British Airways Proposes New Unit to Lower Costs at Gatwick

(Bloomberg) -- British Airways is prepared to bring back short-haul flights at London Gatwick airport that were terminated at the start of the coronavirus crisis, if unions back the formation of a new unit with less costly contracts.

The end of furlough support from the U.K. government combined with lingering travel curbs means the restoration of European flights at Gatwick will require a “competitive operating model,” British Airways said in an internal memo to staff seen by Bloomberg News.

“We are working with our unions on proposals for a short-haul operation at Gatwick,” the unit of IAG SA said in an emailed statement. “We are not prepared to comment further while this process continues.”

British Airways is operating only long-haul flights from London’s second-biggest hub, with shorter services limited to its main base at nearby Heathrow and regional routes from London City. Air travel is still struggling to recover from the Covid-19 pandemic, with U.K. demand held back by ever-changing rules and pricey tests required for incoming passengers.

The U.K.’s Coronavirus Job Retention Scheme, which supports 1.9 million people, is due to end on Sept. 30 following the lifting of almost all pandemic restrictions last month. Travel firms have warned that thousands of jobs may be lost if the government fails to offer an extension.

BA has a notional schedule of 47 short-haul routes at Gatwick, mothballed since last spring after rules on the use of operating slots were suspended following coronavirus lockdowns, making it the airport’s biggest operator after EasyJet Plc, according to data from aviation analytics specialist Cirium.

The new Gatwick operation would run alongside the existing long-haul business from summer 2022, allowing a sustainable short-haul presence to be restored “over time,” the staff memo said.

“These routes are leisure focused, so it makes sense to move to a separate unit to better compete with the likes of EasyJet,” said Alex Irving, an analyst at Sanford C. Bernstein. “Leisure customers are much more price sensitive.”

Based on the current slot holding, British Airways would be due to operate 1,881 short-haul flights in July 2022, according to Cirium, with Malaga in Spain and Faro in Portugal its biggest foreign destinations.

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