WITHIN DAYS of putting itself up for sale, Flybe, a beleaguered regional airline based in Britain, has attracted interest from the country’s two largest carriers. Its executives are hoping for a bidding war between International Airlines Group (IAG), which is the parent company of British Airways (BA), Britain’s flag carrier, and Virgin Atlantic, its main rival. Flybe’s shares have surged in value due to the tussle. But only one of the bids would be good for the travelling public.
IAG already controls over 54% of the take-off and landing-slots at London Heathrow, Britain’s biggest airport. By contrast Heathrow’s second-largest carrier, Virgin Atlantic, has a market share of less than 5%. For London-based travellers who only fly short-haul, there is meaningful competition in the skies from low-cost carriers. But for regular business travellers—who demand multiple daily flights, lounge access and a good frequent-flyer scheme—there is only one attractive airport in London, and only one attractive carrier at that airport: BA.
Britain’s flag carrier cannot be blamed for inheriting its privileged status. But regulators can be blamed for allowing the airline to exploit it. Over the past few years the airline has been accused of hacking back at service levels. Baggage allowances, legroom and on-board refreshments were all cut. This year BA began charging passengers to sit next to each other. The tactics are justified by an alleged need to compete with short-haul low-cost carriers. Yet the frugality extends to long-haul routes on which there are few direct competitors. Constant criticism of BA on social media and in the national press achieves little. Its customers keep coming back, because they have no other alternatives on many of those routes.
If BA is allowed to buy Flybe, this monopoly will extend to other parts of Britain. Heathrow currently has limited appeal to those living in the Midlands and the North. Both BA and Virgin Atlantic would seek to change this by plugging Flybe’s network into their Heathrow hubs. But unlike BA, Virgin Atlantic also operates long-haul flights from other British cities like Manchester and Glasgow. Strengthening these secondary hubs will weaken Heathrow’s, and thus BA’s, grip on the market. Sky-high profits at BA amid declining service standards show the flag carrier has an unassailable lead over competitors. A Flybe-Virgin tie-up might be the first step towards giving it a run for its money.