LONDON – British Airways PLC already losing money as a result of the severe downturn in the aviation industry, has lost its hold over some high profile customers as the recession forces the U.K. government and companies like oil giant BP PLC to cut costs.
U.K. Prime Minister Gordon Brown, who would usually fly BA on official government business, will switch to BA’s fierce British rival Virgin Atlantic when he travels to the G20 summit in the U.S. city of Pittsburgh at the end of September.
“The decision relating to the Prime Minister’s travel, including choice of aeroplane for international visits are taken to deliver maximum value for money for taxpayers at all times and ensure most efficient and effective use of the Prime Minister’s time,” a spokesperson for Dowling Street told Dow Jones Newswires.
The move doesn’t mean Brown won’t fly BA again in the future, and a BA spokesman said: “We have flown the Prime Minister on many occasions to important meetings around the world and will continue to do so and we look forward to carrying him and his team again in the near future.”
BA is heavily reliant on premium travel, particularly across the Atlantic, for its earnings, and the sharp drop in this type of travel has plunged the airline into the red. It reported a GBP106 million net loss for three months to June 30.
However, the wider fall in airline traffic as a result of the economic downturn hasn’t only hit BA, and The International Air Transport Association, or IATA, has predicted that airlines around the world will lose a cumulative $9 billion this year.
Oil giant BP said employees would now be booked on the “lowest logical fare,” rather than automatically being given a BA flight when flying within or from the U.K.
In the past BP’s travel department has defaulted to BA when a U.K. flight is available due to an agreement between the two companies over many years, but in light of a cost-cutting drive at the company, the firm will now search around for fares, a spokesman for the firm told Dow Jones Newswires.
The spokesman said the oil giant could still use BA if they are the cheapest or the only carrier to fly to certain destinations, but said there’s now more commercial pressure among airlines to provide cheaper fares to large companies whose employees fly frequently.
Under deals with specific airlines, companies get preferential fares depending on bulk flying or a certain number of flights per year.
A spokeswoman for BA said: “All of our corporate agreements are confidential. We continue to work closely with all our corporate partners to meet their requirements in these challenging times. We are confident in our ability to provide competitive travel arrangements for all our partners on our extensive global network.”
The BP spokesman also said employees won’t fly business class on short-haul flights in the U.K. – for example between southeast England and Aberdeen – but could still do so on long-haul routes.