DALLAS — In Q4 2021, British Airways (BA) announced plans to create a new low-cost subsidiary to take over its short-haul operation at LGW in summer 2022. In a memo to staff, the flag carrier announced that its LGW base would need a more "competitive operating model" if it is to continue short-haul flights from the airport. 

After a two-year hiatus, the first service departed for Larnaca on March 29, 2022, at 6:25 am local time. However, BA has struggled for many years to make any real profit at the West Sussex facility. Various takeovers and franchise agreements had all promised to revolutionize its operation there. But all failed.

It would be BA Euroflyer's turn, the new BA branded subsidiary, that the flag-carrier hoped in 2022 would turn around its LGW fortunes. Today, most of BA's capacity at LGW is now handled by BA Euroflyer.

However, easyJet (U2) has gained seat share from BA, which is only expected to operate at the airport at about 79% of its summer 2019 capacity in summer 2024.

Although BA might not have returned to LGW without BA Euroflyer, more time is required before the subsidiary can be fairly assessed. We start by looking at it's history at the secondary international airport serving London.

The Beginning

"The World's Favourite Airline" can trace its history back at LGW to 1935. However, its presence here was always minimal compared to its operation at London Heathrow (LHR).

This all changed in 1988 when BA purchased rival British Caledonian Airways (BR). Formed in 1970 after the merger of British United Airways (BR) and Caledonian Airways (CA), as of 1974, the newly created airline went on to become the largest British independent airline and was often referred to as Britain's 'Second Force' carrier.

With LGW BR's main operating hub, the takeover led to BA commencing a major investment in its operation at the newly opened North Terminal. It planned to develop the facility into its second London hub. The first flight from here departed on March 22, 1988, bound for Naples.

Dan-Air Takeover

Following the takeover of BR, BA transferred many of its services to Latin America and Africa over from LHR to complement its recently acquired network. BA now needed a short-haul network to feed its long-haul flights.

Struggling Dan-Air (DA) was purchased on November 27, 1992, for just £1 for this very purpose. British Airways 'European Operations at Gatwick LTD' was established and BA launched 'Project Jupiter,' its strategy to turn around its poor financial performance at LGW. A 'hub-and-spoke' concept was put forward, with the North Terminal now marketed as “The hub without the hubbub.”

But the strategy didn't work, especially as low-cost airlines such as easyJet (U2) with their point-to-point networks began to encroach on BA's territory. The events of 9/11 only exasperated the situation and between 1999 and 2003, its short-haul base was reduced from 54 to 35 aircraft and destinations from 54 to 34.

Franchise Partners

Another strategy utilized by BA was franchising agreements, whereby one airline will operate services on behalf of another. BA's first, and indeed the first franchise agreement in the UK airline industry, was launched with CityFlyer Express (CJ) in August 1993.

The five-year contract saw all CJ services operated under the 'British Airways Express' banner, designed to increase feeder traffic at LGW. By 1999 CJ had become the second-largest airline at LGW, holding around 13% of all slots. Management decided to put the profitable airline up for sale.

British Airways did not want to relinquish its position at the airport and, much like the DA takeover, management believed purchasing CJ improve its financial performance. In November 1999 BA completed the purchase of CJ after the Competition Commission concluded its investigation into the sale. 

GB Airways (GB) became a franchise partner in February 1999. The leisure-focused carrier took on many of BA’s “bucket and spade” routes from LGW using its fleet of Airbus A320/A321s.

New Boss, New Focus

When Rod Eddington became BA's new boss in 2000 he quickly set to work disposing of the franchise agreements which he saw as 'unfit for purpose.'

CityFlyer Express was merged into BA's mainline LGW operation. Its turboprop fleet was retired and 16 Avro RJ100s transferred over to BA's new 'CitiExpress' regional subsidiary. Any cost savings CJ previously had over its new owner was gone.

In early 2007, as GB neared the end of its franchise agreement, the airline stepped forward with its 'Project BOLD' proposal. This would see the carrier take over all of BA's short-haul flights from LGW. The plan was rejected by the flag carrier and GB was subsequently taken over by easyJet on October 25, 2007.

Overnight U2 overtook BA to become LGW's biggest airline.

The Last Roll of the Dice?

Industry observers have seen BA's announcement as the last roll of the dice for its short-haul operation. Pre-COVID, BA operated 47 short-haul routes from LGW offering 6.8 million seats. However, during the pandemic, the airline has operated just a skeleton long-haul operation.

BA's last attempt at a low-cost airline Go-Fly (GO) in the late 1990s lasted until 2002 before it too was purchased by U2 in May 2002. Other companies have of course attempted to develop a low-cost "airline-within-an-airline" concept such as United (UA) with Ted and Delta (DL) with Song (SG). All have quickly been reabsorbed back into the parent's mainline operations. 

However, fellow International Airlines Group (IAG) carrier Iberia (IB) has been operating a successful low-cost subsidiary since March 2012. If BA can emulate this success, we may see the flag carrier subsidiary BA Euroflyer at LGW for many years to come.

For now, BA is still struggling to make a decent profit with its short-haul LGW operation, especially as U2 grew to become the airport's biggest operator.