airline will be shut down unless it returns to profitability by the end of the 2007-8 financial year. “He told me that face to face, which is something I respect,” says Evans.
That gives him just over two years to turn around a carrier that lost £30 million ($53 million) in the 2003-4 financial year and, while accounts have yet to be filed, probably lost over £20 million in 2004-5. Evans insists that CitiExpress “is going in the right direction”, but admits that more needs to be done.
To this end, the airline will be rebranded as BA Connect at the end of March. The new initiative will see the Club Europe business class ditched on international services as the carrier moves to a one-class product – domestic services already operate in a single class. Fares will be slashed by more than 40% to as little as £25 inclusive per leg – with ticket restrictions to be ditched.
Passengers will have to pay for on-board catering, which Evans says will not make a profit, but will cover its costs. He adds that while yields will suffer from the changes, going down by 5% or more, this will be more than compensated for by increased volumes. London City flights will be excluded from the changes, and will continue to offer a two-class full service.
The airline is in the middle of a cost-cutting exercise which, Evans says, will save around £35 million over a two-year period. This will include some fleet changes – the carrier has already shed six Avro RJ100s – and a 20% reduction in overheads. However, Evans insists that “no matter what cost improvements we put in place, we have also got to do something else”.
It is clear that the carrier is feeling the pressure, effectively competing with a mixed fleet of regional jets and turboprops against mean, lean low-cost carriers, generally operating Boeing 737s or Airbus A320s. And it is obviously going to be tough for CitiExpress to compete on seat costs.
Walsh has made clear that he is not going to be shy when it comes to trying to obtain BA’s long-term goal of 10% operating margins. Evans points out that this is an overall figure for the company, and does not mean that every single business segment has to meet this target. “What is clear though is that we have to contribute,” he says.