Yesterday’s announcement that BA pre-tax loss amounts to £401m didn’t come as a surprise to me. While BA attributes this loss to a weak pound and higher fuel costs, I wonder how much of £401m belongs to the self-inflicted problems manifested through extremely high number of disruptions.
During the last five years BA punctuality dropped from 81% in 2004 to 63% in 2008 (Group results), indicating serious planning and strategic weaknesses. The fact that BA operates diverse fleet from one of the world’s most congested airports suggests that good amount of losses may have their origins in disruptions.
Industry experts estimate that disruption related costs of network airlines amount to 10-20 % of total operating costs shared between precalculated trade-offs, unforeseen events, and internal weaknesses. It is hard to say how much more delays can cost an airline taking into account investment in spare aircraft to keep punctaulity at bearable level.
This calculation can be applied to any ‘mega’ carrier with complex organisation, multiple hub-and-spoke networks, diverse fleet, and aged aircraft. It’s been proved through practice that such systems are difficult to manage and control. If the answer to the cost efficient and punctual operations is in business simplification, than further mergers and acquisitions won’t work towards this goal.
