Analysis: BA reasserts commitment to Caribbean

Analysis: BA reasserts commitment to Caribbean

by Ian Taylor

The Caribbean forms the bedrock of British Airways’ long-haul schedule from Gatwick, with daily flights to Antigua, Saint Lucia and Barbados through the summer and increased frequencies in winter.

There are frequent services to Trinidad and Tobago and to Jamaica, flights to the Dominican Republic, Grenada and Puerto Rico, and a daily service to Bermuda (though the latter lies 1,000 miles from the Caribbean).

That level of commitment reflects the strength of the Caribbean tourism market, but it is a market under pressure from the high oil price and a rate of APD that penalises the Caribbean like no other region.

The islands are saddled with higher APD than nearby Florida and Orlando and, even more unjustly, longer-distance US destinations such as Las Vegas, Los Angeles and Hawaii.

Colm Lacy, BA’s head of commercial at Gatwick, said: “The fuel cost on flying to the Caribbean is significant. It’s the main cost: almost 50% of the total. APD is big as well, given it has gone up 360% in the last six years. It is completely disproportionate. A family of four pays £324 to fly to the Caribbean [in economy], when flying to Miami it is £260. The Caribbean is unfairly penalised.”

Lacy insisted: “APD has damaged the leisure business, which is why we continue to talk about it.”

BA planned growth to the region two years ago, using a conference in Barbados in October 2010 to announce new routes, adding an extra aircraft to the schedule for 2011.

Lacy said: “We’ve taken a little capacity out since then. APD continues to go up. Fuel has gone up. Customers are paying more. Demand has fallen. So we are tweaking capacity, particularly
in the summer. We’ve done our best to maintain as much as we can in winter.”

Most of the changes would be barely perceptible without poring over a timetable, but continuation of the weekly Puerto Rico service, launched last year, appears unlikely beyond 
this winter.

VFR traffic fall

Lacy says: “The impact of APD is cumulative.

“The customer only sees the seat price and thinks it’s due to us putting up fares, but the money goes straight to the government.

“VFR (visiting friends and relations) passengers who used to fly to the Caribbean twice a year are going once and those who went once a year are going every two years. Traffic out of the Caribbean has also been hit.”

The lower APD rate to the US has led BA to switch some capacity. “In summer, we’ve pulled three services from the Caribbean to add extra Orlando services, because APD there is £64 cheaper for a family of four,” said Lacy.

“We’ll start three times a week to Las Vegas from Gatwick [in October]. APD is cheaper to Las Vegas although the flight is significantly farther.”

The problem is compounded by Caribbean governments adding their own taxes to fares.

“A lot of the islands are in recession. Caribbean governments have their own deficits and are adding airport taxes. Consumers are paying tax in the UK and in the islands,” said Lacy.

However, the impact of APD has not been enough to make BA cut its premium economy cabin, despite World Traveller Plus seats carrying double the APD rate of economy. Lacy said: “Premium economy is doing well. Passengers are pleased with the experience. 
It has an exclusive feel.

“The question is: what would demand be like if we did not have that additional cost?”

Gatwick capacity

BA was finalising its summer 2013 schedule to the region as Travel Weekly went to press, but Lacy said: “We’ve no new plans at Gatwick for next summer. There will be a couple of tweaks and a couple of tags [onward flights] coming out.”

BA currently operates nine long-haul aircraft at Gatwick and doesn’t anticipate increasing capacity until next year at the earliest. Lacy said: “It will be winter 2013-14 or summer 2014 when we get new aircraft and we’re deciding whether to operate those from Heathrow or Gatwick.”

The state of the UK market does not help. “The UK is technically in recession. People are being careful about what they spend. A holiday is key for people, but demands have changed and we change our network based on the demand. There are a lot of alternatives to the Caribbean for summer.”

He suggests more of the islands might want to consider developing all-inclusive resorts and suggests some restaurants should reappraise their prices. “All-inclusive resorts are very popular and some of the islands offer much more of what the UK market wants. People want to know how much a holiday is going to cost.

“A lot of the restaurants are really great, but have London prices. A lot are average but have London prices, and people don’t know what to expect.”

Lacy suggests the competition between BA and Virgin Atlantic to the Caribbean has benefited both. “Virgin Atlantic is a great competitor,” he said. “We respect what they offer. The UK market is better for the competition.”

But he is less happy about Caribbean Airlines’ recent re-entry to the market, flying between Gatwick and Trinidad. Lacy said: “Their prices reflect the fact that they are not paying in full for fuel. All the other islands are concerned about it making them less competitive. It is great for the consumer in the short term, but it’s not sustainable. It’s having an impact on the VFR market, which is very price sensitive.”

Growth at Heathrow

There have been substantial improvements to the BA departures area at Gatwick since a year ago, with Lacy suggesting the North Terminal is now “a step ahead” of Heathrow’s Terminal 5.

“There are new check-in facilities with self-service kiosks that print luggage tags as well as boarding passes. It’s a five-minute process to check in for economy. There are no snaking queues.”

The improvements are important but do not signify any move away from a BA Gatwick operation that is based on point-to-point short-haul services and a long-haul leisure network.

Lacy said: “We don’t run a hub at Gatwick. We have 22 short-haul aircraft at Gatwick and do get some feeder traffic, but we do not have enough long-haul aircraft.  There are 70 long-haul departures a day at Heathrow. At Gatwick there are nine. Feeder traffic won’t work. Our focus is our catchment area and point-to-point services.”

At the same time, the takeover of BMI has given BA the opportunity to grow at Heathrow. Lacy said: “The acquisition of BMI was great news. We have the opportunity to optimise the Heathrow hub. There is opportunity for growth.”

The focus at Gatwick will remain on leisure, and on regions such as the Caribbean. As Lacy explained: “The big difference between Heathrow and Gatwick is cost. There is about a £15 difference in airport charges per passenger. If you start flying pure leisure routes from Heathrow, would people pay? I compete with Heathrow on who can make the best return.”

New destinations

The emphasis at Gatwick this winter will be on short-haul. Lacy said: “We’ll be doing some short‑haul marketing in October as we did last winter, talking about routes from Gatwick.

“We have a couple of new destinations for summer 2013 – we’re going back to Barcelona [to which BA last flew in 2009] and have two more routes to announce.

“We’re looking at the Gatwick short-haul operation and at what works,” said Lacy. “We’ve done a lot of work on our unit costs so we can offer competitive fares.

“We offer an alternative to the low-cost carrier experience. Our short-haul fares for summer lead in at £49 to Malaga and £39 for winter, and you know what you get for that.”

Lacy said easyJet’s introduction of allocated seating from November was interesting.

“Imitation is the best form of flattery,” he added.

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