British Airways' Profits Squeezed by Eurostar and Oil Prices

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Yesterday we heard how Spain’s new high-speed rail service is getting set to take on the airlines. Meanwhile, on the other side of Europe the airlines may already be suffering through the twin threat of rising oil prices and competition from an ever greener and more convenient Eurostar. According to The Guardian, British Airways has seen a drop in economy class sales to European destinations, though the airline sees the shift as a result of increased hand baggage restrictions, rather than any move to be greener:

Walsh added that economy class sales to European destinations such as Brussels, Paris and Amsterdam also fell in January, on top of weak premium bookings to those destinations, which emerged towards the end of last year. BA is blaming the fall on a combination of Eurostar's growing success and customer frustration over hand luggage restrictions, which were lifted at most major UK airports earlier this month.

This author is not quite as convinced that hand baggage restrictions are the only motivator. He personally knows of at least 10 journeys made by himself and by his friends and family on Eurostar in the last year alone that were at least partially motivated by a concern about climate change (along with the fact that it is just a more pleasant way to travel). He's pretty sure his circle of acquaintances can't be the only one making the shift to greener travel either.

On top of such pressures, BA is also taking a hit on its profit margin as a result of fuel prices:

Shares in BA fell 4.6% to 316.75p as analysts expressed fears that the group will fail to reach its 10% margin target in the next financial year due to rising fuel costs. In a trading update today BA said that mitigating the high oil price - which will take its fuel bill to more than £2bn in 2007 - will be "challenging" next year. The remark spooked analysts at Deutsche Bank, who said the warning was "another way of saying that margins will fall next year".

::The Guardian::via site visit::