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Why Did BA Sell Go?  
User currently offlineUK_Dispatcher From United Arab Emirates, joined Dec 2001, 2597 posts, RR: 29
Posted (12 years 11 months 3 weeks 1 day 7 hours ago) and read 1062 times:

All the hype about bmi british midland starting a new low-fares airline out of East Midlands makes me ask why BA chose to sell Go.

If they thought that was a good idea, won't bmi end up doing the same??

What are your thoughts?

4 replies: All unread, jump to last
 
User currently offlineIkarus From United Kingdom, joined Jan 2001, 3524 posts, RR: 2
Reply 1, posted (12 years 11 months 3 weeks 1 day 7 hours ago) and read 1057 times:

Why? Because back then, low-cost no-frills airlines looked like a niche market with limited potential, compared with the generous margins to be earned on intercontinental long-haul routes. The temporary collapse of the transatlantic market and the general downturn of the aviation industry post-September have reversed this trend. Now low-cost airlines are almost the only ones still managing profits, and they benefit greatly from the losses of big airlines, as predatory pricing has become too expensive. There is a good reason why Lufthansa pulled out of Stansted, for example. They just cannot afford trying to compete with low-cost airlines while their cash cow markets are suffering. So they cut their losses and try to concentrate on those segments where money can still be made. And suddenly, low-cost airlines find themselves with less competition, cheaper expansion possibilities (eg used aircraft) and a solid customer base that is not affected by post-September reluctance to fly. If BA had failed to sell go by September, they'd probably be more than happy to hang on to it.

Regards

Ikarus



User currently offlineBanco From United Kingdom, joined Oct 2001, 14752 posts, RR: 53
Reply 2, posted (12 years 11 months 3 weeks 1 day 6 hours ago) and read 1032 times:

When BA were looking to sell Go, Easyjet came up with a proposal whereby BA would take a "significant" stake in an enlarged company combining U2 and Go. I was surprised that that option was not progressed further, as BA would not only have retained access to the low cost market but would also have been able to limit the damage from the low cost sector from one of its main competitors. There must have been a reason beyond it not being "part of the core business" but I don't know what it was.


She's as nervous as a very small nun at a penguin shoot.
User currently offlineDonder10 From Canada, joined Oct 2001, 6660 posts, RR: 21
Reply 3, posted (12 years 11 months 3 weeks 1 day 5 hours ago) and read 1015 times:

I never heard about that Banco.As you said there must be reasons why BA did not take up the offer.

User currently offlineRichardw From United Kingdom, joined May 2001, 3762 posts, RR: 0
Reply 4, posted (12 years 11 months 3 weeks 1 day 3 hours ago) and read 1001 times:

because they thought go would compete with easyJet, when in fact it also competed with BA's exisitng routes and BA felt this was not acceptable, so they retrenched to their "full service" mode.
When go was sold the first thing they did was get rid of the Saturday night stay condition for the cheaper Saver fares and special offers, so the competition has increased for BA from its sold offshoot, and the competition from go will intensify if go starts services from LGW.
bmi are unlikely to be successful in the long term because low cost airlines only succeeed from economies of scale and low borrowings.


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