A quiet revolution

UK airline bmi has traditionally taken a back seat in the publicity stakes. And the soft launch of its “Better for Business” marketing campaign is no exception. BMEU gives Managing Director Peter Spencer a chance to make some noise about bmi’s new raft of services.

bmi has never been an airline that has believed in standing still for long. Its history since being set up 70 years ago, is peppered with acquisitions and takeovers - the latest of which are bmi's purchase of British Mediterranean Airways in 2007 and its buyout by German carrier Lufthansa last year. Today though it is Lufthansa's passengers that are experiencing the biggest changes, thanks to the airline's decision to revolutionise the business travel experience. Having re-branded itself as an airline for the travelling executive it has launched a marketing campaign, Better For Business, that will see it introduce completely paperless travel, chauffeur drive services and a new international lounge and check-in desks at Heathrow Airport. This has been a low-key launch however, with bmi preferring to let the services speak for themselves. "I don't think we've advertised these changes at all yet," says bmi Managing Director Peter Spencer about the paperless boarding system, which allows boarding passes to be texted to passengers' mobile phones. "I think we're quietly professional. What is interesting is the number of people that know about this without us telling them, because it is technology driven.  People straight away start using these facilities when you haven't told them about it."

Under the radar

This understated approach is a very different one from that of bmi's closest rival British Airways and Spencer says it means the size of the airline is often underestimated by the public. "We want people to understand that we are the second largest carrier at Heathrow. I thinking people feel there are a lot of carriers bigger than us. We have 80 flights a day at Heathrow. bmi has developed into a major force in the UK travel industry and we want to be recognised for that." Seeking to stand out in the UK's crowded aviation market is the main reason why bmi has launched Better For Business. The Chauffeur drive service has now been introduced on routes to and from London, Saudi Arabia, Tehran, Oman, Damascus, Beirut and Moscow and bmi's new international lounge is opening at Heathrow's Terminal 1 this month. It is also opening new economy check-in desks and a new premium check-in area in Terminal 1 - moves facilitated by the transfer of BA to the Terminal 5 building last year. "The great thing about having BA out of Terminal 1 is that it moves 10 million passengers a year out of the terminal," says Spencer.  "Now it is the quietest terminal at Heathrow.  You don't queue at security or check in anymore and it's a really good facility because it is actually able to handle, manage and look after our customers in a good ambience. What all this has meant is that Terminal 1 becomes our terminal and we wanted to upgrade all our facilities at our terminal in competitive response to Terminal 5." He goes on to say however that the launch of the new services was not without its challenges as a result of the well publicised chaos surrounding BA's move." There were the BA problems in Terminal Five, which re-bounded on all the moves. So we're pretty upset about it all because it was meant to be a really beautifully packaged customer offer."

On a more positive note BMI's most successful Better for Business innovation has been the introduction of completely paperless boarding on its domestic flights out of London Heathrow - making it the first British carrier to take such a step. This allows customers to check in online or by mobile phone up to 24 hours in advance, choose their seat and have their boarding pass delivered electronically to their mobile phone or PDA as an SMS. They can then present their mobile phone in order to board the plane saving valuable time for travelling executives: "We believe we're the only carrier that offers this," says Spencer. "We actually offer domestically, the opportunity to send your boarding pass to your mobile phone and it can be used for going through security, going through the check in gate and getting on to the airline. So it is actually seriously paperless. With most carriers you have to print your paper pass off. But if it's a domestic route, so for instance between London and Belfast, then you don't need a computer. You just check yourself in on your mobile phone."  The services have now been fully launched following a successful trial in 2008.

The same cannot be said however for bmi's pilot trial of in-flight text messaging and email, OnAir,  -Spencer admits has had a mixed reception: "There was some appetite for this and we're still looking at it. But it wasn't overwhelming 'let's do it', in your face enthusiasm." The main objection from passengers, he says, was the concern that in-flight text messaging and emailing may eventually lead to the introduction of in-flight voice calls: "The feedback you get is "I hope this doesn't develop into people jabbering into their mobile phones'. Because I think when you say you (BMI) are mobile phone enabled people straight away think of speech rather than text or email. We're certainly not going to go for voice that's for sure. I'm leaving the guys in marketing to decide what we should do to fulfil customers' requests and whether or not we can fulfil those requirements."

Customer is king

bmi's response to the customers' concerns following the OnAir pilot reflects its desire to make changes based on customer feedback. It was this approach that led it to remove fuel surcharges from its UK and European flights last December. This was as part of its strategy to offer fares with no hidden charges for baggage, check-in or seat selection - giving it a strong competitive advantage over other low-cost European carriers, says Spencer: "If you go to some carriers, you end up paying to go to the toilet. You pay for every single step of the way and you never really know how much has been taken out of your pocket in total. They take a little bit here and there. This seems to be a clever way of extracting as much money as they can out of the customer. We combine everything into one fare for European and domestic flights so you know the fare incorporates all these added extras." It's a shrewd move given the economic climate in Europe, which saw 30 airlines fail in 2008: "I think in this particular time the most important thing to say is 'as long as I have sufficient money I should invest in the customer'," says Spencer. "So we're not taking the peanuts away from the customer we're saving money in other areas."

While it has grown its market share, Spencer says bmi's passenger numbers have remained flat and that like all European carriers, it is suffering.   "I wouldn't say we are buoyant. What is happening is that we are suffering in the marketplace just like other carriers. I've been in the business more years than I care to remember and what is happening now is unprecedented," he says admitting that the airline has made some essential cut backs: "We have cut capacity to address the downturn in demand. We're putting on smaller airplanes. We're tightening our belts on the cost side to deliver good value for money to the customer."

Pastures new

As well as cutting back bmi has also made strategic investments in new routes where it sees high demand potential and gaps in the market - particularly in the Middle East.

Describing how bmi is the largest operator to the region and why it plans to ramp up its routes in the Middle East, Spencer says: "These routes are doing well in spite of the decline in business that everybody is experiencing elsewhere across the Atlantic, in the Far East and in Europe. All the statistics you look at show a downturn but the Middle East is holding up. These routes are very important for trade and investment between the countries that we operate to but it's also specifically important that they are bearing up through the current downturn. This year alone bmi will double its daily flights between London Heathrow and Tel Aviv, double flights to Riyadh and introduce the wide-bodied A330 aircraft for Cairo and Tel Aviv routes.  In its boldest move yet it has also revealed plans to re-establish air links between London and Baghdad and recently met with Iraqi government officials at a meeting attended by the Iraqi Prime Minister Nouri al-Malikiand. At the meeting bmi CEO Nigel Turner handed a letter to Iraq's transport minister Amr Abduljabber Ismail stating bmi's wish to facilitate commerce between Iraq and the UK by providing commercial flights between the two countries. Speaking after the meeting Turner said: "The ability to travel by air between Heathrow and Baghdad is vital in supporting the considerable energy that is going into bringing business ties and investment back to normality. bmi has a great depth of experience in serving the Middle East and it makes both geographical and economic sense for us to add Iraq to our growing network of services to the region. Iraq is surrounded on four sides by countries that we already serve from Heathrow. We are carrying an ever-increasing number of passengers who, at the moment, travel from Baghdad to Heathrow via our existing intermediate point of Amman. As trade and business ties grow we envisage that these numbers will grow."

Outside the Middle East bmi is also ramping up flights to Eastern Europe and has recently launched flights five times a week to Kiev. It also flies twice daily to Moscow and daily to Azerbaijan, three times a week to Almaty and three times a week to Bishkek, the capital city of Kyrgyzstan where it is the only European carrier serving the route.

"These routes are niche markets and they do very well for us," says Spencer.

As the airline continues to introduce new routes and services for its business passengers it is also preparing for big changes internally - as its buyout by the German aviation giant Lufthansa approaches. Lufthansa has had a 20 percent stake in bmi since 1999 but the buyout - which is expected to go through this quarter following approval from the EU commission - means it will fully own the airline, creating lucrative new business opportunities for the British operator, says Spencer: "It will be great being part of the Lufthansa family. They have been shareholders for ten years now but it's going to be a great new world for the airline. There will be a lot more business flowing between the two companies, which can only ever be good." Being part of the Lufthansa family also offers some protection against the damage suffered by smaller carriers in the turbulent European aviation market. The airline's determination to survive the crisis is the main driver behind the revamping of its services and the introduction of innovative products not offered by its rivals. Because as Spencer points out, failure is not an option for the modern airline.  "What we're determined to do is fight our way through this and come out the other side. This is survival of the fittest stuff."

A brief history of bmi

The early years

bmi began life in 1938 as Air Schools Ltd, specialising in RAF pilot training. In 1949 the company became known as Derby Aviation, diversifying operations to include passenger and cargo charter services. In 1959 the company became known as Derby Airways, changing to British Midland Airways in 1964 when it moved to the newly opened East Midlands Airport in 1965.

1970s

British Midland Airways further expanded domestic and international passenger services including long-haul destinations throughout the 1970s. The company celebrated a landmark in 1979 when over one million passengers were carried for the first time in a single year.

1980s

bmi's growth continued during the 1980s and passenger carryings were recorded at 1.8M. The company established its headquarters at Castle Donington near East Midlands Airport in 1982, and in 1986 the airline changed its name to British Midland. In 1989, Scandinavian Airlines (SAS) purchased a 24.9 percent stake in the airline at a cost of €27 million.

1990s

By the end of the 1990s British Midland enjoyed passenger carryings of over 6.5 million a year. In 1992 Scandinavian Airlines increased its share to 40 percent. In 1993 it became the first European carrier to offer a separate Business Class cabin for business travellers and in 1995 it became the first airline to offer a booking service with payment over the internet. In 1999 Lufthansa acquired a 20 percent stake in British Midland from the 40 percent owned by Scandinavian Airlines.

2000s

British Midland was renamed bmi British Midland in 2003 and then reverted to bmi. In 2002, bmibaby, a low-cost subsidiary with its own unique brand was launched.

The turn of the century saw a rapid expansion of routes offered by bmi including routes to Washington DC and Chicago, long-haul services to Mumbai, India and Riyadh and Jeddah in Saudi Arabia, and mid-haul routes to Moscow Domodedovo. Following the acquisition of BMED in 2007, bmi had access to another 17 mid-haul routes to the Middle East, Asia and Africa.

In 2008 bmi launched five new US destinations from London Heathrow and in March 2008 bmi successfully launched services from London Heathrow to Tel Aviv and Dammam. In May 2008  bmi group reported revenues over €1 billion