The proposed takeover of BMI by BA parent IAG will be bad for competition at the UK’s main hub airport Heathrow and therefore bad for consumers, says Sir Richard Branson.
There is no doubt we are living in painful and challenging economic times. Twenty eight years ago the UK was also undergoing significant structural change.
Manufacturers were moving away from traditional mass production, the financial sector was preparing for its “big bang” to ensure London became the world’s financial heart and the UK was leading Europe in freeing up regulated services, including aviation.
When we started Virgin Atlantic in 1984, this spirit of liberalisation meant we could respond to consumer demand for better, fresher service and greater value. We weren’t alone.
Three years earlier, British Midland Airways had finally won the right to introduce competition on to the routes from Heathrow to Edinburgh and Glasgow. Virgin Atlantic brought to transatlantic flying what British Midland had given to domestic flying in the UK: real freedom of choice.
Since then, Virgin Atlantic has prospered by offering choice to long-haul travellers. Sadly, British Midland (now BMI) has not achieved the same success.
There are many reasons for this but in particular, BMI was unable to join up its largely short-haul routes with long-haul flying. Put simply, it could not take people from Aberdeen to Accra, Belfast to Boston or Dublin to Delhi.
Instead, BMI acts as a feeder to other long haul airlines, performing a vital service for a large number of business people and holidaymakers.
In 2010, 1.6 million people travelled from Aberdeen, Edinburgh and Manchester to London Heathrow to connect with a host of international destinations. Those people had a choice of airline for the domestic leg of their journey, and they could use the power of the web to compare prices and choose the airline that offered the best experience.
This choice BMI offers is not a ‘nice to have’ or a novel notion. This choice keeps prices down which means families far away can still travel to see each other, holidays remain part of our lives and struggling small businesses can continue to prosper.
When British Airways was left as the only operator on the Glasgow to Heathrow route in 2011, fares paid by Scottish travellers rocketed by 34% in six months. That is not beneficial, it is backbreaking and plainly unfair.
Whether it’s business people connecting from Manchester to Johannesburg or tourists from Tokyo visiting Edinburgh, BMI’s existing network sustains choice for the three million travellers who fly between Heathrow and Scotland each year. The alternative is to force them to use British Airways only, an increasingly overbearing airline monopoly.
BA’s parent company, IAG, has applied to the European Commission for clearance to take over BMI. Should this matter to politicians, business people and the UK travelling public? Of course it should and we should all brush up on the arguments.
Not only will this proposed deal poorly serve flyers from the north of this country but it’s likely that a dangerous fault line could grow at UK’s only global airport hub at Heathrow.
London is unique in the world in having the demand to support two UK long haul airlines, providing choice on long-haul routes. It means Heathrow can sustain competition, adding economic value, and supporting thousands of UK jobs.
However, if this IAG merger is not blocked, BA will control 52% of Heathrow’s landing and take-off slots, tightening its suffocating stranglehold on flying in and out of this country.
When you consider that BMI is the next biggest slot holder at 8.4% and Virgin Atlantic, just 3%, you would wonder why there is even a conversation about whether BA is allowed to swallow another slice of the market.
When you further consider that all of the remaining slots are held by a host of foreign carriers such as Qantas, Emirates, and United, which fly only between their home and ours, there will not be another opportunity for another UK airline to obtain enough extra slots to grow effectively.
The competition authorities know that nodding through a merger cannot be right. They know that BA is already overly dominant at Heathrow and that the airport is already full – unlike other European hubs. This makes it impossible for new competition to establish a meaningful base.
The regulators also know that with BA removing competition from domestic and European flying into Heathrow, many airlines will have their supply of connecting customers choked off and long haul airlines may be forced to reduce their presence at the airport. In short, they know that an IAG takeover would spell an end to choice for many UK travellers and visitors.
However, there is another option. Virgin Atlantic is ready to play its part. I believe we can replace BMI’s challenge to BA by adding regional UK flying to our long haul network.
By creating a second network carrier at Heathrow, we can build new routes to the countries vital to the UK’s economic future such as Brazil, China and India. We can support and grow UK employment and make Heathrow an effective, competitive hub.
The choice facing the regulators is stark: one dominant carrier that squeezes the life out of UK flying or two tenacious competitors that fight for low prices, increase customer value and ultimately provide more jobs, economic contribution and flying.