The general assumption here is that the purchase will effectively just add slots to the IAG portfolio at Heathrow. IAG (owner of British Airways and Iberia) will see its slot holdings rise from 45 percent to 53 percent. It’s expected that BMI regional will be sold off as will bmiBaby, the low cost airline. That is, however, assuming anyone wants to buy them. If this scenario plays out, here’s who wins and who loses.

bmi – Mixed
Shall we start with the most obvious, bmi itself? The airline has languished for years as a distant second fiddle in the UK behind BA, but people did like the frequent flier program and it gave Star Alliance fans a good base within the UK for travel. Still, there wasn’t much hope that bmi would survive on its own, so having the airline sold off as a whole instead of taking it apart, piece by piece, means there is some hope for those who work at the airline today. Of course, there would have been a much greater outcome for those folks had someone like Virgin Atlantic taken over. This is one of those, “could have been worse, could have been (a lot) better” scenarios.

British Airways – Winner
The most obvious winner here is British Airways. Being based in the anti-aviation UK is not easy, and it can’t grow capacity to save its life because the government is too blind to understand how important it is. BA will now get its hands on a nice chunk of slots at Heathrow so it can finally grow. According to management, BA is eyeballing east Asia destinations like Korea and Vietnam, so that will give BA the ability to better compete with foreign flag carriers. It should be noted that BA will still just have over 50 percent of slots at Heathrow, so it’s hardly a massively dominant position. But it will increase concentration, and that will certainly get some hard scrutiny from the competition authorities.

Virgin Atlantic – Loser
The biggest loser by far is Virgin Atlantic. Virgin had hoped to purchase bmi to give itself some heft and possibly as an easy way in to an alliance partnership with Star. This had the makings a big coup for both sides. Star would gain a stronger player in London, Lufthansa would be rid of the money-losing ownership stake, and Virgin Atlantic would finally have a strategy on how to compete going forward. But it’s not to be. Virgin Atlantic’s bid wasn’t high enough, so instead all those slots will go to Virgin’s arch-rival. I’m sure we can expect to see some slogans painted on the back of Virgin planes, maybe “bmi + BA = no way”? Virgin’s best hope now lies with the regulatory agencies.

Lufthansa – Mixed
I think of bmi like a vampire that’s slowly draining Lufthansa’s blood. After being forced to buy bmi two years ago, the long nightmare is over and Lufthansa will get a nice little payday out of the sale. But it’s also enabling one of its biggest European competitors, BA, to become more effective. With these slots, BA can ramp up and provide better schedule coverage. It can also woo Star Alliance loyalists in the UK away because that simply isn’t much of an option anymore.

Other Star Alliance Airlines – Loser
The impact is not as great for other Star Alliance airlines, but over all, this is bad for them. It helps British Airways to build a bigger and better strategic hub at the expense of a Star Alliance presence in one of the most important cities in the world. It cuts down on options for Star loyalists and makes BA stronger. For that reason, Star members can’t be happy, mostly because they didn’t have a financial interest in that sinking ship. They just wanted to take connecting traffic from the airline and let Lufthansa suck up the losses.

UK Travelers – Mixed
Finally, let’s talk about the traveler. The bad news is that any Brits who liked to fly on Star Alliance airlines will now have their options dramatically reduced. And to make things worse, the next best option is just a bigger and stronger British Airways. For some people, bmi provided a good, more manageable option than BA with a nice little mileage program to boot. Those people will be sorely disappointed by this.

On the other hand, we have people who only flew bmi because they had no choice. For example, if you had to fly to Casablanca or Beirut, BA wasn’t an option. In fact, North Africa, the Middle East and some of the former Soviet republics in the south were bmi territory. Though BA seems to be hoping to do more in the Far East with these slots, I imagine that at least some of the existing bmi cities will be able to hold on to service with BA. That can be good for travelers, though it remains to seen what fares would do.

Customers will also pay the price in terms of the Heathrow operation. BA squeezes as much as it can into its Terminal 5 at Heathrow with the rest along with its oneworld partners stuck in Terminal 3. With all these new flights, BA will likely once again be spread across the airport, making connections more annoying for travelers once again. Will they need to keep a presence in Terminal 1 where bmi is today? Ugh, that would be a pain.

Now we just sit back and wait to see if this actually goes through. Will the UK require massive slot divestitures that make this deal a no-go? It wouldn’t shock me. If that happens, then maybe Virgin Atlantic can step back in and make a go at it. I anticipate there will be a lot of fighting before this whole thing is said and done.

Most of you know Heathrow as that awful place where congestion is such a part of life that your plane has to circle a couple times on arrival and when you do arrive, your bags immediately get lost. That’s why British Airways was so focused on building Terminal 5. Heathrow’s previous arrangement had Terminals 1, 2, and 3 in the central terminal area between the two runways. Terminal 4 was on the south side of the airport, completely away from the other three. BA’s long haul operation was in Terminal 4 and its short haul operation was primarily in Terminal 1 and that meant trouble.

The long distances made for all sorts of problems. Yes, bags got lost frequently and connections were long and painful for people as well. Terminal 4 was a nightmare because being on the far south side meant that to get to and from the north runway, BA airplanes had to cross the south runway. That was a very time-consuming process at an airport that operates at maximum capacity. The parking areas were also very tight, so like Delta at JFK, BA had traffic jams between its own airplanes that caused delays.

So BA worked with airport operator BAA to build a more than £4 billion new terminal to the west of the existing central terminal area. That became Terminal 5. Why didn’t they build Terminal 4 there? Well, there was a big sewage treatment plant and that had to be relocated along with a bunch of other stuff. That’s one of the reasons that the terminal was so expensive. There was a ton of site prep work.

But now Terminal 5 is built and it’s a great place. There is the main terminal area T5A and then two satellites connected by an underground train, T5B and the soon-to-open T5C. I arrived in T5B, as do most of the US flights, and found that the scale of the terminal was not noticeable upon arrival. You are shuttled through a series of escalators and trains, and when you finally come out, the arrivals area is a very small place with just a couple of shops. There are in-terminal connections to the Tube, the Heathrow Express train, the Sofitel Hotel, and a ton of buses that take you all over. It works very well, though the up and down of the escalators can be somewhat confusing after a long flight.

The departure level is where you really sense the size and feel of the terminal. The ticketing area is enormous and it lies in a huge open space. The concept has you check in at podiums and then keep walking through to a wall of shops at the back. Security sits on both sides, and I’m told that if the line on the left side is long, go to the right where the premium check-in areas are. Those may be shorter.

Once through security, you come in on a mezzanine level above the departure areas. There are a couple of shops and restaurants up top but much of the action is down below. Once you descend to that level, you get that trademark Heathrow shopping experience where you’re completely overwhelmed. It’s just crazy how much shopping they are able to shoehorn into that place. If you’re a fancy pants flier, you can head to the right where the bulk of the lounges are in the terminal. This is one place where the smooth flow is interrupted. Instead of just walking from the mezzanine into the lounge, you have to go down and then back up to reach that area. Goofy.

There are two large Club World and First Class lounges that also welcome BA’s elites. They’re large, light, and have a ton of options including things like food and champagne bars. Then there’s the Concorde Room. This room is only for First Class passengers and it is old-school. It uses a lot of dark wood, has a fire burning, and is a very quiet place unlike the other First Class lounge. It’s traditional British luxury at its best. The room has a full service dining area and an excellent balcony area where you can look over the little people down below. It also has a couple of private day rooms for those with long layovers. Unfortunately, I wasn’t allowed to take any pictures in any of the lounges.

Back with the normal folks, I found there to be plenty of seating. T5A is where the domestic flights go from so you see a lot more narrowbodies there. To board, you actually descend another level to the gate itself. It flows well. If you need to go out to the satellites, you descend to the train which takes you there. There are some shops and a lounge (on T5B) for people, but you shouldn’t go out there unless you know your gate. Once you go out to T5B or C, you can’t come back to T5A. It’s happened before and apparently required BA’s staff to step in to help figure out a way out without going into the customs area.

Underground, there are apparently several stories of a baggage system that does what Denver’s system was supposed to do before the airlines gave up on it. The result is that lost bag numbers have plummeted and on-time percentage has spiked. When the snow/ice storm hit in December, BA had to cancel scores of flights like the other airlines, but while other terminals had to set up tents to deal with all the stranded passengers, BAA built Terminal 5 to have enough extra space that it wasn’t necessary.

According to BA, the cost savings have been so huge in terms of improved on-time performance, shorter taxi times, and better baggage numbers that it is easily paying for itself, even with the large increase in costs at the airport. In that sense, the savings justify the insanely high cost. Could they have shaved a billion off the place with a less grandiose design? I would assume that there could have been more savings and I wish they would have taken advantage of them. Then maybe airlines like bmi wouldn’t feel so much pressure to drop shorter haul flights because the costs have gone up too much.

But Heathrow is still constrained with two runways and the government has opted to ignore the problem and refuse a new runway. That means Heathrow will continue to see more and more long haul at the expense of short haul so the cost doesn’t have as much of an impact in those cases. For passengers, the experience is certainly a good one, and it’s nothing like it used to be.

Low-Cost Airlines: Increasingly Flying to a Major Airport Near You – BNET Headwinds
Secondary airports used to be the place to find low cost carriers, but they’re now increasingly moving toward primary airports.

Why airline fees are good for travelers – CNN.com Out of the Office
I’m now writing a new weekly CNN.com column entitled Out of the Office. I started off with a very controversial topic, and the reaction was, um, stiff. People aren’t nearly as civilized with their comments on CNN.com, that’s for sure.

US Airways: Why We Don’t Bother Hedging Jet-Fuel Prices – BNET Headwinds
US Airways doesn’t hedge, and so far it’s paying dividends. See why the strategy makes sense for the airline today.

Google-ITA Rewards Orbitz and Undercuts Merger Opposition at the Same Time – BNET Headwinds
ITA signed a renewal with Orbitz and that might have some impact on whether or not Google’s effort to buy ITA gets approved.

In the Trenches: Getting Help with Hiring – Intuit Small Business Blog
After realizing that hiring on my own wasn’t going to work well, I looked elsewhere for help.

Heathrow-Virgin Spat: Virgin Caves, but Wins the PR Battle – BNET Headwinds
Virgin Atlantic’s effort to withhold funds from BAA has failed, but the war is still ongoing.

Delta ranks near bottom in on-time performance – Atlanta Journal-Constitution
I was asked whether a poor on time performance record would make fliers consider alternatives. Yep.

Why Frontier Airlines Isn’t Going Anywhere Any Time Soon – BNET Headwinds
A post came out suggesting that Frontier wouldn’t exist by the end of this year. That’s laughable.

In the Trenches: Burning Out – Intuit Small Business Blog
It’s been a long time coming, but I’m starting to feel twinges of burnout. It’s time to fight that feeling.

Making Your Travel Agenda More Efficient – Intuit Small Business Blog
One way to save money is by being smart with your travel budget, but you can also save money be just being more efficient with how you spend your time traveling.

Airlines vs. Airports: Virgin Atlantic Stiffs Heathrow After Icy Shutdown – BNET Headwinds
Virgin Atlantic is withholding all landing fees from Heathrow until it knows the result of the inquiry into what happened during the snow storm in December. This is not a great plan.

In the Trenches: Going Corporate – Intuit Small Business Blog
We’ve ramped up our small business efforts at Cranky Concierge, and it’s already paying off.

Southwest Keeps ‘Em Happy, but Its Late Flights Are Starting to Stack Up – BNET Headwinds
Southwest is not running the best operation these days, but its reputation keeps people happy anyway. I don’t know how long that can continue if things don’t improve.

Cranky Flier Radio Interview With Brett Snyder – Ask Mr Credit Card
I spent 90 minutes doing an interview with Ask Mr Credit Card about the industry. We talked a lot about current events and some of my personal background. If you’ve got time to kill . . .

JetBlue Blames Airport Construction for Late Flights. Um, No – BNET Headwinds
JetBlue is another airline that’s been struggling to run on time, and the excuse has been airport delays. I’m not so convinced.

The Impact of Demand
When it comes to domestic flying, travelers care primarily about price and schedule. If an airline has frequent flights in a market, it’s going to punch above its weight, so to speak. But when you start talking about long haul flying, the equation changes. Most people become less time sensitive and the nonstop isn’t quite as important.

For a 1 hour flight, you want to see flights going hourly all day long. For a five hour flight, you’d like to see flights going at least 4 or 5 times a day. And for a 10 hour flight, well, the schedule doesn’t matter nearly as much. When you’re traveling that far and changing so many time zones, you just expect to have a long travel day.

If we look at the Denver-London flight, it originally left Denver at 655p and arrived London at 1050a. Now, if you want to fly United, you’ll have to leave at 355p, go through Washington and arrive at 1010a. Sure, it causes you to lose some time but it’s really only about 2.5 hours. In the scheme of things, that doesn’t matter that much.

So there are viable connecting options on United and that’s likely to keep most of the United fliers happy enough that they won’t leave. The only better option is the British Airways nonstop, but if you’re tied to Mileage Plus and Star Alliance, you probably won’t be defecting. American miles don’t do much for you if you live in Denver.

On top of that, many of the people who would connect through Denver can either go through San Francisco or LA in the west along with Chicago and Washington in the east. Sure, some of the smaller mountain towns won’t have one stop service anymore, but there’s not huge demand for that.

So on the demand side, while travelers would like to have a nonstop, United isn’t going to lose a ton by not having it. Could it gain in the way of higher fares? Sure, that’s possible, but that also doesn’t mean it’s the best use of that airplane.

The Trade-off
The issue is figuring out if there’s a better way to use that airplane and that slot. For United, the opportunity to put another flight in Washington for a total of 4 daily makes sense. There is a lot more demand for flights to London from Washington than there is from Denver, but that’s not all. The shorter flight time from the East Coast to London means people are somewhat more time sensitive. For example, there is a morning flight that goes to London as well as three at different times in the evening, and that makes a difference when the flight time is only 6 hours and you have 2 fewer time zones to cross.

United also faces stiffer competition in Washington. Besides BA’s three daily flights there, Virgin Atlantic has one as well. While BA and Virgin both have flights leaving at 640p, United can now bracket its current 6p flight with one at 7p. It makes for a very compelling schedule and it allows United to spread thing out for better connecting opportunities as well.

Best and Highest Use
Another thing to consider here is aircraft. United was using a 777 on the flight from Denver, but it can use a 767 from Washington. That frees the 777 to fly longer, more profitable missions. Then again, maybe United will pull it out of service to refit the seats to the new standard. Either way, the 767 probably makes for a better match with demand in Washington and freeing up a 777 is a big deal. They don’t just grow on trees.

In the end, my guess is that Denver-London did ok in the summer but not “ok” enough. United doesn’t risk losing a lot of demand because of the connecting opportunities, so it might as well move the fleet around to where it can be more profitable. My guess is that the 787 will make Denver-London look a lot more compelling when it finally gets delivered. But until then, there are better ways to use the airplanes in the fleet. You may not like it in Denver, but it does make a lot of sense.

[Original photos via Wikimedia Commons users Janusz J. and AgnosticPreachersKid/CC-BY-SA-3.0]

I realize this may not be fascinating to all of you (or, um, potentially most of you), but RDC Aviation puts out a great monthly report on UK air traffic data. The last report was for January – October 2009, and I found myself just fascinated by a lot of what’s in there. Here are some random fun facts in no particular order.

• About 100 million passengers went through Heathrow, Gatwick, or Stansted through October. That’s more than half of the entire country’s air traffic.
• A full 20 percent of the traffic at Gatwick is charter. That’s the largest charter airport in the UK.
• Quick – what’s the largest destination country from the UK? Nope, not the US. It’s Spain with more than 27 million passengers. The US sees a paltry 14 million yet it is number one from London. There are nearly 16 million people going from the rest of the UK to Spain and that makes the difference. (Should I make my pasty white Brits comment again?)
• Outside of the British Isles, Amsterdam is the number 1 destination. I’m surprised to see that Paris is #8 from London. Considering that most of that traffic is now on Eurostar, that shows just how big that market is.
• Only one route within the UK carries over 1 million passengers – Heathrow to Edinburgh. If you add in the other London airports, you get to 2.5 million.
• The largest domestic UK route not touching London? That’d be Belfast to Liverpool with 336,000 (another 123,000 if you include Belfast City airport).
• #1 international? New York, of course. Heathrow to JFK has over 2 million people. Adding in Newark, you get close to three.
• The largest US market that doesn’t touch London? How about those sunseekers in Manchester – more than 300,000 headed to Orlando.
• The #1 charter route from the UK is from London to Dalaman. Manchester to Dalaman is second. Dalaman, by the way, is in Turkey.
• Heathrow is the largest cargo airport, but #2 is actually East Midlands. In last place, we have Wick, which had one single tonne for the first 10 months of 2009.

See, I told you that was fun. Wait, hello? You guys still there? Definitely come back tomorrow for the Air NZ product launch coverage.

1. Limited-to-no premium check-in – My friend always flies business class for his frequent work trips, and he noticed that while there was a “tiny first class check in area,” there was “no dedicated first/gold card security lane” and “no business class check in at all.”
   
   Hmm, that didn’t seem right to me, but sure enough, that was BA’s plan all along. I spoke with John Lampl, spokesman for BA here in the US, about these issues, and he confirmed that “one of the concepts is . . . no dedicated queues for premium travelers, because what we expect them to do is check in online . . . get to the airport in time for their flight, go through the bag drop [if necessary] and security and go up to the lounge.”
   
   How strange. John says this comes from a great deal of research, but I know there are premium travelers who prefer the personal touch and want a human being to take care of things for them. Unfortunately now, if you want help from a real person, you have to wait in line with everyone else. The goal is, of course, to have no lines at all, but that’s not always realistic.




2. Security validation – Apparently BA has set up a fancy pants system that makes you scan your boarding pass when you go through security. According to John, if you have a valid boarding pass and you’re there more than 35 minutes prior to your flight’s departure time, then you shouldn’t have any trouble. That didn’t work out so well for my friend. He says:
   
   “I checked in online and printed [my] boarding pass but had to go to [the] check in desk to have my [ticket] ‘validated’ or activated in the system. This was after stopping by the first check in area and having been told to proceed to security.”
   
   Hmm, this doesn’t sound very good either. I’m sure there are opening day glitches, but it’s not far-fetched for a boarding pass to get corrupted or a system to malfunction. Sending someone back to the general check-in area every time there’s a problem is not only aggravating, but it’s poor customer service.




3. Lounge locations – As a gold card holder on BA, he’s entitled access to certain lounges. Apparently, it’s not very convenient in his eyes. He says:
   
   “There is a door into the lounge area right by security but it is for pax booked in first only (a gold card won’t cut it…) so to access the lounge you have to walk in a loop, go downstairs, then back upstairs.”
   
   That seems rather strange to me, but John says there is some hope here. “We had elevator problems in the first few days. He may have been forced to go downstairs and then upstairs.” So hopefully this one isn’t a problem.




4. Security bins – “Everything has to go in a security bin – even your bags. Someone tried to get way too clever and design an automatic bin return. Needless to say that does not work to well. And my carry-on got stuck in the stupid bin.”
   
   Yeah, that’s definitely frustrating. Sometimes, the most simple things are the best way to go. Designing an automatic return system may sound good in theory, but it could end up being more trouble than it’s worth. Hopefully this one is just part of those “opening day jitters.”




5. Lounge quality – Apparently, once my friend found the lounge, it was fine, but that’s about it.
   
   “Lounge is nice – food is nothing special at all. Virgin still kicks their ass on this front – in fact I think BA will lose a lot of business to Virgin b/c the setup here for a premium pax is stupid. . . . Regular lounges have same and more food than first. I don’t think it qualifies as a coffee house if you have automatic machines that make marginal cappuccinos. Champagne bars with only 2 champagnes would not last long. Oh – why can they do decent fresh oj on plane but [the] lounge has concentrate?”
   
   Something tells me this could be an issue of overpromising with the brand. What do I mean? If they’re going to call it a “champagne bar,” which they do, then it probably should have more than 2 types of champagne. If it’s just a lounge, then 2 champagnes are fine.
   
   The orange juice issue is the one that is most likely to get action. When I told that to John, he said, “I totally agree with him. We will take that comment and that will be sent to the people catering the lounges.”




6. Arrivals lounge – Once my friend returned, he sent me a follow up note about the arrivals experience. Though many of those gripes were probably just “teething problem,” I think his notes on the arrivals lounge were interesting.
   
   “Classic BA. Indifferent staff, no warm greetings and same crap food. You really think they could make something better on the ground than in an airplane. I especially like the “self service” luggage check. You present your bags, the counter clerk open the little gate and says “Yep. Take them back there”. Staffing levels clearly low. No one at the spa area or shower check in.”
   
   Sounds adequate but nothing more, in his eyes.

So that was about it. My friend summed it up after his trip by saying “Compared to [Virgin Atlantic], I would say BA completely lost the plot and missed a huge opportunity to create a great space for premium pax. Watch their load factors drop.” That’s certainly an unfortunate opinion and not one that will please BA. I know they were trying to do something amazing here.

So, for him it was clearly a disappointing experience, but one man does not represent everyone. Who else has an opinion of the Terminal 5 experience? Anyone else have a different view on things?