British Airways - Last call for offline sales?

When British Airways announced that it wanted to drive 50 per cent of ticket sales through online channels by the year 2003, many people looked at the current two per cent, then looked at the giant airline’s former attempts at re-branding itself, and shook their heads knowingly.

When British Airways announced that it wanted to drive 50 per cent of

ticket sales through online channels by the year 2003, many people looked

at the current two per cent, then looked at the giant airline’s former

attempts at re-branding itself, and shook their heads knowingly.

It is a tall order. In the US, Jupiter Communications expects consumers to

spend œ10 billion online on business and leisure travel by the year 2003,

which is just 10 per cent of the travel market. So how does BA plan to

persuade its customers that buying electronically is that good an


Much is at stake for BA. Last month saw overtake it to

become the most recognised online travel brand among internet users,

according to the eTravel Market Report by BMRB International, while new

brand creations appearing on the list included BA has found

itself caught in the headlights, struggling between competing against cut

price merchants while retaining its premium brand and a customer base

that, since the launch of its budget airline Go, has consisted largely of

business and wealthier leisure travellers.

Relative newcomers, such as easyJet, believe they can steal customers by

slashing prices and building brand awareness by using blanket


Some market observers are beginning to wonder when companies like Amazon

will jump on board the online travel boat. But the travel industry is one

of the most evolved online and, as a result, is tiered in a way that

online bookselling is not. From premium brands such as BA, selling direct

from a corporate web site, to the price-driven bargain buckets like, the roles are clearly defined.

By watching the US market a pattern emerges. The industry has morphed

itself into three main distribution channels. The first is a direct sales

channel dominated by the likes of American Airlines, which BA taps into

via its site. This caters for loyal frequent flyers

and is fuelled by developing customer relationships. In the US, direct

sales account for 35 per cent of the online travel market, far higher than

in the offline world.

The second and biggest sector consists of new full-service online

intermediaries like Expedia and Travelocity, and niche players like, all of which are starting to market themselves aggressively

in Europe and the UK, alongside UK-based players such as Travelstore.

There are also the pure discounters, like Priceline in the US and in the UK.

The stock markets reacted favourably when BA announced in February that

œ100 million had been set aside for a two-year push into all three


The investment aims to establish the airline as an online travel solution,

an expensive puzzle that head of its e-commerce unit Pat Gaffey says will

have four pieces, only two of which will directly affect the consumer.

The first segment comes under the umbrella of e-commerce and is headed by

Gaffey. This team will spend œ90m on raising online revenues from œ45m per

year to œ700m by developing new products and services aligned with online

booking, including direct selling over the web site, partnerships with

intermediaries and the targeting of leisure travellers on interactive

television (iTV).

But even with investment in the direct sales channel, consumers will still

be drawn to intermediaries for choice and price savings. ”People don’t

naturally gravitate towards our main web site, and will always remain

selective about where they spend their money,” says Gaffey.

The second piece of the puzzle - a unit the airline calls eVentures -

seeks to address this problem. To this end, BA is currently in talks with

other major European airlines to launch its own intermediary this year -

an online travel agency in the vein of Travelocity and Expedia that,

although not necessarily BA-branded, will help to boost the company’s

online power.

”There are increasing numbers of services sitting between the airline and

the customer and we thought: ’Hang on a minute, we own this product’,”

says Gaffey. ”And we realised the capital value of competition like

Expedia and Travelocity.” BA wants the new portal to do everything those

two players do, offering flights and hotels, and is considering selling

package holidays.

It did not want to position its new venture as a discounter.

”It’s not just about selling cheap seats,” says Gaffey. In fact, when

start-ups ask BA for cheap unused seats, Gaffey finds himself asking

what’s in it for him. ”In the past, you could predict how many cheap seats

would be available and if you could sell them just above cost price, that

was fine, but the internet has changed all that,” he explains. ”Now,

because it is all about eyeballs on pages, the value of unused seats has

changed and we’re asking ourselves why we should sell our tickets for

others to gain eyeballs.”

Customer loyalty has always been a point of pride for BA and that won’t

change online. ”If a customer spends thousands of pounds on weekday

club-class travel, then I’d rather give them first shot at discounted

weekend breaks,” says Gaffey.

He doesn’t think the launch of a rival will upset BA’s business

relationships with Travelocity and Expedia either. ”In Europe, there is

room for at least two more major players in the full-service intermediary

section and we just might own one of them.”

The second eVenture that the airline is embarking upon is the launch of a

lifestyle portal, which will not necessarily be BA-branded or even

dedicated to travel. The company is talking to media content and

technology partners with a view to launching the portal this year. ”This

is a bit off-piste for BA,” admits Gaffey.

The thinking behind the portal is that BA is already proficient at

marketing its products and delivering content in the form of in-flight

magazines, video channels and audio programmes. Add to this its database

of 20 million customer records, its household name and its distribution

capability, and Gaffey is confident that it makes sense to exploit BA’s

renown by encouraging travellers to associate BA with the internet.

That said, he is fiercely protective of its home web site. ”It is a huge

asset for us online, and one that brings us enormous brand equity which we

must not lose,” he says. Energy spent on new ventures must not be taken

from the original direct-selling tool, which is why the company

restructured its digital team early this year, leaving Gaffey in charge of

e-commerce and reporting to commercial director Carl Michel.

”People are far more forgiving of fledgling start-ups than of a big

offline brand like ours, and particularly a brand that has been so bold in

stating its intentions,” says Gaffey. The company’s intentions were helped

by last year’s introduction of its Ocean Wave relational database, giving

it an insight into the different segments across 20 million customer


”People talk about CRM and e-commerce as though they were separate things,

but they are one and the same,” he says. ”Everyone talks about one-to-one

marketing, but no one is doing it; Amazon claims to be, but it isn’t -

it’s doing great things with customer service, but it is template-driven,

not personalisation. The next two years will see the prizes given out and

they will go to those who get personalisation right.”

The company has already employed a language consultant to advise it on the

various nuances that affect the way in which different cultures should be

addressed. ”This is not the sort of thing that can happen in 10 minutes,”

explains Gaffey.

Last year, BA invested œ12m in the technological framework for its

e-commerce platform, which links booking, check-in and flight details,

enabling the airline to accumulate historical data on what happens to each

customer across the internet, iTV, WAP and, eventually, any mobile


”Most companies behave differently towards you, according to the channel

you are buying through,” says Gaffey. ”A customer who spends œ5,000 on

Friday evening booking a business trip and then decides to book a family

summer holiday on Saturday morning over the TV is not going to feel very

special if the earlier purchase is not acknowledged.”

BA is as upbeat about digital television as it is about the internet.

Gaffey quotes Forrester Research figures, which predict that by 2003, 40

per cent of UK online business will be conducted over the TV. Gaffey is

reluctant to put this figure to BA’s custom, but is adamant that of the 50

per cent online by 2003, a ”significant” proportion will be over the TV,

perhaps up to 20 per cent.

Although Gaffey believes that a TV audience will book primarily for

leisure, the importance of keeping the airline’s offering media-neutral

and integrated is never far from his mind. ”As a ’lean back’ experience,

rather than a ’lean forward’ one, the design and technicalities around

digital TV will of course differ, but the customer remains the same

person,” he says.

BA is the first UK airline planning to sell flights over interactive TV

through Cable & Wireless, ntl and Telewest by the summer. It has already

been selling to 60,000 customers in the North West with C&W. The airline

intends to sell everything from flights to holiday packages. ”We are

targeting the leisure traveller, people who want to book in their own time

without threat of interruption, which can mar the experience at work,”

says Gaffey.

”There is lots of money behind this channel and I believe penetration will

be high. It is an added bonus that such an exciting development is

happening in the UK first,” he adds.

Although the same cannot be said of WAP, BA is conducting SMS trials to

1,000 customers before it launches any live services. The penetration of

mobile phone users within BA’s executive club is 88 per cent, half of whom

are interested in mobile check-in. ”We are talking to potential partners,

but we want to get the results of the SMS trial first to determine what

people want,” he says. ”It’s a case of having the service ready for when

the customer demands it, not making the customer want it because we say

they do,” he says.

”Choosing partners is easy, and we’ve already worked with Vodafone, but

the hard part is choosing the product which will evolve through the

different generations of WAP devices,” he adds.

Gaffey views WAP as a service rather than a commercial entity. ”It will be

great for time-sensitive information like delays and will enable business

travellers to have a more ’guess-free’ journey, but I don’t foresee

customers booking their flights over it,” he says. Future personalised

options include informing a relevant person, such as a business partner,

that a customer’s flight has been delayed.

Like its WAP plans, BA will be selective about whom it targets for a

new-media initiative. It is currently installing interactive kiosks in new

’terrace lounges’ at airports across the world - with 60 per cent of its

executive club members being active internet users, it makes sense to

enable them to book online and select seats while they wait for


Regardless of the channel to market, Gaffey insists that the full product

range will appear whenever possible. ”Our products will be consistent, but

the way we market ourselves will begin to change,” he says. BA’s marketing

strategy online and offline is to focus on innovation. The ball is rolling

with the launch of the first Superstitial ad campaign for its 21st Century

Travel microsite last month and interactive television ad trials with


Clive Peoples, interactive marketing manager at BA, says that although the

company has had many online ad campaigns, it has yet to do an

above-the-line promotion of its online services. ”It’s a balancing act of

keeping our intermediaries and travel agents happy and communicating

directly with our customers,” he says. The key will be to demonstrate the

benefits of dealing direct with the airline, he explains, whether the

planned redemption of Air Miles on the site or the ease of booking.

”Perception of BA is at odds with reality,” says Peoples. ”If you ask

someone in the UK who they thought was the first airline to have a

commercial presence on television, they are likely to mention a US

airline,” he says.

”We must work as hard above the line as and ebooker to

counteract this.”

The airline will also be careful about who it attracts. A recent

distribution deal between BA Travel Shop and the online branch of Waitrose

will offer late discounts, but Gaffey insists that this is rewarding its

core customer base. ”The demographic of the Waitrose shopper matches our

customers, so we are rewarding people who would use our services anyway,”

he says.

In the same way, future distribution deals might bypass usual consumer

portals and head straight for personal finance or business sites, to make

sure it is the correct 50 per cent who are booking online.

Gaffey has a clear idea of what this 50 per cent of online travellers will

look like. In the not-too-distant future, they will have consoles in their

living rooms and offices that combine TV, PC and telephone. ”What is

important today - the convergence of technology to give our business and

leisure travellers personal treatment - will one day be meaningless,” he

says. A lesson anyone in the new media business would be wise to



Having stripped its home site ( down from its

previous 3,500 pages to improve its performance, BA now plans to revamp it

on a three-monthly cycle, adding new features and improving


The site, which has been transactional for more than three years, attracts

around three million visitors each month, has content in 33 languages, and

sells across 92 countries. The site is information-heavy, including flight

arrivals, departure details and city guides, but Gaffey believes that

consumers are becoming more demanding and are less swayed by pretty


”Increasingly, travellers are asking for faster, more efficient and

personalised information,” he says. The regular revamp will introduce

several new features, all of which should be in place by the end of the

year. The 3,500-page site is being replaced by a template-driven

architecture to enable local subsidiaries to make changes themselves,

rather than rely on local agencies to update the site - a time-consuming


Facility to book other airlines

Visitors to the site will soon be able to book flights with other


”If a customer cannot book a desired flight on our site for whatever

reason, I’d rather they remained within our branded site than went to a

competitor,” says Gaffey.

Redemption of Air Miles Visitors will be able to trade in Air Miles for

flights that are booked online. ”As the second most recognisable currency

in the UK after Sterling, the option to redeem Air Miles online is planned

for the end of the year,” he says.

Online check-in

Instead of queuing at the airport, travellers with BA will be able to

speed up the process by checking in online.

”Once again, this will be marketed selectively. With any web service,

there will be certain customers who want to turn up three hours in advance

of their flight and take their time shopping. This is a service that suits

business travellers and will be marketed as such.

It will also reward our loyal customer base and won’t be offered to

intermediaries,” says Gaffey.

Package holidays

The airline is considering the inclusion of package holidays on both its

web site and its planned online travel agency.

”This will be introduced at the end of the year and we are currently in

discussions with partners. We’d rather wait until we can offer a

value-added package rather than a basic service no better than teletext

that almost demands a phone call,” he explains.

You’ve come a long way, baby ...

Go, the British Airways-owned no-frills airline, is as bullish about

internet sales as low-cost rivals easyJet and Buzz. Set up to compete with

the likes of easyJet, Go has always placed a big emphasis on e-commerce,

which now accounts for nearly half of its total sales.

That figure was over 50 per cent for the duration of a five-day

post-Christmas promotional drive in January, peaking at 63.4 per cent on

one particular day. The promotion, which offered the company’s lowest-ever

prices to all its destinations, was backed up by extensive radio and press

advertising that used the company’s web site address ( as

its sole call to action.

The site was launched at the same time as the company, in April 1998, but

it didn’t accept online booking until five months later. By January 1999,

only six per cent of the airline’s total sales were through the site, so

it has come a long way in a year.

It’s the role of Jenny Taylor, Go’s internet sales and marketing manager,

to drive it even further. ”The overall strategy is about converting people

to use the web,” she says. ”It’s my job to increase the percentage of

people buying online and the volume of online sales. It’s about getting

new customers, but it’s also about getting existing customers to come


”Part of our call centre deals specifically with callback from the web

site. And part of its job is to drive people back to book online wherever


The company, which carries around two million passengers a year, is run

wholly separately from BA, but some of its activities resemble its giant

parent. For example, like BA, Go is installing intranets for travel

bookers within its larger corporate customers. In fact, the business

travel market represents a surprisingly large proportion of the company’s

sales for a low-cost operator at around 30 per cent. It is something the

airline is looking to push even further with another BA-like initiative, a

web-based booking service aimed at travel agents.

Rather than making disintermediation a central part of its business model,

as rival budget airline easyJet has done, Go is aiming to combine travel

agent sales with direct selling, particularly in the business market.

More than 1,000 agents have so far signed up for the online booking

service, which offers them special discounts.

”It opens up a large area of business we weren’t tapping into before,”

comments Taylor. ”It helps us to sell more business seats, which are more

likely to be flexible, high-end fares.”

Richard Lord.

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