British Caledonian (BCal) was a private independent airline in the United Kingdom that operated from 1970 until it merged with British Airways in 1988. It operated primarily from London Gatwick Airport in south-east England. BCal was formed by the merger of Caledonian Airways and British United Airways (BUA). It was created as an alternative to the British government-controlled corporation airlines and was described as the "Second Force" in the 1969 Edwards report. The carrier slogan was Let's go British Caledonian in the 1970s and We never forget you have a choice in the 1980s. The BUA takeover enabled Caledonian to realise its long-held ambition to transform itself into a scheduled airline. The merged entity eventually became the UK's foremost independent, international scheduled airline.

A series of major financial setbacks during the mid-1980s combined with the airline's inability to grow sufficiently to reach a viable size put it at serious risk of collapse. British Caledonian began looking for a merger partner to improve its competitive position. In December 1987, British Airways (BA) bought the airline. The Caledonian name was used to rebrand BA's Gatwick-based subsidiary British Airtours as Caledonian Airways.

History

Inception

right|thumb|British Caledonian [[Boeing 707#707-320C|Boeing 707-320C at Gatwick Airport in June 1975]]

On St. Andrew's Day (30 November) in 1970, Caledonian Airways acquired British United Airways (BUA) from British and Commonwealth (B&C) for £6.9 million. Caledonian Airways also purchased three new BAC One-Eleven 500 aircraft, which B&C had leased to BUA, for a further £5 million.

BCal was a wholly owned subsidiary of Caledonian Airways Ltd. BCal itself had a number of subsidiaries as well. Amongst these were Caledonian Airways Equipment Holdings and Caledonian Airways (Leasing), which were set up to acquire and dispose of aircraft on behalf of the airline as well as to sell maintenance, training and management expertise to third parties. BCal also owned two package holiday companies as well as several hotels in Spain and Sierra Leone. BCal also inherited BUA's minority stakes in Gambia Airways, and Uganda Aviation Services.

The airline's formation followed publication of the Edwards report entitled British Air Transport in the Seventies in 1969. and a subsequent White paper from the government The report recommended the creation of a "Second Force", private sector carrier to take on the state-owned corporations — British European Airways (BEA) and British Overseas Airways Corporation (BOAC) — by providing competing domestic and international scheduled services on trunk routes. The government rejected the proposed transfer of routes from BOAC and BEA to the Second Force, and held that dual designation on a route should be open to any British independent. The new airline established its headquarters and operational base at Gatwick Airport and Sir Adam Thomson, one of the five co-founders as well as one of the main shareholders of Caledonian Airways, became its chairman and managing director.

BCal was a full member of the International Air Transport Association (IATA) at its inception as a result of inheriting BUA's membership. This included membership of IATA's trade association as well as participation in tariff co-ordination with other member airlines in the organisation's annual traffic conferences. BCal also had its own air freight terminal at Heathrow

BCal inherited from its predecessors 31 jet aircraft: 11 long-haul aircraft (seven ex-Caledonian Boeing 707s and four ex-BUA Vickers VC10) and 20 short-haul planes (eight ex-BUA and four ex-Caledonian BAC One-Eleven 500s and eight ex-BUA BAC One-Eleven 200s). The issued share capital was £12 million — more than that of any other wholly private, British independent airline at the time — and its workforce numbered 4,400.

This made BCal the UK's foremost independent airline of the time. Although Dan-Air and Britannia Airways exceeded BCal's total annual passenger numbers from 1975, BCal maintained its position as Britain's leading independent international scheduled airline, in terms of both the number of scheduled passengers carried each year and the total yearly scheduled capacity measured in passenger kilometres, throughout its 17-year existence.) The newly created company's output measured in available capacity tonne kilometres was greater than that of some of the smaller, contemporary European flag carriers, such as Aer Lingus, Air India, Sabena, or Swissair. By that measure, BCal was about the same size as Australia's flag carrier Qantas. were also among the shareholders of the newly constituted airline. They included The Automobile Association (AA), Great Universal Stores (GUS), Hogarth Shipping, Lyle Shipping, — one of the two predecessors of Investors in Industry, Kleinwort Benson, the Royal Bank of Scotland (RBS) and Schroders. (Airways Interests (Thomson), which had been set up at Caledonian's inception a decade earlier as an investment vehicle for that airline's founders to enable them to maintain control, was renamed Caledonian Airways Ltd and became the new group holding company.)

Before adopting the British Caledonian name, the new airline legally constituted two separate entities — Caledonian Airways (Prestwick) Ltd and British United Airways Ltd. These traded together under the interim name Caledonian//<nowiki>BUA</nowiki> until September 1971. The combined airline carried a total of 2.6 million passengers during its first year of operation. and G-SCOT were the registrations of the Piper Navajo Chieftains, G-DCIO was the registration of the eighth DC-10 and G-HUGE was the Boeing 747 Combi registration)

The "Second Force" inherited BUA's extensive network of scheduled routes serving the British Isles, Continental Europe, Africa and South America. Its scheduled ambitions were aided by the British Government transferring to it BOAC's West African trunk routes to Nigeria and Ghana as well as the corporation's North African route to Libya. These routes represented only 3% of BOAC's annual, worldwide turnover.

The Government also agreed to let it serve Casablanca in Morocco from Gatwick in competition with BEA's service from Heathrow. Furthermore, the Government agreed to license BCal to operate non-stop scheduled services between London and Paris and to begin negotiations with the French authorities to secure reciprocal approval for BCal to be able to commence scheduled operations on what was then the busiest international air route in Europe. (BUA, from whom BCal inherited these routes, had been prevented from offering a first class on its East African routes. To compensate for this loss of competitiveness, Sir Freddie Laker, BUA's managing director from 1960 to 1965, had come up with the idea of designing a cargo door to be installed on the left-hand side of the forward fuselage of that airline's long-haul VC10s, where the first class cabin was normally located. This modification permitted the carriage of additional freight instead of first class passengers on the East African routes.)

In addition, BCal became the Government's "chosen instrument of the private sector". This meant that the Government agreed to accord preferential status to BCal's worldwide scheduled ambitions, especially in the award of additional licences to operate scheduled services on major domestic and international trunk routes. The Government hoped that putting BCal's requirements ahead of other UK-based independent airlines' rival scheduled ambitions would help the new "Second Force" develop into a fully fledged, major international scheduled airline, thereby enabling it to achieve the critical mass to challenge the corporations' near-monopoly among UK-based scheduled airlines.

BCal also had a Gatwick airside lounge for its premium passengers, which it named Clansmen Lounge.

Formative years

BCal commenced scheduled operations from Gatwick to Nigeria (Lagos and Kano) and Ghana (Accra) in April 1971. Scheduled services from Gatwick to Tripoli began in July 1971. On each of these routes BCal replaced BOAC as the designated UK flag carrier. On 1 November 1971, BCal started scheduled flights between London Gatwick and Paris Le Bourget Airport, where it replaced BEA's London Heathrow—Paris Le Bourget service and competed with that airline's Heathrow—Paris Orly Airport service.

In 1972, BCal extended its East African network to the Seychelles. The airline introduced simultaneous night-time departures from Gatwick, Glasgow and Edinburgh, resulting in an overall frequency increase to six daily round-trips on each route. The company charged a very low £5 one-way fare on these night-time services, which were marketed under the Moonjet trademark. This move, which was modelled on the high-frequency-low-fares operation run by Pacific Southwest Airlines (PSA), the original "no frills" airline, along the busy San Diego—Los Angeles—San Francisco air corridor in California, boosted passenger numbers and profitability on both routes.

During that year, larger capacity, longer range and more fuel-efficient Boeing 707s replaced VC10s on BCal's South American routes,

To support its ambitious expansion plans, BCal acquired a number of additional, second-hand Boeing 707s from various sources through its aircraft trading and leasing subsidiaries during the early 1970s. These included a pair of 320C series aircraft procured on a long-term lease from Britannia Airways featuring a two-class, "widebody look" interior. Another three 707s received re-modelled "widebody" cabins. All five were used to inaugurate the airline's transatlantic scheduled routes to New York and Los Angeles where the established competition was operating widebodied aircraft, such as the Boeing 747 "jumbo jet". It was thought that the aircraft's widebody style interiors would leave passengers with the impression that BCal was operating widebodied aircraft when in fact it was not. During that time, BCal placed an order with the British Aircraft Corporation (BAC) for two new One-Eleven 500s and acquired additional second-hand examples. At the same time, the airline disposed of some of its 707s, followed by Gatwick — Los Angeles International a few days later. Earl Mountbatten of Burma was BCal's chief guest on board its inaugural Gatwick—JFK flight. (The flight diverted to Boston due to inclement weather in the New York area.) This occasion marked the first time that a British independent airline commenced non-stop transatlantic scheduled services on routes linking the UK and the US. Also on 1 April 1973, BCal replaced the two-letter CA airline designator – which was originally used to prefix all Caledonian Airways flight numbers and continued to prefix flight numbers allocated to transatlantic charter flights until 31 March 1973 – with the BR airline designator it had inherited from BUA at the time of its formation. This resulted in exclusive use of the BR designator as a prefix for all BCal flight numbers.

In 1973, BCal also inaugurated its fourth scheduled domestic trunk route between London Gatwick and Manchester. The new service was contracted to British Island Airways (BIA), BUIA's successor, which operated two daily return trips using its Handley Page Dart Herald turboprops.

On 20 March 1974, BCal switched its Gatwick—Paris services to the then brand-new Charles de Gaulle Airport in the northern Paris suburb of Roissy-en-France, thus becoming the first scheduled carrier to operate between London and the new Paris airport.

To further extend the network's reach and improve its connectivity, BCal agreed to host Dan-Air's new, twice daily Gatwick—Newcastle flights, which began on 20 April 1974, in its computer reservation system (CRS) as part of a combined marketing effort.

June 1974 saw the launch of BCal's non-stop Gatwick—Brussels scheduled route, the third European trunk route on which the airline operated scheduled services in competition with the incumbent flag carriers' established services from Heathrow.

1974 crisis year

The creation of British Airways (BA) as a result of the 1974 BEA-BOAC merger came against the background of the first global oil crisis in the wake of the 1973 Arab-Israeli War, which led to the quadrupling of the price of a barrel of oil as a consequence of the decision by the Organization of Petroleum Exporting Countries (OPEC) to boycott the West in retaliation for its support of Israel during that war. This meant that the newly merged corporation's original revenue and profit projections were far too optimistic. During that time, BA began exerting pressure on the Government, at the time its sole owner as well as the regulator for all UK airlines, to curtail the activities of its independent competitors generally and of the "Second Force" in particular.

The difficult operating environment at the time did not affect BA alone. In fact, the major scheduled airlines were all losing enormous amounts of money at the time. The sudden spike in the oil price caused a major recession during the second half of 1974 as well as the first half of 1975, with much reduced demand for air travel. This in turn led to the collapse of a number of prominent travel companies and their associated airlines — most notably the Court Line group and Horizon Holidays, the latter having provided work for three BCal short-haul aircraft prior to its collapse. There was also massive overcapacity on the North Atlantic routes.

thumb|British Caledonian BAC 111-509EW at Gatwick

These circumstances forced BCal to put in place a major programme of retrenchment, known internally as Plan "S" (from "survival") Plan "S" began to be implemented from 1 November 1974. It resulted in route cut-backs — including the suspension of the transatlantic "flagship" services, of which Flight International said the fuel crisis was a "heaven-sent excuse" to back out of a failure. It also resulted in organisational changes that saw Adam Thomson become the airline's chief executive in addition to continuing in his role as chairman of a reconstituted board, Two surplus aircraft were leased out to Air Malta and Austrian Airlines respectively for the duration of the 1975 summer timetable period. Another aircraft was stationed at West Berlin's Tegel Airport during the month of July of that year to fulfill a short-term charter contract to carry Turkish migrant workers to and from Istanbul on behalf of a local tour operator. BCal also decided to increase its 707 freighter fleet from one to four aircraft and to acquire a five-seater Piper Aztec to serve the rapidly growing executive charter market. These changes left BCal with 25 operational aircraft for the 1975 summer season. To reduce operating costs further, the airline decided to contract out its scheduled operations between Gatwick and Le Touquet to BIA. The reason for replacing BCal's One-Eleven 200 jet aircraft on this route with that airline's Herald turboprops at the beginning of the 1975 summer timetable period was the high price of jet fuel, which had made BCal's own jet aircraft operations uneconomic.

Even during this period of severe retrenchment, BCal continued launching scheduled services to new destinations. Dakar joined the airline's network on 1 November 1974,

As a result of the "success" of Plan "S", BCal's fortunes quickly recovered. The airline operation itself made a small profit of £250,000 during the financial year ended 30 September 1975 after having lost £4.3 million the year before.

Spheres of influence

left|thumb|A British Caledonian Airways Cargo Boeing 707 at London Gatwick Airport

The then Trade Secretary Peter Shore conducted a review of the Government's aviation policy and in 1976 announced a new "spheres of influence" policy that ended dual designation for British airlines on all long-haul routes. It was no longer believed that competition was increasing the UK market share of the traffic. As a result, BA and BCal were no longer permitted to run competing scheduled services on long-haul routes, and BCal had to withdraw from the East African routes inherited from BUA as well as from the London—New York and London—Los Angeles routes. BCal lost its licences to New York, Los Angeles, Boston and Toronto – routes it had stopped running in 1974. It gained Lusaka (Zambia) The net losses of revenues was about equal for the two airlines. The loss of BCal's East African routes enabled the airline to replace the one-stop scheduled service via Nairobi to Lusaka with non-stop flights.

During 1976, BCal's recovery continued, leading to the introduction of a new scheduled route to Algiers and the reinstatement of scheduled services to Tunis. It also led to BCal's decision to replace the two daily Gatwick—Manchester round-trips BIA had operated with turboprops with a BCal One-Eleven service from the start of the 1976–77 winter timetable period. This equipment change was accompanied by the addition of a third daily frequency. This presented BCal with new transatlantic opportunities to begin scheduled services to additional gateway cities in the US.

Under the new agreement, BCal had its licences to commence scheduled services from its Gatwick base to both Houston and Atlanta confirmed and was designated as the UK's exclusive flag carrier on both routes. In addition, BCal obtained a licence and sole UK flag carrier status to commence scheduled all cargo flights between Gatwick and Houston — including an optional stop at Manchester or Prestwick in either direction.

During the Bermuda II negotiations, the UK side succeeded in having inserted into the new air services agreement a clause stating that Gatwick — rather than Heathrow — was to be nominated as the designated US flag carrier's London gateway airport whenever BCal was going to be the sole designated UK flag carrier on the same route. This clause was meant to support the growth of BCal's scheduled operation at Gatwick as well as to redress the competitive imbalance between it and its much bigger, more powerful rivals.

For Gatwick-based BCal this meant that it did not have to face any competitor that was using Heathrow, a more accessible airport with a bigger catchment area and a far greater number of passengers connecting between flights, on any of the new routes it was planning to launch to the US. It also meant that it had any new route to the US completely to itself for the first three years of operation, which most airline industry analysts reckon is sufficiently long for a brand-new scheduled air service to become profitable. on the London—New York and London—Los Angeles routes. The principle of dual designation was to be extended to another two high-volume routes. The airline became the first UK carrier to launch a daily, non-stop London (Gatwick)—Houston scheduled service This was the first time since the beginning of the jet age that a scheduled airline had offered a "third" class specifically aimed at the business traveller. It was intended to replace the 707s operating the all-passenger services with a brand-new, larger capacity as well as more fuel-efficient DC-10 widebodied aircraft at the start of the 1978/79 winter timetable period. On 3 June 1976, the airline placed a US$70 million order for two long-range series 30 aircraft with an option on another two. To ensure an early delivery, the company took over a delivery slot for two aircraft that had originally been booked by China Airlines.

On 13 March 1977, the first of the two DC-10s ordered arrived at the airline's Gatwick base from Prestwick at the end of a delivery flight from the manufacturer's plant in Long Beach, California.

The aircraft, which was configured in a 265-seat, two-class layout, entered commercial service on BCal's busy West African trunk routes to Nigeria and Ghana later the same month, replacing the airline's Boeing 707s on six of the seven weekly services on these routes. was initially configured in a 295-seat, single-class layout. It entered service later that month on BCal's Advance Booking Charter (ABC) routes to the US and Canada.

BCal was so pleased with the DC-10's performance that it decided to convert both of the options it had taken when placing the original order for two aircraft during 1976 into firm orders for delivery in autumn 1978 and spring 1979 respectively. However, a subsequent strike at the manufacturer's plant meant that McDonnell Douglas could not honour its delivery schedules. This necessitated the temporary lease of a Boeing 747-100 from Aer Lingus, and the use of BA flightdeck crews to operate the aircraft. The aircraft, which wore a slightly modified BCal livery, was operating the Gatwick—Houston schedule during the 1978/79 winter timetable period to cover for the late delivery of the airline's third DC-10.

Attaining success

By 1978, BCal had fully recovered from the 1974 crisis year, which had threatened its very existence at that time. After the severe contraction forced upon it by the early 1970s' oil crisis, the company's core scheduled operation was growing again with new widebodied aircraft and routes being added and schedules being expanded. Business was booming with planes being fuller than at any time in the firm's history. The airline recorded a pre-tax profit of £12.2 million during its 1977/78 financial year to 31 October 1978. This translated into a £10 million retained profit. It was the company's best financial result since its formation back in November 1970. BCal's senior management decided to allocate £644,000 of the retained profit to a new profit-share scheme to reward its staff for their hard work, and as an incentive for the future. BCal's profit-share scheme, which began the following year, was one of the first of its kind in the UK airline industry.

BCal also became a "scheduled service only" airline during 1978, implementing a decision taken the year before when the share of passengers travelling on charter flights had declined to just 15% of all passengers carried. There were two reasons for BCal's withdrawal from the charter market:

  • A 25% contraction of the transatlantic ABC flights market as a result of the initial success of the daily Laker Airways Skytrain low-fares, "no frills" scheduled operation between London Gatwick and New York JFK, which had begun in the previous year's autumn season.
  • A steady decline in charter rates in the European package tour holiday market where BCal used to supply whole-plane charter seats to its Blue Sky Holidays tour operator affiliate as well as third party tour companies.

1978 was also the first year BCal operated the majority of its scheduled services plying the prime long-haul routes to West Africa and South America with widebody equipment.

At the start of that year's summer timetable period, flight frequencies on BCal's Gatwick—Glasgow and Gatwick—Amsterdam routes increased to five round-trips per day on week days. During that period, the airline also resumed its Edinburgh—Newcastle—Copenhagen service, which it had abandoned in 1974.

During 1978, Abidjan and Birmingham BCal's introduction of a 747 on the daily Gatwick—Houston schedule furthermore enabled it to replace its two-class configured One-Eleven 500s on the West African coastal schedule to Banjul (The Gambia) and Freetown (Sierra Leone) via Casablanca and Las Palmas with 707s. The 707's greater range enabled it to cut out intermediate stops and offer its passengers a more convenient, direct routeing that took less time. BCal replaced two-class One-Elevens operating on the Tripoli route with 707s.

In early 1978, BCal introduced an updated livery.

In addition, the British Airports Authority had just completed the first phase of a major refurbishment and extension of BCal's Gatwick base. The centrepiece of this revamp was a completely refurbished centre pier featuring 11 telescopic, widebody-compatible loading bridges. These were the first loading bridges to be installed at Gatwick, which was a single-terminal airport at the time. For the first time in its history, BCal also gained a dedicated check-in area for all its flights. The airline needed to develop its connecting traffic at Gatwick by growing the European network to include destinations in Germany, Switzerland, Scandinavia and southern Europe to help it increase load factors on its long-haul flights to Africa, South America and the US as well as to improve the profitability of these services. The airline had planned to commence new short-haul scheduled services from Gatwick to Copenhagen, Gothenburg, Oslo and Stockholm during summer 1978, using the licences the CAA had awarded it the year before. However, BCal was unable to use its newly awarded licences as there was no provision in the bilateral air services agreements the UK had concluded with Denmark, Norway and Sweden for another carrier to operate scheduled services on the main trunk routes between London and these countries. This meant that BA and Scandinavian Airlines (SAS) had an effective monopoly on most routes between the UK and Scandinavia. The UK Government agreed to assist BCal in securing reciprocal traffic rights for the London—Scandinavia licences during its negotiations on a new bilateral air services agreement with its three Scandinavian counterparts in December 1978. by 1 April 1979, banning whole-plane charters at Heathrow and to compel all airlines that were planning to operate a scheduled service to or from London for the first time to use Gatwick instead of Heathrow. The latter policy was officially known as the "London [Air] Traffic Distribution Rules". It came into effect on 1 April 1978 and was applied retroactively from the beginning of April 1977. These rules were designed to achieve a fairer distribution of traffic between London Heathrow and London Gatwick, the UK's two main international gateway airports. The policy was aimed at increasing Gatwick's utilisation to help the airport make a profit.

Another pro-active measure the Government took to aid BCal's and Gatwick's development at the time was to grant permission for Airlink, a high-frequency helicopter shuttle service linking both of London's main airports.

This service was operating 10 times a day in each direction using a 28-seater Sikorsky S-61N helicopter, which was owned by the BAA. BCal held the licence to operate the service, provided the cabin crew and was in charge of reservations and ticketing. British Airways Helicopters, the wholly owned helicopter subsidiary of BA whose headquarters were located at Gatwick, provided the flightdeck crew and engineering support.

Another important reason for BCal's decision to set up a Concorde task force was that the 1976 aviation policy review had exempted Concorde from the "spheres of influence" policy BCal's Concorde task force's brief was to assess the viability of a second daily all-premium supersonic service complementing the airline's existing daily subsonic, mixed-class widebody service on this route.<!---->

BCal put in a bid to acquire one of the remaining two "white tail" aircraft.

Both supersonic services were to be launched at the start of the 1980 summer timetable period.

In 1979, the airline took delivery of its delayed third and fourth McDonnell Douglas DC-10-30 widebodied aircraft during the first and third quarter. This permitted the aircraft's introduction on its daily Gatwick—Houston schedule as well as the replacement of the remaining 707-operated services on its mid- and South Atlantic routes. It also launched a new route to Oran and added Quito and Guayaquil The company furthermore increased frequencies on its short-haul routes. A fourth daily round-trip was added to both Gatwick—Manchester and Gatwick—Brussels. A third daily frequency operating on week days was added to the Newcastle—Amsterdam sector of BCal's Glasgow—Newcastle—Amsterdam regional route.

thumb|A British Caledonian Helicopters [[Sikorsky S-61N at Aberdeen Airport in May 1986]]

thumb|A British Caledonian Helicopters [[Bell 214ST at Aberdeen Airport]]

During that year, BCal also established a wholly owned helicopter subsidiary and it placed the UK launch order for a brand-new widebodied aircraft, the Airbus A310.

This was also the time BCal came up with a proposal to create a new network of European low-fare services. These were to be marketed under the trademark Miniprix and were meant to counter Laker Airways's plans for a pan-European Skytrain operation. Excluding BCal's existing four European destinations, it envisaged linking Gatwick with 20 additional points on the Continent.

BCal was evaluating both the McDonnell Douglas MD-80 narrowbody as well as the Airbus A310 and Boeing 767 widebodies as suitable long-term replacements for its existing narrow-bodied aircraft on these routes.

BCal's setbacks during 1979 included continuing frustration of the airline's desire to launch scheduled services to Scandinavia despite the conclusion of a new Anglo-Scandinavian bilateral air services agreement and the temporary grounding of the airline's widebodied fleet — three McDonnell Douglas DC-10-30s — during the second quarter following the crash of American Airlines flight 191, a DC-10-10, in Chicago in May that year.

With their DC-10s grounded, BCal took a short-term lease of a 747 to provide adequate capacity on its Nigerian trunk routes during that period. BCal also operated a Dan-Air Comet on short-term lease between Gatwick and Tripoli while the 707s normally used on that service were redeployed to operate a reduced schedule to Houston and South America. In addition to these aircraft, a Boeing 707-120B was leased during that period as well to cover the shortfall in capacity.

Network expansion

alt=British Caledonian DC-10-30 G-BHDJ|left|thumb|[[McDonnell Douglas DC-10#Longer-range variants|McDonnell Douglas DC-10-30, one of BCals's new aircraft in 1980, at Faro Airport in 1986]]

BCal took delivery of three more McDonnell Douglas DC-10-30 widebodied aircraft in 1980.

These planes enabled the launch of new routes – to Atlanta on 1 June, and to Hong Kong on 1 August, though in the latter Cathay Pacific and Laker Airways were also permitted without restriction on frequency or fares. Routes to San Juan, Puerto Rico's Isla Verde International Airport, and Dallas/Fort Worth followed on 26 October. It also enabled the airline to replace the Boeing 707s, with which it had inaugurated another new route to St. Louis in April of that year, with its newly delivered DC-10 widebodies at the end of October when St. Louis became a stop on the new Dallas/Fort Worth route. During that year, the company also added Tangier to its North African network.

This accelerated pace of growth made BCal the fastest growing member airline of the Association of European Airlines (AEA) in both 1980 and 1981.

BCal received a boost during 1980, when the Civil Aviation Authority (CAA) approved carriers (BCal, Cathay Pacific and Laker – subject to ratification) on the London – Hong Kong route to be able to pick up and put down passengers at intermediate stops in the Gulf states as the Hong Kong route was not otherwise expected to generate enough revenue for four carriers. For BCal this meant using their Dubai refuelling stop to carry passengers, cargo and mail between London and Dubai and Dubai and Hong Kong, despite objections from British Airways (BA) which already had such rights for Dubai and Bahrain.

BCal's 10th anniversary on 30 November 1980 coincided with the completion of its new corporate headquarters&nbsp;— aptly named Caledonian House&nbsp;— in Crawley's Lowfield Heath area close to the airline's Gatwick base. It was the first purpose-built headquarters in the company's history, which was designed to accommodate all 1,100 office-based staff at the airline's Gatwick base under one roof.

The high oil price during that period was a mixed blessing for BCal. It helped the airline fill its premium cabins on its oil-related business routes to Nigeria, Libya and Texas. On the other hand, the escalation of the jet fuel price and the fact that the high price of oil had considerably worsened the severe recession in Britain at that time significantly increased the company's operating costs, while at the same time reducing overall demand for its flights. BCal therefore decided to reduce off-peak frequencies on most of its short-haul routes from the start of the 1980/81 winter timetable period. This also included combining week-end, off-peak flights from Gatwick to Glasgow, Edinburgh and Manchester by converting non-stop flights into one-stop operations.

Among the set-backs BCal suffered at that time were the CAA's rejection of its application to serve Manila (Philippines) from Hong Kong or Singapore and BA's successful lobbying of the Government to revoke BCal's long-standing Gatwick—Bahrain—Singapore exempt charter licence in return for having granted it permission to launch a fully fledged scheduled service to Hong Kong.

BCal received another new DC-10-30 widebody in 1981. It also permitted a frequency increase on the Gatwick—Dubai—Hong Kong route from four to five weekly round-trips.

At the start of the 1981/82 winter timetable period, BCal added Douala (Cameroon) to its network.

Also in 1981, BCal opened a new engine overhaul plant at Prestwick Airport near Glasgow in Scotland. The new engine overhaul plant was owned and run by Caledonian Airmotive, a dedicated, wholly owned subsidiary of the airline, which had been set up with technical support from GE.

BCal's search for a more fuel-efficient replacement for its ageing BAC One-Eleven fleet&nbsp;— especially, the range-limited One-Eleven 200s&nbsp;— acquired a new sense of urgency during 1981 against a backdrop of further escalating fuel prices. The airline was evaluating both the new BAe ATP turboprop for entry into service during 1986 and the BAe 146, the UK aircraft manufacturer's new, four-engined regional jet that was due to enter service in 1983, in addition to the McDonnell Douglas MD-80 between Gatwick and Brisbane (via Colombo and Melbourne), and between Gatwick and Adelaide (via Perth), at a frequency of two flights a week each, in both directions. BCal proposed to inaugurate what would have been the first ever scheduled operation "Down Under" by a wholly private, British independent airline with McDonnell Douglas DC-10-30s. BCal wanted this to be a joint operation with Ansett Airlines, one of Australia's two leading contemporary domestic airlines, and held out the prospect of placing an order for brand-new, higher capacity Boeing 747-200SUDs to replace the DC-10s on that route as soon as this was justified by increased demand. It also promised to give a major boost to Australia's inbound tourism from the UK and to deliver a steady stream of international transfer passengers to Ansett. BCal's application did not succeed, mainly because of British Airways's and Qantas's determined opposition to any move by the authorities in the UK and Australia to dilute the lucrative BA-Qantas duopoly on the "kangaroo route". The CAA turned down BCal's application although it considered it superior to a rival application by Laker Airways as it felt that there was no realistic chance of obtaining reciprocal approval for the proposed service from the relevant Australian authorities, as long as there was no desire on their part to license a second Australian carrier as well. It did promise to look favourably on the application if BCal re-submitted it with specific proposals for a joint Anglo-Australian operation, once Australia no longer opposed licensing additional carriers on that route.

BCal ended its 1980/81 financial year with a £6.2 million loss as a result of high fuel prices, a major recession on both sides of the Atlantic and heavy route development costs.

BCal's senior management realised that it needed to develop the traffic flows across its network in an east–west direction to increase the network's reach and to enable its passengers to make omnidirectional flight connections. This was also essential to enable the airline to increase its economies of scale and to reach the minimum size envisaged in the Edwards report.

BCal's new Gatwick—Dubai—Hong Kong route was intended to be just the first step in this expansion to the East. The Hong Kong route had come about as a result of the UK government decision in 1979 to open up the lucrative route between London and the Crown Colony of Hong Kong to additional competition. This was to be provided by a second British scheduled carrier to ease the shortage of capacity passengers were experiencing at peak times on the monopoly service operated by BA from Heathrow to Hong Kong.

BCal had proposed running a conventional scheduled service from Gatwick to Hong Kong via Dubai utilising its rapidly growing fleet of McDonnell Douglas DC-10-30 widebodies in a three-class configuration featuring a first and an executive class in addition to an economy cabin. BCal had also agreed to offer a limited number of low fares that would match the lowest fares Laker had proposed. The CAA decided to license BCal to operate unlimited scheduled services between London and Hong Kong., rejecting both Cathay Pacific's and Laker's applications, clearing the way for BCal to become the second British scheduled carrier on that route. licence. BCal was awarded licences for both routes.

The fairly liberal bilateral air services agreements between the UK and Germany as well as between the UK and Switzerland enabled BCal to commence double daily flights to Frankfurt and 10 services a week to Geneva within a relatively short time span following the award of the licences. This was the first time since 1974 that BCal was able to launch new routes from Gatwick to Europe. These were BCal's first scheduled services to Germany and Switzerland, which were going to be important sources of feeder traffic for the airline's long-haul services from Gatwick.

The launch of the two new routes coincided with the introduction of a dedicated business class cabin on all of BCal's short-haul flights to Europe, the first time the airline had offered two classes on its short-haul routes since its inception, with the exception of a brief period in the early 1970s during which it had offered a first class on the Gatwick—Paris route. BCal used the Executive Class brand for both its new European and its longer established long-haul business class.

Falklands War and re-entry into the charter market

alt=British Caledonian Charter DC-10-10|thumb|This British Caledonian Charter McDonnell Douglas DC-10-10 at Gatwick in March 1984 was one of two acquired from bankrupt [[Laker Airways in 1983.]]

The 1982 Falklands War was an unexpected, major setback for BCal. Argentina's decision to close its airspace and airports to all UK-based airlines as well as to all UK-registered aircraft and Peru's decision to follow suit resulted in the loss of the most profitable parts of BCal's South American network, especially Buenos Aires&nbsp;— its most profitable destination in that part of the world&nbsp;— and the lucrative "fifth freedom" traffic rights between Madrid and Buenos Aires. That conflict left the airline with an unprofitable rump network because the remaining routes to Brazil, Venezuela and Colombia did not generate sufficient traffic to be profitable on their own, even after a reduction in frequencies. The ex-Laker aircraft that joined BCal's fleet included two DC-10-10s and four BAC One-Eleven 300s. BCal used the DC-10-10s to set up a new charter subsidiary named British Caledonian Airways Charter as a joint venture with the Rank Organisation The latter aircraft and three second-hand One-Eleven 500s that had been acquired from other sources replaced BCal's seven, ageing One-Eleven 200s.

Launching a new narrow-bodied aircraft

In 1983, BCal became the first non-French airline to order the Airbus A320. BCal placed a firm order for seven A320s and took an option on another three, with deliveries of the aircraft on firm order due to commence during the spring of 1988. The options were subsequently converted into firm orders as well.

Although the A320 was bigger than BCal's actual requirement, it was the technologically most advanced contender with 27% lower seat-mile costs than the BAC One-Eleven. Airbus Industrie had also offered the airline a generous discount to sign up as a launch customer. Having BCal [co-]launch a brand-new narrow-bodied aircraft, gave the manufacturer added credibility in its global sales campaigns. This was of particular importance in the all-important US market, which Airbus needed to penetrate with its new aircraft if it wanted to break the stranglehold Boeing had enjoyed in this market segment with the 737 for over 15 years. Airbus knew that the major US carriers would be suspicious of the new aircraft's commercial credentials if only state-owned (and at the time subsidised) airlines (Air France and Lufthansa) of countries, whose aerospace industries benefitted from orders, as launch customers. Therefore, having a successful wholly independent airline with a major, worldwide scheduled presence like BCal order a brand-new, technologically advanced aircraft came in handy.

BCal intended to use its A320s to replace the ageing One-Elevens on its short-haul European and medium-haul North African routes. weekly Gatwick—Frankfurt—Mahé services under contract to Air Seychelles and a wet lease agreement with Surinam Airways to operate a weekly Paramaribo—Gatwick—Amsterdam service. The Caribbean Airways and Air Seychelles contracts used spare capacity on BCal's DC-10-30s, while the Surinam Airways wet lease utilised the ex-Laker DC-10-10s operated by British Caledonian Charter. Although BCal's airline operation incurred a loss of £655,000 in the financial year to 31 October 1983, the airline managed to make an overall pre-tax profit of £2.6 million. This translated into a £300,000 retained profit at group level.

Reorganisation and improved industrial relations

During the early 1980s, BCal and its affiliated companies adopted a new organisational structure to reflect the growth in the group's business and the diversification into new activities. Caledonian Aviation Group (renamed British Caledonian Group in 1986) became the new holding company. It had an issued share capital of £20 million in June 1987. began implementing a new co-operative, industrial relations strategy. The airline termed its new industrial relations strategy "The Way Ahead". This strategy was designed to make the airline the most productive among its peers in Europe by redefining established working practices. Its aim was to achieve a significant reduction in labour costs through increased productivity, thereby putting the firm ahead of its rivals. It was hoped that this would ultimately translate into higher profits as well. BCal's senior management saw this as a major threat to the company's continuing existence as the UK's second largest international scheduled airline. According to BCal's own calculations, the relevant figures for 1983 had shown that BA alone accounted for 83% of all UK scheduled airline capacity measured in tonne kilometers as opposed to a mere 13–14% for BCal. These figures also showed that BA carried seven-and-a-half times as many passengers as BCal, and that Heathrow's share of international scheduled air traffic was five-and-a-half times greater than Gatwick's (79% and 14% respectively). This meant that a privatised BA on this scale would enjoy far greater financial clout than BCal. It also meant that BA's market power would be disproportionate compared with that of any other UK airline as a result of its much greater economies of scale. Furthermore, the Government's decision to proceed with BA's privatisation inevitably meant the end of the "Second Force" policy, which had guided BCal's development since its inception. In addition, the transfer of BA's ownership from the public to the private sector meant that BCal could no longer rely on the indirect protection Government ownership afforded it to prevent BA from abusing its power&nbsp;— for example, by engaging in anti-competitive behaviour against BCal.<!-- to Abu Dhabi, Kuwait, Harare, Islamabad, Kolkata, Singapore, Kuala Lumpur, Tokyo, Seoul and Beijing. BCal also proposed the transfer of BA's short-/medium-haul routes from Heathrow to Vienna, Helsinki, Athens, Istanbul, Malta and Larnaca, which it wanted to serve from Gatwick, and the removal of capacity restrictions on its existing short-haul European routes from Gatwick. BCal estimated that it would require nine more aircraft&nbsp;— six long-haul and three short-haul planes&nbsp;— to operate the additional routes. It also reckoned that this would allow it to grow to the minimum size that was required to turn its Gatwick base into an efficient hub to enable it to prosper in the post-BA privatisation environment. BCal was furthermore of the opinion that this would allow it to increase its scheduled capacity to about 20% of all UK scheduled airline capacity while permitting BA to continue in its role as the dominant UK scheduled carrier, which would still have accounted for 70% of total scheduled capacity.

BCal's senior management told the Government that the only alternatives to this proposal were shifting its existing scheduled operation from Gatwick to Heathrow's then new Terminal 4, which it expected to produce an additional annual profit of at least £20 million in the first year itself, or to merge with BA. BCal's senior management also told the Government that its preferred option was to remain at Gatwick and to strengthen its position there through the proposed route transfers to enable BCal to turn it into an efficient hub-and-spoke operation that would allow it to compete with BA and the giant US carriers on a level playing field. The airline's senior management furthermore told the Government that a merger with BA was its least preferred option.

In June 1984, BCal's original proposal to share out BA's routes ahead of the latter's privatisation was followed up by a plan BCal had jointly formulated with eight other UK independent airlines. This plan sought to give the independents a greater share of the UK's air transport market by reducing BA's share. Measured in terms of capacity tonne kilometres (CTKs), it would have increased the independents' share from 17% to 40% while reducing BA's share from 83% to 60%. For BCal alone this would have doubled its share from 15% to 30%. In their submission the independents claimed that privatising BA in its existing shape would allow it to dominate and destroy its competition. They also regarded BA's continuing dominance as incompatible with the CAA's goal of a less-regulated air transport market. BA countered the independents' contentions by maintaining that rather than benefiting consumers through increased competition, the independents' intent generally, and BCal's in particular, would merely result in substituting its own services with those of other carriers.

The opposing views of Britain's leading independent airlines on one hand and BA on the other regarding the future shape of the British air transport industry led to a review of the Government's airline competition policy by the CAA. The result was CAP 500, a Government-commissioned White Paper in which the CAA outlined the findings of its review of existing UK airline competition policy. CAP 500 also contained a number of recommendations that were designed to ensure that a competitive balance between BCal and the UK's other independent airlines on one hand and a privatised BA on the other was maintained.

Full implementation of CAP 500 would have resulted in strengthening BCal's position at Gatwick by making it the sole UK scheduled airline on all trunk routes from that airport while maintaining BA's status as the dominant UK scheduled carrier at Heathrow. Instead, it settled on a limited route transfer from BA to BCal. This entailed transferring BA's profitable Saudi Arabian routes to Dhahran and Jeddah to BCal to add to its new route to the Saudi capital Riyadh.

The limited route transfer on which the Government had decided was far less ambitious than either BCal's own proposals or the CAA's recommendations and would still leave it far smaller than BA and the giant US carriers. Although this was less than it had bargained for, BCal's senior management decided to accept the Government's decision because they estimated the two Saudi Arabian routes BA was going to transfer to be worth £18 million in additional annual profits. This would be only £2 million less than what BCal expected to earn in extra yearly profits from its existing network had it been able to transfer its entire operation to Heathrow. Given these magnitudes and Heathrow's already tight slot situation at peak times, BCal's senior management considered this difference in annual profitability immaterial.

The route transfer was to take place at the start of the 1985 summer timetable period.

Reaching new heights

alt=British Caledonian A310-203|thumb|A BCal [[Airbus A310#A310-200|Airbus A310-200 seen at Paris Charles de Gaulle in May 1984]]

1984 was a record year for BCal. It ended the financial year to 31 October 1984 with a pre-tax profit of £17.1 million, which surpassed the record financial performance of 1978. This translated into a £10.9 million retained profit at group level.

In 1984, the CAA awarded BCal a licence to commence scheduled services from Gatwick to Riyadh and authorised the airline to operate dedicated scheduled services to Abu Dhabi, Doha, Dubai and Muscat, rather than serving these destinations as intermediate points only.

Libreville was added to the network during 1984. At the start of the summer timetable period, frequencies to Frankfurt and Geneva increased to three daily round-trips. Connectair and RFG

1984 also marked the end of the long-haul, narrow-bodied era for BCal when the last Boeing 707 left its fleet.

1985 was the year that broke all previous financial records at BCal. The pre-tax profit in the financial year to 31 October 1985 reached an all-time high of £21.4 million. The retained group profit for that period was £11.3 million. At the same time, BCal relinquished its traffic rights to Recife, Salvador, Rio, São Paulo, San Juan, Caracas and Bogotá. BA acquired these traffic rights and began serving most of these destinations from Heathrow. BCal's 1985 re-launch of scheduled Gatwick—JFK services coincided with the introduction of its door-to-door limousine service for premium travellers.

The temporary lease of a Viscount sporting the full BCal livery for the duration of the 1985 summer timetable period enabled the airline to increase capacity on the Gatwick—Brussels route by replacing smaller aircraft Connectair had used to operate that service under the British Caledonian Commuter scheme and to add more capacity on week-ends on the busy Gatwick—Jersey route.

Two more, second-hand DC-10-30s were acquired to replace BCal's A310s, which left the fleet when the additional DC-10s arrived.

1985 also saw the establishment of British Caledonian Flight Training, a new flight crew training facility.

As Gatwick became busier, BCal's senior management called on the Government to ban all charter flights from the airport and to move those services to Stansted.

The limited route transfer had allowed BCal to grow its scheduled capacity to about 18% of all UK scheduled airline capacity, while BA only suffered an insignificant reduction in its share of total scheduled capacity.

BCal's 18% share was still far less than the minimum size BCal needed to acquire the economies of scale to compete with BA and the giant US carriers on a level playing field.

This situation was unsatisfactory for the airline and unrewarding for its shareholders.

Therefore, under pressure from its controlling shareholder 3i, the search for a new, long-term strategy began.

As a consequence of its main shareholder's dissatisfaction, the British Caledonian Group's board of directors established contact with ILG's board in November 1985. The purpose of this meeting was to begin exploring ways of combining BCal's and Air Europe's separate short-haul operations in a new joint venture that would have enabled both airlines to acquire the economies of scale to compete with a privatised BA on a level playing field. Another objective of this exercise was to smooth out each other's peaks and troughs, for BCal's peaks occurred during week days while Air Europe's occurred on week-ends. This meant that both airlines could offer their spare capacities to each other to achieve an overall higher level of equipment utilisation and higher load factors throughout the week. ILG's dominant position in the inclusive tour market would also have helped BCal to significantly increase its generally low short-haul loads by filling seats that would otherwise remain empty with ILG's clients, especially on week-ends. A series of meetings ensued. The result was a 150-page study entitled An Airline for Europe. It envisaged the commencement of joint scheduled operations from Gatwick to Hamburg, Munich, Düsseldorf, Milan Linate and Nice in 1987. The next stage of development was to occur during the 1988/89 winter timetable period when further routes linking Gatwick with Copenhagen, Stockholm, Vienna, Rome and Athens were to be added. The study also envisaged adding services from Gatwick to Zürich, Dublin, Madrid and Lisbon at a later stage to enable the joint venture to acquire sufficient economies of scale to become a viable entity in the long term. However, it recognised that it might be difficult to implement the last stage of the envisaged expansion as the relevant routes had already been licensed to Dan-Air.

The study also made profit projections for each stage of the envisaged joint venture's development.

These were:

  • £3.7 million for 1987/88.
  • £5.5 million for 1988/89.
  • £25.2 million for 1989/90.

The latter represented a return on total equity employed plus previously retained earnings of 18.2%. This was substantially better than BCal's short-haul operation could have hoped to achieve on its own.

Despite several rounds of talks being held that lasted well into the first half of 1986, both sides eventually decided not to proceed further with their joint venture study and to go their separate ways. The British Caledonian Group expected its turnover to exceed half-a-billion pounds while BCal expected to carry just under two-and-a-half million passengers. The year's crowning glory was to be the flotation of the British Caledonian Group on the London Stock Exchange.

Instead, 1986 turned out to be BCal's "annus horribilis" during which it faced its most acute crisis as a result of events beyond its control. The airline was never going to recover from this crisis, which ultimately sealed the company's fate.

The events that brought about a dramatic turn-around in BCal's fortunes plunging it into a £19.3 million pre-tax loss (translated into a £14.4 million retained group loss). included

  • the American bombings of Libya during April 1986 in retaliation for that country's (at the time) alleged involvement in the bombing of La Belle nightclub in West Berlin, which injured over 200 and killed three.
  • the world's worst nuclear accident in Chernobyl in the then Ukrainian Soviet Socialist Republic on 26 April 1986

The first two events almost emptied the cabins of BCal's widebodied planes plying the transatlantic routes linking Gatwick with Houston, Dallas/Fort Worth, Atlanta, New York JFK and Los Angeles because of a sudden surge in cancellations, especially from passengers based in the US. Many of BCal's American passengers cancelled or postponed their trips at that time because they feared retaliatory attacks by Libyan secret service agents and did not want to risk exposing themselves to the radioactive fallout from the Ukrainian nuclear catastrophe while conducting their business or spending their holidays in Europe. At the time, BCal's transatlantic scheduled services accounted for a quarter of the airline's worldwide revenues and 37% of its passenger traffic. The resulting reduction in the number of passengers changing flights at BCal's Gatwick base had a detrimental effect on load factors on the airline's profitable long-haul routes. This in turn reduced the profitability of these routes, as well as the airline's overall profitability by an estimated £2 million per annum.

alt=British Caledonian DC-10-30|thumb|Seen here at [[London Gatwick Airport|London Gatwick in April 1984, McDonnell Douglas DC-10-30 G-BGAT was one of the aircraft BCal sold to Continental Airlines in 1986.]]

As a result of the problems it was facing during that time, BCal announced 1,000 job losses out of a total worldwide workforce of 7,700 It also needed to make adjustments to its schedule to take account of the expected changes in traffic patterns. This led to an immediate reduction in the number of weekly frequencies on BCal's underperforming Saudi Arabian routes. The aircraft capacity released was redeployed on BCal's well-performing route to Dubai and Hong Kong. while the airline itself lost two-and-a-half million pounds every month at that time. the sale of Caledonian Airmotive to US-based Ryder Systems, the sale of Caledonian Leisure Holdings and the disposal of British Caledonian Helicopters the following year.

Despite facing a major crisis, BCal continued adding new aircraft, routes and flight frequencies in an effort to maintain a competitive operation.

Two more 747s joined the fleet during 1986. joined the network.

BCal's acquisition of a fifth 747 the following year permitted the launch of a new route from Gatwick to Tokyo on 31 May 1987, at a frequency of three return flights per week. In addition, for the first time in five years, two new European routes were launched from Gatwick. These served Milan Linate and Nice

Therefore, the search for a financially strong partner acquired a renewed sense of urgency.

Several rounds of talks that were aimed at achieving a full-scale merger ensued with various airlines in the UK, the US, Canada and Europe.

BCal's future prospects as a stand-alone, medium-sized airline operating a variety of short-, medium- and long-haul scheduled services were rapidly diminishing against a background of looming consolidation in the airline industry. This was driven by the giant US carriers that had begun channeling their traffic flows into powerful hub-and-spoke operations, rather than feeding these into the networks of BCal and other international partner airlines, in the wake of US deregulation. In addition, BA's impending privatisation and the Government's refusal to fully implement the recommendations contained in the CAA's airline competition White Paper meant that BCal was unable to acquire the economies of scale it needed to compete with these airlines on a level playing field. This prevented BCal from achieving higher volumes over which to spread its fixed costs.

BCal's precarious financial position made it obvious for most of its rivals and seasoned industry observers that the ailing airline lacked the financial strength to survive on its own for much longer.

BCal had valuable traffic rights to operate scheduled services on a number of lucrative, long-haul routes to parts of the world that were not served by any other British airline at that time. It therefore became a desirable takeover target and a bidding war ensued between several potential suitors.

The chief protagonists in this takeover battle were BCal's archrival BA as well as ILG/Air Europe and SAS.

Proposed BA-BCal merger

On 16 July 1987, Sir Adam Thomson and Lord King of Wartnaby, chairmen of British Caledonian Group and British Airways respectively, surprisingly announced at a press conference the intention of the latter to acquire the former in an agreed £237 million bid. They had agreed on this deal only the day before. Officially this was presented as a "merger between equals" but within the industry it was widely acknowledged as a mutually agreed rescue deal to avoid the collapse of BCal. In addition, BA, which had been privatised only in February of that year, was keen to get hold of its main home-grown competitor's most valuable assets. These included BCal's lucrative traffic rights to those parts of the world BA could not serve itself as a result of the now defunct "Second Force" policy. This itself had resulted in a "spheres of influence" policy for BA and BCal that had prevented both airlines from competing with each other on a number of important long-haul routes. BA also saw this as a necessary move to fill the gaps in its global route map to acquire the economies of scale that would permit it to compete against the giant US carriers on a level-playing field. BCal's financial difficulties furthermore presented an opportunity for BA to forestall any competitive threat a revitalised BCal could pose to it in future, either on its own or in alliance with another airline. It therefore wanted to get hold of these assets before any competitor could lay its hands on them. Moreover, BA wanted to prevent BCal's assets from passing into the hands of any [partially] foreign-owned or controlled competitors. It felt that under such a scenario the long-term competitiveness of the entire UK air transport industry was threatened.

ILG/Air Europe's unsolicited counter bid

Following Sir Adam's outright rejection of ILG chairman Harry Goodman's offer to purchase BCal's short-haul operation, and to merge that operation with the short-haul operations of ILG subsidiary Air Europe in return for not having the proposed BA-BCal deal referred to the Monopolies and Mergers Commission (MMC), ILG decided at the end of July 1987 to launch a counter bid for the entire British Caledonian Group.

Air Europe was concerned that a new entity combining BA and BCal had the power to destroy the UK's remaining independent airlines, especially with regard to their ability to compete with such a behemoth. At the time, Air Europe had ambitions of its own to become a major short-haul scheduled operator. Given a combined BA-BCal's superior financial strength, considerably lower borrowing costs and far greater economies of scale, Air Europe's management felt that it would be imprudent to launch these new routes if it had to compete with BA out of Heathrow and Gatwick as well. Therefore, its parent ILG had decided to make a counter bid, which it hoped would either kill off BA's proposal to take over BCal lock, stock and barrel or result in it being referred to the MMC.

To enhance its credibility as a serious contender, Air Europe's bid contained a detailed proposal to return BCal to profitability by way of a reorganisation. This proposal had been prepared by a retired BA head of route planning whom ILG had specifically hired for this purpose. BCal would be split into four discrete businesses, each of which with its own management accountable for the performance of that unit. The businesses would be a long-haul operation under the BCal brand, a short-haul operation merged with Air Europe's existing short-haul operation using the BCal brand on business routes and the Air Europe brand in leisure markets, and an engineering and a ground handling unit. BA's materially inferior offer to buy out the shareholders of the British Caledonian Group led to BCal's senior management turn against BA and to recommend to their shareholders not to accept the revised bid. Instead, with the backing of BCal's controlling shareholder 3i, a desperate search for a "white knight", who was prepared to pay the same amount of money BA had offered to pay in its original bid, began.

Talks with British Midland, UTA and SAS ensued. Among these sets of talks the one with SAS seemed to be the most promising. It would also have given UTA, an exclusively long-haul carrier at the time, access to BCal's short-haul network. This could have delivered additional passengers transferring at UTA's Paris Charles de Gaulle base between that airline's long-haul services and BCal's short-haul feeder flights from/to London Gatwick. However, at the time the French authorities were thought to disapprove of establishing a shareholding relationship between any of their airlines and a foreign carrier.

Parallel talks with British Midland, which wanted to transfer all of BCal's scheduled services from Gatwick to Heathrow, ended without result at an early stage because BCal's senior management felt that this was not feasible given the tight slot situation at London's premier airport. These talks had come to nothing because the US carriers feared that there were insurmountable regulatory obstacles to such a cross-border acquisition in the highly regulated airline industry. They were prepared to extend a loan to the trustees of the envisaged employee trust fund to enable them to acquire an equal number of shares on the employees' behalf. The SAS executives discussed these ideas with BCal's senior management and the unions representing its staff at the British Caledonian Group's Crawley headquarters as well as with Government officials in London.

SAS faced a barrage of hostile propaganda and delaying tactics from BA that were designed to stall any third party's competing bid to acquire BCal for as long as possible and got a mixed response to its planned counter bid for BCal from various departments of the UK Government.<!--this ref does not mention delaying tactics nor propaganda

To counter these negative sentiments, SAS's proposals also included a plan to offer Dan-Air to participate in its merger with BCal by merging its scheduled services division with the new airline combine's scheduled operation, thereby strengthening its position at Gatwick and the airport as a hub.

SAS's rationale for launching a counter bid for BCal was the airline's desire not to be left behind in the then widely expected scramble for consolidation in the airline industry by becoming part of one of the four or five global airline groupings that were predicted to dominate the entire industry.

SAS thought that BCal's Gatwick base would give it access to a centrally located hub in the world's biggest international air travel market, thereby helping it to overcome its geographic isolation on the margins of Northern Europe.

BA was using a mix of rational and emotive arguments to convince both the regulators and the shareholders of the British Caledonian Group that its revised offer was in their best, long-term interest.

At the time, SAS used to pursue a high-fares-high-yield strategy in its Danish, Norwegian and Swedish home markets. BA argued that the SAS bid for BCal would lead to higher fares and thus would not benefit British consumers. In addition, BA also argued that BCal's takeover by SAS, in which the governments of Denmark, Norway and Sweden jointly held a 50% stake at that time, effectively represented a back-door nationalisation of a significant part of Britain's privatised air transport industry and contrasted this with its own, recent privatisation. In this context, BA highlighted that two of these governments represented countries&nbsp;— Norway and Sweden&nbsp;— that were not even members of the European Economic Community (EEC) at that time and therefore were not bound by moves to liberalise its member states' air transport markets. BA furthermore argued that this would call into question BCal's international traffic rights as most bilateral air services agreements contained a clause demanding airlines to be substantially owned and controlled by interests based in the countries they represented, and went on to argue that this could force the British Government to make concessions to its overseas counterparts that were not in the interest of the British air transport industry to preserve BCal's UK flag carrier status. As the uncertainty surrounding BCal's future led to a further, significant deterioration of its financial position and BA's final bid trumped SAS, the fiduciary responsibilities of the British Caledonian Group's board towards their shareholders meant that the only option left was to recommend the acceptance of the BA bid. 3i and the other shareholders decided to sell their stakes in British Caledonian Group plc to British Airways relinquishing control of BCal.

The referral of BA's original bid to take over the entire British Caledonian Group to the MMC had resulted in the imposition of several conditions before the proposed deal was allowed to go ahead. These included BA releasing a minimum of 5,000 annual slots BCal had held at Gatwick to competitors and requiring it to surrender to the CAA several of BCal's licences to operate scheduled services from Gatwick on a number of important, short-haul feeder routes. Although BA had been permitted to re-apply for these licences, the CAA decided to re-allocate all of them to rival airlines.

BA also needed to withdraw the objections to Air Europe's application to the CAA for licences to launch new scheduled services on several short-haul routes BCal already used to serve from Gatwick.

Furthermore, both companies' combined turnover exceeded the minimum threshold that automatically triggers the referral of a proposed merger between two or more companies that conduct a significant part or all of their business in EU member states to the European competition authorities in Brussels. Therefore, the Competition Directorate of the European Commission (EC) needed to clear BA's takeover of BCal as well.

In addition to the conditions imposed by the MMC, BA agreed further concessions with the EC's Competition Directorate to prevent BA from abusing its dominant position at both of London's main airports. These included limiting BA's presence at Gatwick to a maximum of 25% of all available slots, relinquishing BCal's unused route licences and to not oppose Air Europe's designation as an additional UK flag carrier on Gatwick—Rome. BA also had to give a legally binding undertaking that it would not seek to increase its share of Gatwick slots above 25% through any additional acquisitions of other airlines and/or their slots until 1992. These measures were primarily intended as safeguards for other airlines that required access to a sufficient number of attractive slots at Gatwick to launch viable scheduled services in competition with BA. Otherwise, BA's dominant position at both of London's main airports would have made it virtually impossible for the much smaller independents to replace and enhance capacity lost as a result of BCal's takeover, especially on routes where BCal had competed with BA and which accounted for more than half of its net revenue earned from scheduled services.

Air UK was awarded the licences for BCal's former London—Scotland trunk routes from Gatwick to Glasgow and Edinburgh. Dan-Air obtained the licences for the old BCal routes from Gatwick to Manchester and Aberdeen as well as from Gatwick to Paris Charles de Gaulle and Nice. The licence for BCal's Gatwick—Brussels route was transferred to Air Europe. The CAA also granted Air Europe permission to increase the frequency on its existing route between Gatwick and Paris Charles de Gaulle, where it had already competed with BCal, so that it could match Dan-Air's frequency. Both Air Europe and Connectair were successful in their applications for BCal's unused European route licences.

BA continued serving the routes until the new licence holders were ready to assume operations at the start of the 1988/89 winter timetable period.

BCal ceased to exist as a legal entity at 00.01 hrs. on 14 April 1988.

Cal Air International, the former British Caledonian Charter operation, and British Caledonian Flight Training were not included in BA's acquisition of the British Caledonian Group.

BA replaced the former BCal short-haul fleet of 13 BAC One-Eleven 500s with 14 Boeing 737-200 Advanced.

The One-Elevens were transferred to BA's regional bases in Birmingham and Manchester.

The five second-hand 747s BA had inherited from BCal were replaced with its own 747-100/200s.

In addition, BA stationed three Lockheed L-1011 Tristar widebodied aircraft at Gatwick, which were used to operate the former BCal West African coastal schedule as well as a number of new routes to North Africa and the Middle East that had been transferred to Gatwick from Heathrow.

BA transferred all of its international operations from Gatwick&nbsp;— including those it had inherited from BCal&nbsp;— to the then brand-new North Terminal, which opened in March 1988.

The A320s BCal had ordered in 1983 began arriving at BA's new Gatwick base during the spring of 1988. These aircraft had been painted in BA's contemporary Landor Associates designed livery. BA operated its first commercial A320 service between London Gatwick and Geneva before transferring the entire A320 fleet to its main base at Heathrow later that year.

Reasons for the failure of British Caledonian

British Caledonian Commuter Services

thumb|A [[Genair Short 360-100 operating for British Caledonian Commuter Service ]]

To further improve its network connectivity and to transform Gatwick into a US-style airline hub, BCal established a dedicated commuter services network under the British Caledonian Commuter Services brand at the start of the 1982–83 winter timetable period. BCal's commuter network was modelled on the Allegheny Airlines commuter system, the first dedicated commuter operation in the world launched in 1967.

The first airline to join the British Caledonian Commuter scheme in 1982 was Humberside Airport-based Genair.

Genair, which had been formed as a Manchester-based executive charter airline in November 1980, commenced operations with a single Beech King Air E90. Following its move to Liverpool in February 1981, in June of that year, it acquired an 18-seater Embraer Bandeirante and began regional scheduled services to Amsterdam and London Gatwick. Closer links with BCal, followed by Genair's participation in the British Caledonian Commuter scheme and its subsequent relocation to Humberside in late 1982, resulted in acquisition of a small fleet of Short SD3-30 and Short SD3-60 commuter turboprop planes, which were [re-]painted in British Caledonian Commuter colours.

Other airlines that joined the British Caledonian Commuter scheme at its inception included Brymon Airways and Guernsey Airlines.

Fleet

Fleet details

BCal and its subsidiaries operated the following fixed wing aircraft types:

  • Airbus A310-200
  • BAC One-Eleven 200/300/400/500 series
  • Boeing 707-120B/320B/320C
  • Boeing 747-100/200B/200B "Combi"
  • McDonnell Douglas DC-10-10/30
  • Piper PA-23 Aztec
  • Piper PA-31 Navajo Chieftain
  • Vickers VC10 1103/1109 series
  • Vickers Viscount 800 series

thumb|right|British Caledonian [[BAC One-Eleven#Early development|BAC One-Eleven 200 at London Gatwick Airport in 1973]]

thumb|right|British Caledonian [[Boeing 707#707-320C|Boeing 707-320C at Prestwick Airport circa 1972]]

thumb|right|A British Caledonian [[Boeing 747#747-200|Boeing 747-200M at Gatwick in 1986]]

thumb|right|British Caledonian [[McDonnell Douglas DC-10#Longer-range variants|McDonnell Douglas DC-10-30 at Manchester on schedule to New York JFK in 1987]]

thumb|right|A British Caledonian Boeing 747-200 in 1988

thumb|A British Caledonian Airways BAC 111 at Aberdeen Airport in a [[Dan-Air|Dan Air London livery]]

{| class="wikitable"

|+

|-

!Aircraft

!Number

|-

|Boeing 707-320C

|8

|-

|Vickers VC10

|4

|-

|BAC One-Eleven 500

|13

|-

|BAC One-Eleven 200

|7

|-

|Total

|32

|}

;Fleet in 1972

In May 1972 BCal's fleet comprised 32 jet aircraft.

{| class="wikitable"

|+ BCal fleet in May 1972

{| class="wikitable"

|+ BCal fleet in March 1975

{| class="wikitable"

|+ BCal fleet in April 1978

{| class="wikitable"

|+ BCal fleet in May 1981

|-

!Aircraft

!Number

|-

|McDonnell Douglas DC-10-30

|8

|-

|Boeing 707-320C

|5

|-

|BAC One-Eleven 500

|9

|-

|BAC One-Eleven 200

|7

|-

|Total

|29

|}

6,600 people were employed.

{| class="wikitable"

|+ BCal fleet in March 1984

|-

!Aircraft

!Number

|-

|Boeing 747-200B

|1

|-

|McDonnell Douglas DC-10-30

|8

|-

|Airbus A310-200

|2

|-

|Boeing 707-320C

|2

|-

|BAC One-Eleven 500

|12

|-

|Total

|25

|}

6,300 people were employed.

{| class="wikitable"

|+ BCal fleet in March 1986

  • On 28 January 1972, a Vickers VC10-1109 (registration: G-ARTA) sustained severe structural damage to the fuselage as a result of an exceptionally hard landing at Gatwick at the end of a short ferry flight from Heathrow. The airline decided that repairs were not cost-effective and the aircraft was written off and scrapped at Gatwick in 1975.).
  • On 19 July 1972, a BAC One-Eleven 501EX (registration: G-AWYS) sustained substantial damage as a result of aborting takeoff from Corfu Airport too late. The aircraft had passed through a pool of standing water close to its decision speed during the takeoff run. This caused a temporary reduction of engine thrust which the flight's commander interpreted as engine failure requiring an immediate rejection of takeoff. The flight deck crew's decision to abandon their takeoff was delayed and as a result, the aircraft did not stop on the runway but, after crossing some rough ground, finally came to rest in a -deep lagoon. None of the six crew members and 79 passengers was seriously injured in the crash, but an elderly female passenger collapsed after being helped from the aircraft and subsequently died of cardiac arrest on her way to hospital.

See also

  • List of defunct airlines of the United Kingdom

Notes and citations

;Notes

;Citations

References

  • <!-- (Aviation News online - not available online -->

Further reading

  • (Kelsey Publishing Group online)
  • British Caledonian — A Tribute.
  • BA-BCal merger as reported on BBC News, 16 July 1987
  • contemporary timetable images
  • Daily Telegraph obituary of Sir Peter Masefield, BCal's former deputy chairman from 1978–1987
  • History of British Caledonian's VC-10s
  • [ Privatisation of British Airways: Its Management and Politics 1982–1987 (Kyohei Shibata, EUI Working Paper EPU No.93/9, European University Institute, Florence, Italy, 1994)]