Annex 1C
FARES COMPARISON
Both British Midland's domestic and international
services are renowned for consistently offering low cost business
travel, a fact recognised by the UK's own competition and regulatory
authority, the Civil Aviation Authority (CAA). In the CAA's report
"Airline competition in the Single European Market (CAP
623)" it stated:
"Undoubtedly the most significant developments
in the realm of fares have been those provoked by BMA (British
Midland) on its international routes from Heathrow."
In the early 1980s we successfully fought for
the deregulation of the UK domestic air travel market, and subsequently
introduced services from Heathrow to Glasgow in 1982. Following
our entry to this market we have continued to champion the case
for UK travellers, becoming one of the most successful scheduled
airlines to compete against national flag carriers on some of
the busiest European cross border routes. Indeed, the CAA once
again cited the competitive impact of British Midland in its subsequent
report "The Single European Aviation Market; The First
Five Years (CAP 685)", in which it stated;
"Some of the most significant fare developments
in the UK market involved British Midland, an isolated example
of an independent airline consistently offering lower on-demand
fares whilst competing with the national flag carriers head-to-head."
Across 40 of the busiest cross border European
routes during the period 1986-96, the lowest business class fares
increased by an average of 36 per cent on routes with competition
against an average of 48 per cent on routes without. The impact
on leisure fares is even more marked with an increase of just
28 per cent on routes operated with competition, whilst on those
routes which had not experienced the entry of at least one extra
carrier fares rose by 46 per cent.
The European Transport Directorate DGVII in
1996, singled out British Midland as being responsible for "reducing
business class fares by 10-20 per cent on a number of routes from
Heathrow". A position further endorsed by former European
Commissioner for Transport, Neil Kinnock, when he stated:
"Allowing more competition is proving to
be the best way to bring the consumer and traveller better products
and services and more innovation at lower cost."
The case for competition is clear and British
Midland's consistent position has been to operate a fare structure
that is beneficial for the consumer when compared to rival carriers.
The following tables set out in brief detail the historical fare
data for a number of routes operated from Heathrow for the period
both before and after competition from British Midland.
|
| Route | Change before BM arrival
| Change after BM arrival
|
| Year
| Fare Rise | % Change
| Year | Fare Rise
| % Change |
|
| LON-NCE | 1986-91
| £354—£546 |
+54% | 1991-00
| £546—£505 |
-8 |
| LON-FRA | 1986-92
| £218—£350 |
+61% | 1992-00
| £350—£347 |
-1 |
| LON-BRU | 1986-92
| £174—£290 |
+67% | 1992-00
| £290—£284 |
-2 |
|
British Midland is pleased to have recently launched services
to Rome, Milan and Madrid from Heathrow. These routes, once the
preserve of only the national airlines of each country, are now
operated in direct competition with incumbent flag carriers. As
the following figures clearly demonstrate we have, once again,
set in motion the competitive processes that have already lead
to fare reductions for travellers to all three destinations.
|
| Route | Change before BM arrival
| Change after BM arrival
|
| Year
| Fare Rise | % Change
| Year | Fare Rise
| % Change |
|
| LON-MAD | 1994-00
| £480—£482 |
+0% | 2000
| £482—£463 |
-4 |
| LON-MIL | 1995-00
| £316—£512 |
+62% | 2000
| £512—£464 |
-9 |
| LON-ROM | 1995-00
| £424—£576 |
+36% | 2000
| £576—£524 |
-9 |
|
The trends demonstrated above are expanded further and discussed
in more detail in a campaign document produced by British Midland,
entitled "Clearing the Flight Path for Competition".
Despite the fact that this document was published four years ago,
in June 1996, it is demonstrative, even today, of British Midland's
consistent approach to structured and competitive pricing, in
favour of the consumer. This document may be found at enclosure
4.
Further to the pricing analysis detailed above British Midland
has also compared fares charged on a number of domestic routes
operated in competition with British Airways. The table below
provides a price comparison between current fully flexible Business
Class fares with British Midland and a current flexible economy
fare charged by British Airways.
The Committee may wish to note that British Airways chooses
not to offer a separate Business Class product on any of its domestic
services.
As the information clearly demonstrates on these routes a
British Airways economy fare is an almost identical price to a
full business class fare charged by British Midland. Notably,
the lowest British Midland business class fare, while still providing
business class facilities, is actually cheaper than a British
Airways economy fare.
|
| Route | British Midland
| British Airways |
| Fully Flexible Business Class
| Lowest available Business Class
| Fully Flexible Economy Class
|
|
| Edinburgh | £275
| £236 | £264
|
| Glasgow | £275
| £236 | £264
|
| Manchester | £213
| £199 | £212
|
| Belfast | £277
| £255 | £266
|
|
Despite similar ticket prices the benefits offered by British
Midland's Business Class service, as opposed to British Airways
economy ticket, are numerous. British Midland business travellers
are provided with fully equipped, dedicated lounge facilities.
Onboard the aircarft British Midland offer advanced seat selection,
wider seating, priority boarding and disembarkation, and a full
Business Class in-flight service. In addition British Midland
offers a number of ground services to business travellers, such
as chauffered parking.
We once again reiterate that British Midland's pricing strategy
has remained constant and has been structured in favour of the
consumer. As has been shown British Midland offers domestic business
class service at a price lower than an economy fare from British
Airways. In accordance with this traditional position our commitment
with regards to long-haul operations remains to cut the cost of
transatlantic business class travel from Heathrow.
| 
