BA profit dip is good news for Ryanair

For the quarter to end June, British Airways reported its worst quarterly result in seven years, as price pressure and a drop in high paying passengers hurt revenue. Operating profit fell by 46 per cent to £94 million sterling (€141.4 million) due to over-capacity on North Atlantic routes and sluggish growth in Europe.

Furthermore, the airline said trading conditions remained tough and volatile in its major markets. Bob Ayling, BA's chief executive, said the airline planned to reduce capacity by up to 12 per cent for the next three years mainly by cutting economy seats that produce lower profit margins than business class.

This would seem to be very good news for the low-cost carriers such as Ryanair, as BA's strategy looks as if it is turning away from the budget passengers which Ryanair welcomes with open arms. BA would seem to be adopting a strategy that emphasises it is offering a premium product (at premium prices) primarily to the business traveller.

BA plans to cut the number of airports that it serves in Europe from 80 to 60. Its strategy is being seen by many analysts as high risk. While the business segment of the market produces high returns, it is volatile and is usually the first to suffer in difficult economic conditions. Whatever is the ultimate outcome for BA, Michael O'Leary must be rubbing his hands with glee as he looks forward to the prospect of welcoming with open arms the spurned economy class BA passengers.