• British Airways II

After nearly two years of deliberation, the Edwards Committee Report into the UK civil aviation industry was finally published early in May 1969. Among its far-reaching recommendations was the creation of an Air Holdings Board to oversee the operations of BOAC and BEA, as well as envisaging the creation of a ‘second force’ operator, allowed to compete on certain overseas routes. Notwithstanding lukewarm reactions from the state corporations and hostility from staff unions, the government set up the British Airways Board in early 1972. Having already initiated the new Civil Aviation Authority (CAA) in April, with overall responsibility for the whole of British air transport, Michael Heseltine, Minister for Aerospace, decided on the complete amalgamation of BOAC and BEA, a process begun with the establishment of the British Airways Group on 1 September 1972. A year later, to the day, both companies began trading under the title of British Airways (BA), followed by full integration from 1 April 1974. To cope with a network of half a million miles, spanning 200 destinations in 84 countries, the new conglomerate was reorganised into several new divisions: European (BAED), incorporating BEA Mainline, Super 1-11, Cargo and Airtours; Overseas (BAOD), formerly BOAC; Regional, comprising Cambrian Northeast, Scottish and Channel Islands; BA Helicopters, BA Associated Companies, Engine Overhaul and International Aeradio. The combined fleet numbered 200-plus aircraft, a considerable percentage of which would require replacement in the foreseeable future. Indeed, the government had already allocated £200m for the purchase of Lockheed Tristars and BAC Concordes.

Financially, the new organisation was reasonably healthy with joint net profits for 1973 amounting to some £7.5m, although immediate trends were not propitious. Over-capacity on the North Atlantic routes, ongoing route licensing battles with British Caledonian (Edward’s ‘second force’ carrier), cut-backs in government capital expenditure and a world-wide fuel shortage leading to severe reduction in services, all conspired to create a gloomy outlook within the industry. Even the prospect of the new TriStar’s entry into service was not trouble-free; for although the first example was delivered on 28 October 1974, industrial disputes delayed it becoming operational until the following January. On a brighter note, BA launched the first of its no-booking ‘Shuttle’ services between London and Glasgow, using 100-seater Tridents. This venture, with the later extension to other UK cities, was to prove highly successful; in the first week alone, nearly 12,000 passengers were carried during the course of 195 flights. In fleet terms, the Standard VC-10s and remaining Vanguards had already been retired in 1974 due to over-capacity and, foreseeing the gradual phasing out of the long-haul Boeing 707s, an arrangement was concluded with Air New Zealand to lease their DC-10s between London and Los Angeles.

Set against the background of industry-wide difficulties, BA fared little better, announcing a £9.4m net loss for its first trading period, in part attributable to the large number of damaging strikes that had beset the airline. One area of growth was the North Sea oil business, for which two Avro 748s were ordered to replace the ageing Viscounts on the Aberdeen-Sumburgh run. BA Helicopters was also expanded to take advantage of this lucrative market, with three more Sikorsky S-61Ns acquired to handle the award of a £14m contract from Shell Oil.

The early months of 1976 started more optimistically when Concorde made its long-anticipated commercial debut on 21 January, with G-BOAA flying between London and Bahrein. This was followed on 24 May by the opening of London-Washington, later extended in January 1979 to Dallas-Fort Worth under a six-month leasing arrangement with Braniff International. By the year’s end a total of 13.8 million passengers had been carried system-wide and all routes were now doing well, not least Shuttle services which showed a 12.5% growth rate: all of which contributed in transforming the previous financial year’s £16.3m loss into a net profit of £35m. The only unfortunate note had been the tragic loss of all aboard Trident G-AWZT en-route to Istanbul, when it suffered a mid-air collision at 33,000 feet near Zagreb on 10 September 1976.

In a marked change of policy, the CAA now sought to establish ‘spheres of influence’ rather than direct competition on long-haul routes, which effectively limited rival British Caledonian to South America and West Africa, although rival bids would be entertained for Domestic and European sectors. Three years after the merger BA completed full integration of its management structure, resulting in new commercial divisions: UK and Ireland; North and East Europe; West and Southern Europe; (long-haul) Eastern, Southern and Western Routes. In May 1977 the increased payload Rolls-Royce powered Boeing 747-236 was first introduced and having overcome the US anti-noise lobby, Concorde finally entered commercial service between London and New York on 22 November 1977. But its extension from Bahrein to Singapore lasted only a few trips, after noise-related objections from the Malaysian authorities concerning over-flights.

Range limitations on the early TriStars led to an order for six of the Dash 500 version which began plying between London and Abu Dhabi in May 1979, while new Boeing 737-200s were also in the pipeline, primarily as Trident replacements. Margaret Thatcher’s newly-elected Conservative government soon made it known that BA would be ‘privatised’ and that there would be no further state support, although, in the event, these plans were delayed as the looming economic recession began to bite. BA’s profit for 1978-9 had risen to £110m, but the outlook was far from certain; OPEC fuel price increases of 14.5%, poor transatlantic results and competition from Laker’s low-fare ‘Skytrain’ services, £1bn-worth of outstanding orders for new aircraft including 19 Boeing 757s, substantial over-staffing and mounting operating costs would all challenge future financial performance. In response, a survival plan was developed involving a programme of staff reductions, early retirement of older aircraft (Viscount, Trident 2, VC-10 and B707) and the dropping of some 26 uneconomic regional routes. A change of image became evident in June 1980 with the adoption of simply ‘British’ rather than ‘British Airways’ titling on fleet logos.

Entering 1981 with an overall deficit of £544m required desperate remedial measures. Initially, to raise some £60m in much-needed cash by the spring of 1981, BA had disposed of its 15% stake in Cathay Pacific, while several of its new B747-200s headed straight for storage in the Mojave Desert. Pursuing her doctrine of ‘free enterprise’, early in 1981, Prime Minister Thatcher installed self-made millionaire industrialist Sir John King as chairman to prepare BA for stock-market floatation. Combative and commercially ruthless, King, later aided by his protegé, Colin Marshall, embarked on a swingeing round of cost-cutting measures involving the sell-off of major assets to save £600m. Prime London properties and hotels, International Aeradio and the College of Air Training at Hamble were all disposed of, while cuts of 9,000 personnel were also sought within 12 months. In late October the government approved price-cuts of up to 66% for certain transatlantic fares, allowed BA to compete at below-cost with Laker’s innovative budget ‘Skytrain’ operation. While espousing healthy competition, this move helped to push Laker Airways into liquidation on 5 February 1982, the very day on which the government promised £53m of public money to aid King’s massive staff reduction programme.

Unsurprisingly transatlantic fares quickly thereafter rose towards their pre-Laker levels. Although the event was undoubtedly of benefit to BA, its implications were ultimately to prove financially costly. Towards the end of the year Laker’s UK liquidators cited predatory and anti-competitive fare-pricing by a group of 10 transatlantic carriers, including BA and British Caledonian, as a major factor in Laker’s demise, a cause quickly taken up by the US Department of Justice in an anti-trust investigation. The unsavoury affair rumbled on until Thatcher persuaded President Ronald Reagan to drop the matter in a quid pro quo for her support over his up-coming strategic arms limitation talks and SDI ‘Star Wars’ defence programme. This led, in July 1985, to BA contributing almost $35m to the out-of-court settlement fund to compensate Laker’s creditors.

In an attempt to reverse many years of losses in Scotland, the Highlands Division was established in early 1982 as an autonomous unit and three more HS.748s were leased to replace the remaining uneconomic Viscounts. Further re-organisation came in May with the creation of several new business centres; Intercontinental (long-haul), European (short-haul and domestic) and Gatwick (covering all operations from Gatwick, including British Airtours). Shuttle services benefited from the introduction of the Boeing 757 from February 1983, as did European routes from the following summer. Disposals of older aircraft continued apace, with the remaining Super VC-10s and TriStar 500s going to the RAF as transports and tankers for survival cash. By the time of its final service, on 29 March 1981, the VC-10 during its fleet life had completed 560 million miles uplifting 13 million passengers during the course of 1.13 million flying hours. To completely replace the Trident fleet ahead of the 1986 noise-reduction regulations, a further order for 16 B737-200s was placed, with deliveries commencing in late in 1984. The B707 was finally retired in March 1984 and in the same month Concorde services to Washington were extended thrice weekly to Miami.

With profits in the region of £250m achieved for 1982-4, the government felt confident enough in BA’s position to declare its public limited company status from 1 April 1984, although retaining the entire shareholding pending further improvements in financial results. In an effort to throw-off its somewhat dowdy post-nationalised image, BA declared itself the ‘The world’s favourite airline’ following a corporate and fleet image make-over in December 1984 and, on the back of £202m profits for 1984-5, it also claimed to be the world’s most profitable airline. From April 1985 a contested route transfer saw BA relinquish its rights to serve Saudi Arabia, gaining in return British Caledonian’s South American operation for which two Air Lanka TriStar 500s were leased. At the end of 1985, the last two Tridents were finally retired, marking the end of the type’s 21-year history of operation for the state carrier. In August 1986 BA placed the largest-ever single aircraft order for 16 B747-400s, with 12 options at a cost of $4.3bn, to replace the early Dash 100 models. During the following month, BA Helicopters was sold to Robert Maxwell’s Mirror Newspaper Group. Finally, in February 1987 the airline was fully privatised with its 11-times oversubscribed stock-market floatation realising £900m. By this time, it had shed 22,000 personnel, paid for by a £250m sell-off of assets and aircraft, and trimmed its network down to 145 destinations in 68 countries. An almost immediate victim at the altar of BA’s privatisation was British Caledonian, the fate of which had been effectively determined three years earlier when the government chose to ignore the CAA’s recommendation for supporting a strong ‘second-force’ carrier.

Ailing financially, by mid-1987 British Caledonian was in negotiations with SAS over a part-ownership and operational collaboration deal. Air Europe also announced that it would enter the bidding for British Caledonian. Learning of this, BA applied to have all British Caledonian’s licences revoked on the grounds of control by foreign interests, as well as casting doubt on Air Europe’s provenance as a UK airline. Subsequently it quickly put together a ‘shut-out’ bid of £250m, effectively debarring any further moves by other interested parties. The takeover, quickly given the nod by the government’s Monopolies and Mergers Commission, took effect from 1 April 1989. Recognising the strength of British Caledonian’s brand image, British Airtours was re-named as Caledonian Airways, and its aircraft retained significant elements of the former British Caledonian livery. The inherited fleet comprised eight DC-10s, five B747s and 13 BAC 1-11s, together with an order for 10 Airbus A320s, the latter entering service in April 1988 from Gatwick, where operations were boosted in November. Services to Islamabad, Nassau and Bermuda were exchanged with Heathrow for the regained Saudi Arabian routes. The first ultra long-range B747-400 entered service in July 1989 and subsequent orders brought the fleet total up to 57 units. The following February saw introduction of the medium-range   B767, first ordered in 1987, on European routes.

In the early 1990s the Gulf War resulted in the six-month stranding and subsequent destruction of B747 G-AWND at Kuwait during the Iraqi invasion in February 1991. Significant loss of traffic necessitated severe curtailment of non-essential expenditure, deferment of some new aircraft deliveries, staff cuts of 4,600 and withdrawal of uneconomic services to Europe, the Caribbean, West Africa, Pakistan and Southern Ireland. Initiatives to regain lost traffic saw the launch of the economy class Euro and World Traveller schemes and enhanced Club Europe business traveller facilities. Forward aircraft orders, continuing to favour Boeing equipment, now accounted for 11 B767-300, 15 B777-200 and 24 B737-400, the first of which entered service in October 1991 coincident with the withdrawal of the Lockheed TriStar from schedules.

Hard on the heels of British Caledonian’s demise, in March 1991, BA’s potential major competitor at Gatwick and now self-declared ‘second-force’ airline, Air Europe, succumbed to the effects of the Gulf War and a press rumour campaign surrounding its financial viability and the private life of its flamboyant head, Harry Goodman. A similar fate met the virtually bankrupt Dan-Air in November 1992, with BA assuming its assets and considerable liabilities for a nominal £1. More importantly, acquisition of key routes from Dan-Air aided the three-year plan to restore profitability of Gatwick operations and the development of London’s second airport as a major hub. BA Regional was established in March 1992 to operate services from Birmingham, Manchester and Scotland, where from April, new BAe ATPs began replacing the ageing HS.748s. The ATP also saw service on internal German routes, but was eventually superseded by leased B737s, following acquisition of Delta Air Regionalflugverkehr and its transformation from May 1992 into Deutsche BA in the wake of German reunification.

After many years of lobbying by European airlines, the EU Commission finally announced a package of liberalisation measures for air transport effective from June 1993. Quick to seize the opportunities offered, in January 1993 BA obtained a 49.9% holding in the French carrier, TAT, which commenced services from Gatwick to Lyons and Marseilles in April 1993. On the cargo front, apart from the lease of two B747 Combis from MEA to cover capacity shortfalls, BA had long since divested itself of pure-cargo capacity with the sale of B747F, G-KILO, in 1982 and relied on selected all-cargo capacity periodically leased from specialist carriers. Freight activities were subsequently harmonised with the launch of British Airways World Cargo late in 1992.

Having effectively ‘seen-off’ most of its significant UK competitors, one major obstacle remained in the minds of BA’s top management. From modest beginnings in mid-1984 Virgin Atlantic’s unique identity had steadily grown in stature, in the process making noticeable inroads on BA’s transatlantic traffic. When Virgin successfully secured slots at Heathrow and permission to serve Tokyo, BA perceived further erosion of its ‘grandfather rights’ and there followed protracted and often vitriolic exchanges in the media surrounding alleged dubious anti-competitive practices. Matters came to a head in mid-March 1992 when Virgin’s unorthodox boss, Richard Branson, was moved to issue a writ for libel against Lord King  and BA. In January 1993 BA eventually capitulated, stumping up a record £5.2m in an out-of-court settlement and costs (together with a further £2.65m in damages and costs in 1994 over a long-standing engineering contractual dispute), although Virgin’s attempts to bring anti-trust actions in the US courts were subsequently dismissed. Shortly afterwards, Lord King stepped-down as chairman.

Continuing its huge investment strategy, an alliance with USAir was announced in January 1993 with a £198m stake in the North American carrier, resulting in a code-sharing arrangement ultimately encompassing 65 US cities and three new routes linking Gatwick with Baltimore, Pittsburgh and Charlotte NC using USAir aircraft and crews in BA livery. To overcome the political difficulties of operating to both Communist and Nationalist China, British Asia Airlines was set up as a subsidiary in January 1993 with the first service conducted by B747, G-BNLZ, on 29 March between London, Hong Kong and Taipei. In March a further £201m was paid for a 25% stake in Qantas, while in May £6m was expended, matched equally by Maersk Air of Denmark, in rescuing the ailing TPL (The Plimsoll Line), parent company of Brymon European Airways, in which BA already had a financial interest. As a result, Brymon, along with Plymouth Airport Ltd, became a wholly-owned subsidiary and began operating flights under the BA colours from August.

A new trend began in August 1993 when Gatwick-based CityFlyer Express was awarded the first five-year franchise agreement to operate BA Express schedules, operating in BA colours and to BA customer service standards. This initiative, designed to increase feeder traffic into Gatwick without involving any equity purchase, was expanded over successive years through similar regional franchise partnerships, eventually encompassing some nine British and foreign carriers. The airline’s second major investment in South Wales, a new £70m avionics facility was opened in December 1993, as an addition to its new maintenance complex at Cardiff airport. Further afield, Air Russia, a proposed joint venture with Aeroflot in the wake of the break-up of the former Soviet Union, fell by the wayside in 1994.

In order to help fund the huge level of expenditure, the airline had earlier in May conducted a share rights issue, expected to raise some £442m. Finally, in December, agreement was reached with leisure group, Inspirations plc, for the sale of charter subsidiary Caledonian Airways for £16.6m. Changes to the pattern of services occurred in 1994-5 with the discontinuation of under-utilised First Class on Caribbean services from Gatwick, while Concorde flights to Washington finally ceased in November after 18 years of continuous service. Planned joint ‘Kangaroo’ services with Qantas between Europe and Australia finally got underway in May 1995, after resolution of objections from the Australian government. On the equipment front, the 42nd and final Boeing 757 from the initial orders  was delivered in March 1995, while the first Boeing 777 (G-ZZZC) entered service to Dubai and Muscat on 17 November 1995.

Services by short-haul subsidiary EuroGatwick (harmonised nucleus of Dan-Air’s scheduled operations) were further expanded with the addition of eight new European destinations plus Phoenix San Diego in association with America West.  At the same time South American, Central and East African routes were transferred from Heathrow to free up much needed intercontinental slots through 1995-6. By the summer of 1997 the Gatwick-based fleet had been expanded to 33 B737s, 11 B747-400s, five B767s and eight DC-10s, which in conjunction with its service partners were serving over 100 destinations. With the final EC travel deregulation measures in place, BA acquired complete control of the remaining TAT European shares and early in 1997 a majority stake in the ailing French carrier, Air Liberté, eventually combining the two airlines together under the latter title to control 22% of the French market. An extensive code-sharing agreement was also concluded with Canadian Airlines marking the first such transatlantic arrangement. In a mammoth restructuring exercise, the Contract Handling, Ground Fleet Services, Catering, Landing Gear Overhaul and Information Technology units were either closed, sold-off or out-sourced in 1997. A closely guarded secret was revealed in the spring of 1997 with the rollout of the new ‘Utopia’ aircraft livery, ultimately featuring up to 35 different ethnic tail designs to reflect the airline’s worldwide image. However, this venture received mixed reactions, particularly adverse from British air travellers, and the extensive three-year £60m repainting programme subsequently reverted to more traditional images.

After a difficult four-year relationship, in May 1997 BA divested itself of its holding in USAir, preferring instead to concentrate on a developing collaboration with American Airlines, although a full strategic alliance was ultimately abandoned in the face of EC conditional demands to relinquish 267 valuable slots at London-Heathrow. Another joint venture was Airline Management, formed in conjunction with the Flying Colours (later JMC) tour group to operate Caribbean services using DC-10s with BA operating crews and AML cabin personnel. The DC-10s were finally retired in March 1999 and AML continued its operation for BA using three B777s, although this was set to end in 2002.

In February 1997 a record number of wide-bodied airliners were handed over at Boeing’s factory - three B777-236s, two B747-436s and one Boeing 767 at a value totalling £0.5bn. Future orders for B767 777s in June brought the new aircraft to 45 for delivery over the next four years. In order to comply with up-coming EU noise regulations, BA forsook Boeing with a massive order in 1998 for 59 Airbus A319 320 to replace the B737-200s, with initial deliveries scheduled for BA Regional, EuroGatwick, Deutsche BA and Air Liberté. Disposals of first-generation B747s began late in 1997; first to go was G-AWNB, which had completed 102,480 flying hours and 22,150 landings during its 29-year BOAC BA career. Early in 1998 the effects of the Far East trade and financial crisis led to a cessation of flights to Seoul, Nagoya and Osaka and subsequent political unrest in Indonesia saw a marked reduction in frequencies to Jakarta.

To compete in the growing market sector occupied by the likes of easyJet and Ryanair, formation of a ‘no frills’ subsidiary, Go Fly, was announced in November 1997. The new venture took to the air in May 1998 from London-Stansted airport, initially using leased B737-300s on services to Rome, Milan and Copenhagen. In April 1998 Deutsche BA became a wholly-owned subsidiary, as did long-time franchise partner CityFlyer Express late in 1999. Pursuing its aim of becoming a global mega-carrier in late 1998 BA was the prime mover in the formation of the ‘oneworld’ alliance, integrating the services and networks of its major code-sharing partners, initially American Airlines, Cathay Pacific, Canadian International and Qantas, subsequently expanded to other major airlines worldwide.

The new £250m World Cargo centre at Heathrow was unveiled in January 1999, capable of handling 800,000 tonnes of freight annually. Apart from a long-term lease of specialised B747 capacity from Atlas Air and later Global Supply Systems, the majority of cargo was carried on regular passenger services and through capacity sharing arrangements with several Far-Eastern airlines, ranking BA as eighth overall amongst cargo carriers. Concorde services were extended from New York to Barbados (seasonal) in February 1999 and in the following month the airliner reached its 30^th anniversary. To mark this event a commemorative flight was undertaken between Heathrow and the supersonic airliner’s birthplace at Filton on 9 April 1999. Since its creation over 900 different airliners had flown under the BA flag and of the total 101 B747s operated 81 examples remained in service. With the B757 fleet slated for partial replacement by Airbus A320 321s in October 1999 it was announced that all but nine would be phased out and sold over next two years to express parcels carrier DHL for conversion as freighters. Airbus also received an order for 12 A318s for BA Regional, the first of which was delivered on 23 September 1999, taking its combined Airbus commitments to over 70 aircraft, with a further 100 options.

Sales of the 15-strong B747-200 fleet began with the first, G-BDXA, completing its last revenue service on 28 January 2001, while disposal of several B767s to Qantas also took place. A novel contribution to the upcoming millennium celebrations and prominent advertising feature on the London skyline came with BA’s sponsorship of the giant London Eye ferris wheel, offering spectacular views over the city. However, this was to be one of the few highlights in a troubled year - for the first time since privatisation, BA narrowly avoided a severe financial loss, saved only by the disposal of considerable assets. The factors cited were escalating fuel costs, currency exchange rates affecting aircraft purchases and competition from European low-cost carriers, coupled with an £88m expenditure on restructuring. Perhaps not unconnected, chief executive Rod Ayling, one of the remaining survivors of Lord King’s top management team, announced his resignation in early March 2000. Into the breach stepped Australian, Rod Eddington, previously with Cathay Pacific and Ansett, who immediately set about turning things around. Both Deutsche BA and Air Liberté were also losing money, thus BA decided to cut some of the former’s routes and to sell-off its 86% holding in the French carrier. A planned 20% stake in Olympic Airlines was also scrapped, but a 9% holding in Iberia of Spain was taken up coincident with that carrier’s entry into oneworld. Indeed, in April 2007 it was reported that BA was seeking inward investment with a view to taking over Iberia completely. Other plans surrounding expansion at Manchester and transfer of some Gatwick routes to subsidiary CityFlyer were also put back, the latter in the face of opposition from trade unions.

A buyer for loss-making subsidiary, Go Fly, was eventually found in venture capital firm 3i at a price of £100m. For the second time in less than a decade, talks with KLM over a possible merger foundered in September, failing to overcome issues surrounding economic and EU regulatory issues; a similar bid for a stake in Sabena in 1991 had also come to naught. In the late summer 2001 BA’s Concorde fleet was suddenly and unexpectedly grounded, following a fatal accident to an Air France aircraft at Paris on 25 July. After fuel-tank safety modifications and the postponed interior refit costing £30m, the flagship jet re-entered service early in November 2001 but the supersonic passenger service was to last only another two years; on 24 October 2003 Concorde G-BOAG made the last-ever commercial flight from JFK to London after 27 years of continuous successful operation. Thereafter, BA’s fleet of seven aircraft were dispersed for display at various museums and heritage sites.

The 9/11 terrorist attacks on New York’s World Trade Centre in 2001 quickly had a devastating effect on the entire global airline industry. BA, with its strong transatlantic links, was reported to be losing £6m a day in the immediate aftermath, while its share price immediately dropped by 21%. The net result was a loss of £142m for the year ended March 2002, clearly pointing to the need for drastic cost-cutting measures. Accelerating the already announced reduction of 1,800 staff as a result of scaled-down operations at Gatwick, a further 5,000 jobs cuts were an immediate response, with commensurate withdrawal of 20 aircraft and overall operations reduced by 10%; all of which was designed to save some £300m. In an effort to stimulate business and renew confidence in air travel, late in the year five million cut-price tickets for European destinations were on offer and at the same time BA began fitting armour-plated cockpit doors on its aircraft. Subsequently, under the stewardship of chief executive officer Willie Walsh, credited with turning around the ailing Aer Lingus, BA gradually returned to its pre 9/11 profit levels; for 2006 standing at £467m net. It shed the majority of its loss-making subsidiaries, including BA Connect (formerly Citiexpress) to Flybe British European in exchange for a 15% transitional holding and retention of slots at London-City and the Avro RJ100 fleet.

A significant development in 2007 was the addition of 51 extra slots at London-Heathrow for £30m, gained in a deal allied to the takeover of franchise partner BMED by then-competitor BMI; increasing BA’s 41% plus share of all slot capacity at Heathrow. Long-term BA has chosen to remain primarily a full-service airline, as a means of distinguishing itself from the multitude of budget carriers, serving in conjunction with alliance and code-share partners a network of over 600 destinations in 135 countries. In 2007 BA announced its choices for its long-haul fleet replacement programme with orders for 24 Boeing 787 Dreamliners and 12 Airbus A380s. Meanwhile, BA began eliminating all of its UK codeshare franchises: BMED in October 2007, followed by GB Airways in March 2008 and Loganair ceased in October 2008. The long-awaited opening of Heathrow’s new terminal 5 in 2008 proved to be a well-publicised debacle and an embarrassment for BA with lengthy delays, cancelled flights and mishandled baggage, sullying the airline’s reputation.

Even allowing for record fuel price increases, on the back of increased premium traffic British Airways profits rose by 45% in 2007-8 to £883m. Though in the following global economic recession, in May 2009 BA posted its worst ever financial performance with pre-tax losses of £401m, which together with a massive hole in its pension fund, lead to yet another round of staff cuts and significant capacity reductions. More positively, on 29 September 2009 BA launched a novel service linking London-City airport with New York using a specially configured Airbus A318 limited to 32 all-business luxury class seats.

While merger negotiations with Qantas late in 2008 failed to agree a way forward, protracted negotiations with Iberia finally bore fruit with the announcement early in November 2009 of a resolution. The £3bn merger with the ailing Spanish national carrier which finally came into being in April 2010 created one of the world's most powerful airlines with a combined fleet of 419 aircraft serving 205 destinations and with estimated combined cost-savings of £360m within five years. At the same time, a corporate restructuring led to the creation of a new parent company, International Airlines Group (IAG), including a more formal alliance with American Airlines. In March 2012 BA also acquired and absorbed British Midland International, together with its valuable Heathrow slots.

In 2012 British Airways was the official airline partner of the London 2012 Olympic Games and flew the Olympic flame and dignitaries from Athens to RNAS Culdrose. In 2019 the airline celebrated its centenary. Four aircraft were given retro liveries to mark the occasion and the airline's uniforms were redesigned in partnership with British tailor and designer Ozwald Boateng. New bone china and cutlery was also introduced to the airline’s first-class service.

The global collapse of air traffic due to the onset of the COVID-19 pandemic caused huge problems. The company made thousands of staff redundant and its operations at Gatwick airport did not reopen until March 2022. Meanwhile, due to the downturn in air travel and the need to focus on more modern and fuel-efficient aircraft, in July 2020 British Airways announced the immediate retirement of its entire 747-400 fl