MIDAS AVIATION

Slots represent no Gamble for BA

Slots Represent No Gamble for British Airways

 
 

Despite interest from others it seems that British Airways, or more accurately IAG, offered the highest price for the Monarch slots at London Gatwick and have rapidly acquired a useful set of new slots for the Summer 2018 season. But do they represent a gamble by BA?

In a peak Summer 2017 week, Monarch had nearly 250 slots at the world’s busiest single runway airport which equates to around a 4.6% frequency share. For British Airways those additional slots will move them closer to a 21% share of frequency; still less than half of that operated by easyJet but giving them some fifteen percentage points more than Norwegian. So, in terms of strategic positioning acquiring the slots doesn’t seem to either close the gap on the number one carrier whilst the existing gap to the third place was already significant.

The current BA slot portfolio at Gatwick for a peak Summer 2017 period below reveals a pretty consistent spread of inbound slots and the to be expected peak outbound slot periods of a based carrier with a mix of short and long-haul sectors. So, with such a broad spread of slots, why the purchase?

Slots BA.jpg

Firstly, there is no room to grow at Gatwick or at least very little for any carrier at least for the foreseeable future and the arrival of a second runway which surely has to be back for discussion given the UK Government's admission of a flawed series of demand forecasts that prioritised Heathrow. Grabbing a near 5% share of slots in one go is a “once in a decade opportunity”.

Secondly, British Airways seem to have finally made Gatwick a profitable operation. Recent expansion of long-haul services has been successful, new markets opened and with some new aircraft or order for the Heathrow network, options for returns can be converted into new Gatwick based aircraft. BA may rightly claim trading conditions are tough at the moment; they are every year, but demand both to and from the London market remains strong.

BA and perhaps more importantly, IAG gain greater flexibility in their network options. Long haul African leisure markets with early afternoon departures, South American evening departures, expanded North American operations and even perhaps some increased short-haul services could all be absorbed within the old Monarch slots. And if the majority of those services are long-haul, perhaps even rebranded as Level operated services then the chances of adding profitability to the network look promising.

Whichever way you look at the purchase, IAG acquiring these slots appears no gamble at all…….unless of course they play a bad game of craps which would be a gamble too far!