British Airways today unveiled a major restructuring of its CitiExpress regional operation - which employs 750 in Birmingham - in a bid to take on low cost rivals such as Ryanair, flybe and easyJet.
In a strategic move by new chief executive Willie Walsh, the flagship carrier is rebranding the loss-making arm BA Connect, slashing ticket prices by up to 40 per cent and introducing a single-class cabin service on short-haul flights from Birmingham and 13 other regional airports, including Manchester, Edinburgh and Bristol.
Only European flights to and from Heathrow, Gatwick and London City Airport will retain the more upmarket Club Europe cabin service.
The changes, which come into effect on February 1, will also see BA Connect introduce single fares for the first time. For example, Birmingham to Glasgow - one way - will cost just £29.
Mr Walsh is determined to improve BA's profitability. But restructuring CitiExpress will not involve any job cuts among the operation's 2,250 staff.
Instead Mr Walsh, who took over BA late last summer, believes he can turn the business around within two years by driving up passenger volumes in exchange for traditional high-yield traffic - targeting passengers who have turned to budget carriers such as flybe and Ryanair.
David Evans, managing director British Airways CitiExpress, said: "The restructuring of the regional business will set us apart in this fiercely competitive market.
"We have an innovative service promise for business and short-break leisure air travellers, offering year-round, one-way prices that match the no-frills airlines and the added service promise and resources of an airline of British Airways' size and stature.
"The move is a direct response to changing customer needs and the challenges that have emerged in the marketplace since the creation of CitiExpress. We know air travellers value British Airways' distinctive brand and the wide range of benefits associated with a full service airline at competitive prices."
BA's move comes as flybe and easyJet both continue to improve their performance.
Flybe yesterdayposted a 27 per cent rise in passenger figures for December, an increase driven by strong Christmas volumes.
The airline, which has a major operation at Birmingham, said it carried some 350,000 passengers during the month, with all its main bases showing growth.
EasyJet said it carried almost 18 per cent more passengers in 2005 than the year before - helping revenues jump 20.5 per cent, from £1.15 billion to £1.38 billion.
The Luton-based airline flew 30.3 million people during the year, compared with 25.7 million in 2004.
EasyJet was also helped by strong passenger numbers for December, which saw 2.37 million passengers travel with the budget carrier - up 11.1 per cent on the same month in 2004.
Shares in easyJet rose more than six per cent to hit their highest levels since the summer of 2002.
Meanwhile, there is speculation the carrier is taking steps to protect itself from a potential takeover approach.
EasyJet has appointed Goldman Sachs as a financial adviser - a move which some say is to defend the airline from a bid from FL Group.