BACK in the 1990s, British Airways, the nation’s flag-carrier, proclaimed itself to be “The World’s Favourite Airline” in a long-running and hugely successful advertising campaign. Watching its iconic TV commercials from sofas across the country, many Brits—a pint-sized, starry-eyed Gulliver among them—swelled with pride at what was, at the time, a genuinely treasured national asset. Were British Airways to run the same campaign today, it would probably stir a mixture of derision abroad and embarrassment at home.

Rising competition is partly to blame. In recent decades the Persian Gulf carriers have dethroned BA as the standard-bearers for long-haul service, while a new breed of low-cost carriers has attacked its short-haul dominance. Yet the loss of prestige in distant lands and market share close to home has not hit the airline’s finances. To the contrary, British Airways rakes in the cash. It posted a £2.5 billion ($3.3 billion) net profit last year; equivalent to nearly half of all takings in the European airline market. Three factors have driven this success: slot restrictions at London Heathrow Airport, which suppress…Continue reading