The advent of no-frills airlines has
1) Allowed those who couldn't afford BA's extortionate short-haul fares to fly to Europe
2) Captured a small number of BA's business pax, tired of paying GBP250+ for a 1-2 hour flight.
Other than that, I thought their EU ops were doing fine; the problem was the EU ops from LGW, as I understand BA were making heavy losses there. They realised having two hubs close to London was a big mistake (made no sense), and are currently in the process of putting things right.
Increasing high-yield demand for certain long-haul routes has prompted BA to decide to re-allocate all of their 744 fleet back to LHR. 777's will remain to operate a handful of routes (eg. the US routes which cannot be flown from LHR).
Service on BA EU routes is generally "fair" I would say, although certainly not worth the fares they usually charge.
I flew back from Bologna last night, the return trip on GO having cost me GBP49, as opposed to BA's GBP179 on that route.
Although the no-frills airlines are doing quite well, BA don't appear bothered, as they can always rely on a hard-core group of Business pax which are prepared to pay fares of GBP700+ to fly Club Europe to Lisbon etc.
Absolutely mad if you ask me...