MA RK E T INS IGHT RE PO RT

Strategy, Optimisation, Digital Marketing and Customer Relationship Management

Good Growth Market Insight Report

British Airways - The Battle
for the Atlantic
MARCH 2016

Following a profit announcement in October 2015 which fell short of analysts expectations, this market insight report investigates
the state of BA’s e-commerce performance and examines how well-placed they are in the ultra-competitive transatlantic market.

In 2010, British Airways saw profits reduce significantly to £425 million in the red1, the worst in recent years. Since then however,
the company has seen a significant turnaround, with profits in 2014 totalling £702 million2.

The transatlantic market between the UK and North America is reportedly the most competitive in the world. With several US
airlines having gone bust and a fierce feud erupting between BA and Virgin Atlantic over routes and landing slots at Heathrow, the
competition is now between a small number of large airlines operating on very tight profit margins.

Four of the 10 busiest air routes between Europe and the rest of the world are between London Heathrow and airports in the United
States. These routes are dominated by some of the largest carriers in the world, this report focuses on British Airways in relation to
their closest competitors on North American routes from Heathrow: Virgin Atlantic, Delta and American Airlines.

1 http://media.corporate-ir.net/media_files/irol/24/240949/AnnualBA/BAI_AR_2010_final.pdf
2 http://www.iagshares.com/phoenix.zhtml?c=240949&p=irol-reportsannual
 Key Points:
• BA’s e-commerce performance is good, but not great:
o Research by Good Growth reveals that BA have high levels of search traffic and an effective paid campaign but they are
failing to listen to the voice of their customers by utilising best in class analytics and engagement tools.

o Their toolbox in general is poor compared to their competitors, utilising only Google Analytics for general webpage analytics
and Optimost for split testing.

• Significant investments in their website and app have failed to deliver frictionless customer engagement:
o In spite of the impressive façade, their customer engagement is not user friendly and fails to execute simple customer
journeys effectively.
• The transatlantic market is fierce and close to saturation:
o Passenger volumes on transatlantic routes between the UK and the United States are rising steadily, with new routes being
opened up every month. However, there are several significant factors which restrict airlines:

• The UK’s largest airport, London Heathrow, is approaching 100% capacity3.

• Despite the demand at Heathrow, of the 40 busiest international routes in 2014, only 3 out of 10 routes to the
United States increased in passenger numbers, the rest decreased4.

• Significant investments in aircraft:

o British Airways has invested significantly into an upgrade of their entire long-haul fleet at a cost of around $15 billion5. Their
current fuel inefficient, ageing fleet and a demand for smaller aircraft on long-haul routes has prompted this renewal.

o Virgin Atlantic are planning an entire replacement of their Boeing 747 and Airbus A340 fleets in the next few years, recently
announcing an order just over $4 billion with Airbus for the new A3506.

o In stark comparison, the major US carriers into Heathrow (Delta, American and United) operate considerably older fleets and
absorb the higher fuel costs. On average, Delta have the second oldest fleet in the world7.

• Competition ferocity will continue:

o There is minimal route capacity for more aircraft, especially for new airlines on existing routes. Therefore competition
between the big carriers is set to become more fierce.

o The recent surge in large Middle Eastern carriers has put significant pressure on American and European airlines to provide
a wide range of routes at competitive prices.

o The airlines operating on transatlantic routes are remaining competitive but when fuel prices begin to rise once again, airlines
will need to have their e-commerce execution perfected in order to stay profitable.

The Competition
British Airways faces significant competition not just from their ‘traditional’ rivals such as Virgin Atlantic and the American carriers
but the recent surge of Middle Eastern airlines with deep pockets have forced companies such as BA to rethink their long-term
strategies.

The American carriers however possess the advantage of being among the largest airlines in the world and as a result, can offer
some of the cheapest transatlantic fares on the market with a respectable standard of service. British Airways can no longer gain
a significant competitive edge based upon consistency and quality of service alone. With the market having moved online, they
need to ensure their customer engagement and e-commerce execution matches their marketing. Not listening to the voice of the
customer means that BA are failing to gain invaluable insight.

3 http://nats.aero/blog/2015/01/big-data-and-managing-capacity/
4 Civil Aviation Authority.
5 http://uk.reuters.com/article/uk-ba-planes-idUKBRE9630CH20130704
6 http://www.bloomberg.com/news/articles/2016-01-12/virgin-atlantic-said-poised-for-4-3-billion-airbus-a350-deal
7 http://www.ibtimes.com/worlds-15-oldest-airline-fleets-how-do-us-based-airlines-rank-1475194
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The website
Research by Good Growth shows that the entire ticket purchase process from buying through to check in and ordering special
meals, is arduous and does not work as well as the best in class.

Our test purchase was performed on a ticket from London to Vancouver utilising both the website and the app. The team found
the website sluggish to respond and the customer journey poorly laid out. When attempting to select seats and special meals, the
website often didn’t load the options properly or did not save them, forcing users to call the helpline.

Whilst emails were received to prompt outward journey seat reservations 24 hours prior to board, no such emails were sent for the
return journey, requiring our users to spend time at check-in asking for a booking made together to be allocated seats together.

In addition to the difficult seat selection, the company also boast an uncompetitive pricing structure for selecting seats prior to 24
hours before boarding:

• First class – free of charge.

• Business class – upwards from £55 (the ticket we bought wanted to charge us £75).

• Premium economy – upwards from £18.

• Economy – upwards from £20 and upwards from £60 if you wish to sit next to a travelling companion8.

For those of a nervous disposition when flying, British Airways have produced some easy tips on reducing the effects of turbulence
and of course, direct the user to choose their seat based on this information – complete with the extra charges. This lays them open
to a charge of exploitation of fear for profit.

British Airways would benefit significantly from listening to the voice of their customers as they move through the online journey.
Although they will be gathering data from other analytics tools, the best test and learn programmes are driven by data sourced
directly from customers. BA will be missing significant insight to improve their sales execution in order to drive more revenue.

The app
BA’s early attempts at a mobile app were poor due their limited features and unusable design. Their new app is an improvement.
The airline is now placing significant emphasis on their app offering, recognising the importance of features such as easy access to
boarding documents and flight updates.

Given this however, the app’s performance was found to be sluggish and prone to crashing. It was also very slow to open up
boarding cards, something that could pose a problem at the gate. Direct competitor Delta’s app executes much better than BA’s,
with features like boarding card barcodes generating far quicker, making the overall process a lot easier.

Paper boarding passes are still a necessity of air travel in 2016.

Source: Getty Images

8 http://www.britishairways.com/en-gb/information/seating/choosing-your-seat

© 2016 Good Growth Ltd. All Rights Reserved. 3

The insight approach
We analysed the performance of British Airways against some of their biggest competitors in their transatlantic market between
Europe and the United States (Virgin Atlantic, Delta, American Airlines and Lufthansa) using our insight benchmarks and found the
following:

In the United Kingdom:

• British Airways drive a significantly higher amount of search traffic against their closest competitors, with Virgin Atlantic trailing
in second place amassing only a third of BA’s impressive traffic figure.

• Their adword position is mediocre, ahead of their American competitors but beaten by Virgin Atlantic and Lufthansa.

• BA have the second highest number of landing pages but German carrier Lufthansa have far more.

• British Airways have a poor toolbox - but no better than Lufthansa’s. Neither are systematically surveying their customers for
free-form feedback. Surprisingly, considering their overall e-commerce performance, Delta and American Airlines possess full
toolboxes. They don’t seem to be using them to full effect.

In the United States:

• The American carriers both drive a large amount of search traffic in the US but British Airways still lead the European carriers.

• BA’s paid campaign in the United States far exceeds their competitors.

• Their adword position is mediocre, with Virgin Atlantic topping the table, an impressive 99 words in positions 1-3.

• In the United States, BA perform very well with landing pages, with Lufthansa coming a not so close second place.

• Toolboxes are identical across the Atlantic as they are in Europe apart from Lufthansa, who incorporate more analytics tool
than they do in Europe.

Summary
• Based on their e-commerce performance as measured by Good Growth’s benchmarking app, it is clear that British Airways
have made significant investment in their e-commerce execution.

• BA are missing out on vital insight by not possessing a voice of the customer tool among their online analytics. Data sourced
directly from customers will drive the best test and learn programmes. This needs to change if BA intend on staying ahead of
the competition.

• They are aggressively investing in paid media, forcing traffic away from their competitors. In an industry where customers are
heavily influenced by aggregator sites, this will not be the answer to all of their problems.

• They still have to focus on their e-commerce execution. Further investment in their adwords and analytics tools would improve
their understanding of their customers and help to address their recent drop in profits.

• As customers, we found some of the proposition expensive and off-putting: by not asking customers for their feedback but
offering a poll option against their agenda, they are missing key messages.

• Being a brand leader does not guarantee market leadership on its own, an in-depth understanding of customers and how to
attract their attention is vital.

• Large brands such as BA often have to work harder than their smaller competitors to stay ahead, this means investing in the
right tools and having a confident paid campaign.

• Unless you are well informed and engaged effectively with propositions in which you are interested, price will often take
precedence over other factors. BA need to improve the effectiveness of their e-commerce performance – not through
technology but in understanding what customers want and responding to it.

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Good Growth work for clients who realise that what they are doing just isn’t working for them
any more. They know they have to engage with or initiate changes that can re-ignite their
organisations to move forward and grow. That’s why they come to us.

This report is part of a range of research and case studies that focus on how to build effective
ecommerce such that your digital investments deliver profitable growth. More like this can be
found on our website www.goodgrowth.co.uk.

To learn more email us at enquiries@goodgrowth.co.uk

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