UK_Dispatcher
Topic Author
Posts: 2254
Joined: Fri Dec 21, 2001 8:44 pm

Why Did BA Sell Go?

Fri Jan 11, 2002 2:11 am

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?
 
Ikarus
Posts: 3391
Joined: Mon Jan 08, 2001 10:18 pm

RE: Why Did BA Sell Go?

Fri Jan 11, 2002 2:20 am

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

 
Banco
Posts: 14343
Joined: Mon Oct 29, 2001 11:56 pm

RE: Why Did BA Sell Go?

Fri Jan 11, 2002 3:01 am

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.
 
donder10
Posts: 6944
Joined: Sun Oct 21, 2001 5:29 am

RE: Why Did BA Sell Go?

Fri Jan 11, 2002 3:37 am

I never heard about that Banco.As you said there must be reasons why BA did not take up the offer.
 
richardw
Posts: 3138
Joined: Tue May 08, 2001 3:17 am

RE: Why Did BA Sell Go?

Fri Jan 11, 2002 5:45 am

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.