Premium passengers may be deserting BA

BA has announced a slump in the number of premium passengers.

The airline has taken the strategic decision note to slash prices for these customers because they are the most profitable segment of their operations. But last month the number of passengers fell by over 10 per cent contributing to a decline in the carrier’s load factor, which measures how full each plane is from 76.6% to 74.4%.

Global economic turbulence forces BA and many other airlines into a series of difficult decisions. The income elasticity of demand for airline travel is likely to be strongly positive especially for luxury travel and on routes where there is genuine competition the price elasticity of demand is also likely to be a constraint on how high fares can be.

In line with many other carriers, BA is cutting back services on some routes in a bid to reduce spare capacity and there have been several stories circulating in the media about BA entering into negotiations with the Australian carrier Qantas to form a giant international operator.