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 lastminute.com 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 ebookers.com. 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
lastminute.com, 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 british-airways.com 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
Biztravel.com, 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
lastminute.com 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
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
”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
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,”
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,”
”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 lastminute.com and ebooker to
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,”
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
BA OFFERS NEW FACILITIES ONLINE
Having stripped its home site (www.british-airways.com) 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.
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.
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 (www.go-fly.com) 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.”