You wouldn’t think it from the way British governments have acted but aviation is massively important for the economic health of this country and Heathrow is the golden goose. It allows that other great British earner, the City of London to work, it supports one of the world’s biggest airlines, British Airways which is a massive foreign revenue earner and it provides tens of thousands of jobs.
But Heathrow has sclerosis, it is unfit for purpose because it has insufficient runway capacity to meet demand. In other countries they build new runways and terminals as they are needed. In Britain because of lunatic greens, extreme NIMBYism and weak governments we expect the whole nation to rely on a creaky infrastructure, which costs us all dearly.
The effect of insufficient Heathrow capacity is that ownership of landing slots is a prime commercial resource. The slots are an inherited resource owned by individual airlines because of accidents of history. They are so valuable that when they, very rarely, come up for sale they fetch as much as Â£30 million each. And British Airways owns 41% of these slots. This ownership of this scarce resource allows them to charge higher fares than if there was an infinite supply of slots, which would expose them to more competitive forces.
So British Airways has a semi monopoly on slots that allows it to charge higher fares (that ultimately everyone in the economy ends up paying for) so what happens to all the money? Is British Airways massively profitable? The answer of course, is no. As an ex state owned business it is riddled with inefficiencies which suck up the money. And one of those inefficiencies is profligate salaries. The average cabin crew is on about Â£30K PA which is a lot for a glorified waitress and double the Â£15K PA paid by Virgin. So well paid are the BA crew that many can afford to work one month on and one month off. And to use free flights provided by BA to live in exotic foreign places. All paid for by our over expensive fares.
Margaret Thatcher denationalised British Airways in 1987. They have had 24 years to become more efficient and shake of the dreadful heritage of having been nationalised. But they didn’t have to try too hard because of their slot near monopoly. But now things are changing in the world of aviation. A full quarter of Heathrow business is transit passengers who can choose to transit through other airports. And there are new high efficiency airlines in the sky who are taking BAs business off them. The first tranche of these were the budget airlines like Ryanair and Easyjet. BA responded to these by getting rid of European flights and then using the slots for longer range destinations. But now we have the second threat, the Middle East airlines, Qatar Airways, Etihad Airways and Emirates. These are known as the “super connectors” working through their Gulf bases and they are taking immense chunks of global market share off the old fashioned airlines like British Airways.
So now, at long last, British Airways really do have to become more efficient, otherwise they will all be out of a job. So their management have moved steadily to achieve this. With existing crews they are not even asking for wage cuts, just more efficient working practices. And all the aircrew have agreed. And all the cabin staff have agreed. Except those based at Heathrow. Not only did they disagree they decided to show their disagreement in the most primitive way by withdrawing their labour, by going on strike. Further damaging a company that they were already damaging with excessive wages.
Obviously the management are being strong, if they don’t win the company is dead. Not immediately but eventually it will just not be able to compete. And they are winning, each successive strike is less effective and most flights now operate as normal on strike days. But still the dinosaur union is calling more strikes and now they areÂ holding another ballot. Really these people are living in an alternate reality.
What the union should be doing, if it wanted to best look after the interests of its members, is to work with management to increase efficiency. To make jobs secure by striving to make the airline as competitive as possible. To secure their futures against outside threats.
There are other options. The government needs to build a few more runways and terminals in the southeast of England, preferably on a greenfield site in the Thames estuary. They need to totally shortcut the normal planning process to allow this to happen as soon as possible. It would give UKplc a massive and permanent boost. Then there would be plenty of slots and what happened to British Airways wouldn’t matter so much. And the British Airways Heathrow cabin crew could either change their ways or enjoy their unemployment.
Another route would be to get rid of the inherited right to Heathrow slots. Instead they could be auctioned off by government each year to the highest bidder. This way the higher fares that the limited slots produce would enrich the British taxpayer instead of the British Airways Heathrow cabin crew.