From London To Baku & Back

The Not-So-Friendly Skies

On March 15, 2016, British Airways (BA) announced that it will be discontinuing its flights from London to Baku (capital of Azerbaijan) by the end of next month (April, 2016); the last flight will be on April 29, 2016, after which BA will not offer any flights between London & Baku. While that doesn't mean Britishers or Azerbaijanis who wish to visit each other's countries will have to hitch a ride on a banana boat - other airlines will presumably continue to offer comfortable travel options - it does beg the question why BA is walking away from this market segment at this point in time?

Azerbaijan has just signed at least 2 high profile commercial agreements during the last week alone. Silk Way West Airlines & Malaysia Airlines Berhad (MAB) have just inaugurated a Block Space Agreement (BSA) on a twice weekly route to & from Kuala Lumpur & Amsterdam via Baku Heydar Aliyev International Airport in Azerbaijan. In addition, SOCAR & Zenith Energy Company of Canada have signed an agreement on production sharing, restoration, development & exploration at the Muradkhanli, Jafarli & Zardab oil fields.

Obviously, it isn't the lack of prospective passengers that has convinced BA to discontinue the London-Baku route. Some might conclude that the BA pedophile pilot compensation payments have depleted BA's coffers, but considering the documented victims are from Africa, it is highly unlikely that the "undisclosed amount" would be anywhere near the high payouts that are generally the norm in the Developed World. BA hasn't announced any replacement routes either. The reason would have to be something else.

The BA press release concerning the London-Baku route didn't furnish a reason for the move. That means, those of us who are interested in the airline sector - in which BA occupies a fairly important position - will have to look over the potential explanations for ourselves.

1. Cash Flow Problems?

Stock tracking website Live Charts UK (www.livecharts.co.uk) offers a wealth of information on British Airways (symbol: BAY) financial activities. But the point I found stunning was that the last change in the share price took place on January 26, 2016! Has anyone ever heard of a stock price remaining unchanged for nearly 2 months? So far as I know, it's a miracle if a stock price remains unchanged for 2 minutes. How is this possible? Either Live Charts UK has made a serious mistake in its calculations...or BAY is secretly drowning in red ink & is trying to buy itself enough time to somehow resolve whatever problem is plaguing the company.

After all, Pakistan International Airlines (PIA) registered a slight hiccup & the Pakistani Finance Minister hit the speed dial button to call the International Monetary Fund (IMF), which instantly called time of death & demanded that PIA be privatized forthwith - unnecessarily, as it was proved in the end, but the IMF response itself might be enough to make the harried executives of BA a bit nervous. What if the IMF decided that BA is actually not "too big to fail"?

2. Price Wars?

The plunge in oil prices since 2014 has been a blessing for the airline sector, as Cathay Pacific was recently discussing in the media. Surprisingly, BA, which was considered an award-winning airline by Skytrax World Airline Awards (www.worldairlineawards.com) in years gone by, has tragically declined in the latest statistics.

The Top 10 Airlines of 2015 are:

1. Qatar Airways
2. Singapore Airlines
3. Cathay Pacific Airways
4. Turkish Airlines
5. Emirates
6. Etihad Airways
7. ANA All Nippon Airways
8. Garuda Indonesia
9. EVA Air
10. Qantas Airways

The Top 10 Low Cost Airlines of 2015 are:

1. AirAsia
2. Virgin America
3. Norwegian
4. easyJet
5. Jetstar Airways
6. AirAsiaX
7. Indigo
8. WestJet
9. Jetstar Asia
10. Scoot

Is it possible that the shrinkage of BA's routes is because it doesn't have the impressive ratings to market its services to as wide an audience as in the good old days?

3. Image Issues?

BA has maintained a more-or-less respectable record of smooth flights. The last incident of note took place on September 8, 2015 when Flight 2276 (a Boeing 777-236) aborted take-off at Las Vegas McCarran International Airport due to engine failure. The fault lay in its left General Electric GE90 engine, which led to a fire. Fortunately, the aircraft was successfully evacuated & all 157 passengers & 13 crew escaped the aircraft alive. But, if anything, that accident would be the responsibility of General Electric (GE) in that its engine was defective.

But then again, GE has a top-of-the-line public relations team because word was that the Fukushima Daiichi Nuclear Disaster in Japan on March 11, 2011, was actually caused by 6 GE boiling water reactors that failed to deliver on quality when the Tohoku Earthquake (& resultant tsunami) took place. But the only party to be punished for the accident was the plant operator, the Tokyo Electric Power Company (TEPCO).