By MARK FELDMAN
It was March 2008. The sun had broken through the clouds when a sparkling clean BMI Airbus 330 descended from the skies, arriving at Ben-Gurion Airport.
On board were BMI's CEO and a bevy of top executives. Inaugurating the new route to Tel Aviv was a bold step. Eager to end the monopoly enjoyed by British Airways and El Al, the second largest carrier at Heathrow Airport chose Israel to expand to new markets.
The minister of tourism was on the ground to greet them; the British ambassador was present as well. Glasses were raised, and while BA and El Al shuddered, the price of tickets plummeted.
In fact within a very short time, BMI had taken almost 30 percent of the market share on the lucrative Tel Aviv to London route. Charter flights became scarce and the only other operator on this route, Thompson Fly, out of Luton airport, quickly shut up shop.
Passengers reported excellent service and decent cuisine, and their Israeli representative was very effective in marketing this product. Perhaps too good.
With six daily flights to London, passengers, while appreciating the fine service, were more concerned with the price. Simultaneously the recession drove down both the price of fuel and the demand. Forced to compete primarily on price, fares kept on dropping. BA lost billions of dollars and El Al too kept losing large sums, quarter after quarter.
Not just on the Israeli route was BMI hemorrhaging money but throughout its entire network. Senior management needed an exit strategy. Believing they had found a knight in shining armor, serious negotiations commenced with Lufthansa Airlines. After several months of negotiating, Lufthansa won the approval not only of BMI shareholders, but the European Union which had to approve the purchase. This July, Lufthansa completed the purchase. It reassured BMI that, similar to its acquisition of Swiss, though cost cutting measures would be enforced, flight schedules would remain intact.
Thus it was quite a surprise to management in Israel that after its last board meeting in Frankfurt, Lufthansa announced that on January 10, BMI will be pulling out of the Israeli market. Along with a few other routes that BMI flew, Lufthansa felt the best way to stem the huge losses carried by BMI was to convert it back to its original routes as a short haul carrier.
In the past, I've written less favorably about Lufthansa but in this instance the decision reached, based solely on euros and dollars, made complete sense.
BMI was unable to raise its fares, due to the competition, to profitable levels. Coupled with the interest paid on leasing the Airbus, Lufthansa had no option but to sever the service.
It took El Al and BA almost one week before they raised their fares - just proving how quickly lack of competition hurts the consumer.
What concerns me more is not why Lufthansa made its decision but how the thousands of clients holding BMI tickets will be affected.
BMI in Israel released a statement rather quickly. All passengers holding tickets issued by BMI could either cancel them outright and get a full refund or conversely switch their flights to/from London to either Lufthansa or Swiss. Though requiring connecting flights to London, it immediately calmed all clients who had too much experience when an airline ceases to fly. Kudos are due to BMI and its parent boss, Lufthansa, for handling the huge inconvenience in a truly professionally way.
However, BMI could not force the hands of
other airlines (American, for example) that used it to connect to their flights from Europe to the United States.
Let me digress. When airlines fly to a country, they have two options regarding their operations there. Recently airlines have found it more cost effective to not open up new offices, hire staff and deal with innumerable other factors, but to assign a general sales agent. This representative, unknown to the general public, acts as the representative for the airline. Delta utilizes this throughout the Middle East and Europe, as does US Airways.
BMI too decided, rather than investing in its own office, to assign the rights to an Israeli office. In theory, it should be a seamless designation. In fact, though, these representatives have limited power in making executive decisions and too often pass the buck regarding compensation to their actual airline.
Both American Airlines and Virgin Atlantic have for many years promoted their reasonable fares to North America. For example, you can fly BMI or BA or El Al to London and then pick up American Airlines or Virgin Atlantic on the Transatlantic routes. These inexpensive tickets have always been a huge success, with clients preferring to save money in spite of the hassles of switching airlines and air terminals at Heathrow.
Neither American Airlines nor Virgin has its official offices here - both simply have offices representing their concerns.
So when the dramatic announcement of BMI's cessation of flights became public, one would have expected these two airlines to step up and take responsibility. Virgin Atlantic Airlines, represented in Israel for several years by a general sales agent, came through strongly. Promising both the consumer and the travel agent community that solutions would be found, it quickly rebooked clients on EL AL flights and reissued tickets.
American Airlines, represented by Tal Aviation, was less forthcoming. Its original reaction was extraordinary. It stated that it was not responsible for the issued tickets by American Airlines. It claimed that these tickets could not be utilized as the connecting flights of BMI no longer existed; passengers were told to contact BMI. This was outrageous. The only airline responsible is the airline that issued the ticket!
Nobody forced American Airlines to enter into a relationship with BMI; quite the contrary, AA encouraged using BMI along with BA or El Al as a means to market its product.
In fact, after dozens of complaints reached our office, we gently explained to Tal Aviation that it had a fiduciary responsibility to exchange the cancelled BMI flights with another airline. It sheepishly conceded that we had a valid point.
The lesson to be learned: Be very careful when purchasing tickets on more than one airline; be very certain what your rights are. Trust me, missing a flight is only one possible negative outcome; try to locate your missing luggage as each airline places the blame on the other! Flying certainly remains an adventure - and not for the timid.
The writer is the CEO of Ziontours, Jerusalem. For questions and comments, e-mail him at firstname.lastname@example.org.
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