seemed to offer the best solution for providing the level of feeder services BA needed to protect its long-haul loads and profits at Gatwick, without re-creating the complex organisation and fleet mix, and without duplicating the costly overheads of the BA mainline short haul operation at Heathrow, which did not suit the revenue environment at Gatwick. Apart from the additional transfer traffic this generated for BA's long haul services at Gatwick, the main benefit of this arrangement for BA was that CityFlyer was to remain completely independent of the BA mainline operation. The feeder services CityFlyer provided for BA at Gatwick under the franchise agreement did not impact the direct operating costs of BA's mainline operation. CityFlyer also had very low costs as a result of a flat organisational structure and a simple fleet. This suited Gatwick's revenue environment and was the main reason BA decided to make the franchise agreement with CityFlyer Express a central plank of its strategy to achieve sustained, overall profitability at Gatwick. BA's inability to operate profitably at Gatwick following the acquisition of British Caledonian and Dan-Air The prime causes for BA's inability to operate profitably at Gatwick are: The unwieldy route structure it inherited from British Caledonian. The Monopolies and Mergers Commission's decision to require BA to give up 5,000 annual slots at Gatwick to its competitors and to re-apply for some of British Caledonian's short haul feeder routes, as well as the subsequent decision of the Civil Aviation Authority (CAA) to award these routes to rival airlines. Its failure to transform the short haul operation inherited from Dan-Air into a low-cost unit within the Gatwick mainline short haul operation. The fact that on identical routes with the same fare structure its costs at Gatwick are only marginally lower than at Heathrow, whereas load factors, revenues and yields — the profit per passenger — are significantly lower at Gatwick than at Heathrow. Gatwick's location and its smaller catchment area compared with Heathrow. The route structure with which BA was left following its takeover of British Caledonian in December 1987 was notable for the unplanned and unsystematic manner in which it had grown since the early 1960s. At the time Sir Freddie Laker had begun building up British United Airways' scheduled route network in his capacity as that airline's managing director. In those days only very limited opportunities existed for wholly privately owned, independent airlines