British Airways Wants a Business Meeting

Posted by: Justin Bachman on July 14, 2009

When the recession hit with full fury in 2008, many a company slashed its travel spending. Marginally important trips were discarded, while vital ones were curtailed – and business class became verboten. Between a cash crunch for some firms and the perception at others of foolishly funding discretionary jaunts, corporate America’s decision to stay home walloped all the large network airlines.

Into this deep revenue breach come British Airways (BAY) with an effort to spur business travel. The airline, which in May reported its largest full-year loss on record, is hoping to reinforce the dual notions that successful enterprise requires in-person contact and the fortitude to invest – even on airfare – in the face of daunting economic conditions. “People have forgotten about the need to travel,” says Simon Talling-Smith, British Airways’ executive VP Americas.

At the airline’s annual meeting today in London, BA chief Willie Walsh renewed his emphasis on the crisis confronting the company, with much of the blame resting on the decimation of the premium cabin. To expect the business class to return to its prior ample state is “the road to oblivion,” Walsh said, according to The Guardian newspaper. Continental Airlines (CAL) CEO Larry Kellner trod this same turf a month ago, at an investor conference in New York. “The bad news in that is business traffic is clearly the most profitable thing we do. The good news in that is it tends to turn on and off fairly quickly. It’s clear that as the financing markets slowed down, business traffic reacted quite quickly,” Kellner said. “We’re working our business side very hard, because clearly, this is where we could also see a recovery much quicker if we could get the business traffic back on the airplanes.”

Premium traffic dropped 22% in April over the prior year, according to the International Air Transport Assn. (The May figure is to be released July 15, and looks to be just as bad.) BA expects its past business flier volume will return, but possibly not until 2014, Talling-Smith said. The problem is that it’s highly unlikely those future travelers will be willing – or required – to pay for the same level of service as occurred in the past. The high-end of flying very easily could become a miniscule niche for network airlines.

The new British Airways campaign, “Face-to-Face,” targets medium-to-smaller businesses with the lure of a free business trip. This fall, BA will send three planes from New York, LA and Chicago to London (and then onwards where needed) with business people who successfully pitch their need for a business trip, gratis. The passengers will be culled from 500-word pitches to the airline, accepted through July 31, and selected by an advisory panel.

As part of the marketing scheme, BA commissioned a survey from Harvard Business Review of 2,200 people and found, not surprisingly, that 95% said face-to-face meetings are a key factor in building successful long-term relationships. As for “sealing the deal,” 87% agreed that one needs to be in the room. Hardly preposterous contentions, these two, eh? But as industry veteran and analyst Bob McAdoo told Bloomberg, for a July 14 story on the weak numbers expected this earnings season: “If a business has decided not to send employees to Europe, a sale on the price of a business-class ticket doesn’t really change the business’s policy.” There’s the crux of the problem: Absent a free journey, large businesses are not inclined to send their people far, compelling arguments or no. And the pool of entrepreneurs and small/medium companies with the need or prospect of doing business internationally is small relative to the scope of the problem.