BA gambles on budget battle

ONCE it was all adverts full of floating women and upmarket writers as British Airways cosied up to affluent executives to tempt them on to the 'world's favourite airline'.

A £15m advertising campaign launched on Monday could hardly be more different.

Now led by Australian chief executive Rod Eddington, British Airways' new ads will be fronted by the distinctly unsophisticated comedian Dom Joly in an attempt to win the custom of budget travellers.

Less than five years after setting up Go, its own no-frills airline, and only two months after Go was taken over by rival easyJet, British Airways is trying to woo the very people it once said would no longer find space on its fleet of jets.

It looks like a spectacular change of tack, and a brave gamble by Eddington.

Naturally, the national carrier, which will drop out of the FTSE 100 index of top companies next weekend, denies that its decision to target travellers with backpacks rather than those with Dunhill briefcases marks a change in strategy. Marketing director Martin George told Financial Mail: 'This is just a change in emphasis. Yes, we will be cutting some prices by up to 80%, but we will be offering better service than the no-frills airlines.'

Nevertheless, it is a remarkable shift of direction. The airline that spent £200m installing executive beds on its flights is now ready to do battle with the budget airlines.

Three months ago, BA tiptoed into cut-price territory by launching a series of special offers. EasyJet dismissed the number of cheap seats available as 'a drop in the ocean'.

But now BA is hoping its new advertising campaign - devised by its long-standing image gurus Maurice and Charles Saatchi - will reach a new market. Potential customers will also be targeted on the London Underground and at mainline rail stations.

There will be glitzy laser displays in cities in an effort to appeal to the young. Even bank cash machines will carry adverts. The Dom Joly commercials feature the star of Channel 4's Trigger Happy TV shouting into a giant mobile phone to tell people where he is and how he got there on a lowcost BA flight. The first TV advertisements will be screened alongside massmarket film offerings such as Down And Out In Beverly Hills on Channel 5 and Get Shorty on Channel 4.

BA has suffered several setbacks in attempts to redefine its image. In 1997, the carrier controversially spent £60m replacing the Union Flag with whacky 'ethnic' images on the tail fins of all its planes to reflect the international nature of its passengers.

Eddington later scrapped the project because of the public outcry, returning to the traditional flag. Then there was the launch of Go, which was sold to its management for £110m in June 2001, only to be bought for £374m earlier-this year by the budget rival easyJet. British Airways received only a fraction of that sale price. And having built a spectacular £200m headquarters at Waterside, near Heathrow, the airline had to close other buildings and squeeze extra staff into Waterside.

British Airways has to take risks. Its business is being mauled by no-frills rivals and it suffered badly on its major transatlantic routes in the aftermath of 11 September.

In August, its passenger traffic was 10% down on the year before. In its latest financial year, BA reported losses of £200m and announced that 7,000 jobs would be slashed in an effort to save costs. During the past two years, the airline's passenger numbers have plunged from 46m to 40m. In stark contrast, easyJet has more than doubled its passenger numbers in the past year, Go has seen a 41% rise and Ryanair has put on 37%.

There have been other major setbacks for BA. Its long hoped-for alliance with American Airlines, which promised major cost savings, was kicked into touch by the US regulators and another tie-up with the Dutch carrier KLM was also scuppered. Now BA's only significant partnership in Europe is with Spanish airline Iberia.

Eddington has been buffeted by events such as 11 September since he took the helm in April 2000. But analysts argue that he must take stronger measures to cut costs.

The Australian must be hoping that BA's new approach will help the airline to recover and secure his reputation - unlike his predecessor, Bob Ayling, who was responsible for investing £200m on executive beds in the sky.