Willie Walsh, the chief executive of IAG, which owns British Airways, must be looking forward to Thursday’s general election if only because it gets him out of the headlines.
He has had a torrid week that has done his reputation and that of Britain’s flag-carrier no end of damage. The shutdown that affected 750,000 hapless passengers has also exposed BA’s hopelessly inadequate crisis management.
A week after the event, BA was still on the front pages, with the Financial Times reporting that passengers seeking compensation for their bank holiday travel disruption "face further chaos as the airline battles with insurance companies over who will foot the bill".
BA’s compensation form asks whether a claimant has insurance cover and if the answer is yes, the company tells them to make a claim against the insurance company “in the first instance”. The insurance companies, of course, say they should claim off BA in the first place and only go to them “if compensation is not available from any source”.
Talk about digging your own grave. Or, the old saying, “If you’re in a hole, stopping digging.”
Other headlines included "BA in Blunderland" and the FT posed the question: "Flagging carrier?" In The Daily Telegraph on Friday the highly-respected columnist Jeremy Warner concluded that "the airline is putting profit before service and it seems to be run for the benefit of a clique of senior managers", which basically means Mr Walsh. Most of us thought he was still the BA chief executive until a gent called Alex Cruz popped up on our screens three days after the event to insist he was not resigning from a post that no one knew he even occupied.
Mr Walsh did not appear until two days later, blaming it all on everyone other than himself. IT failure? Caused by a power outage followed by a surge – although the electricity suppliers insisted there had been neither. Mr Walsh used to be the chief executive of Aer Lingus, where he earned his “Slasher” nickname, before he moved to BA where he confirmed it. Then, after the merger with Iberia, he elevated himself to the chief executive of IAG, the head honcho of the whole thing, where his last recorded pay was £6.5 million (Dh30.8m). One wonders for what? It is hard to say he has earned it this time around. He casually brushed off questions of wider damage to the BA brand from his cost-cutting.
“Change is a feature of our industry,” he said defensively. “The reality of it is the business has to change to remain relevant.” What he really means is “to remain highly profitable”, which to give him his due, BA is.
Revenues have climbed from £8.2 billion to more than £10bn since 2011 and operating profits from £350m to £1.5bn.
IAG now flies 100 million passengers, double the number when Iberia and BA merged six years ago, and it operates 548 planes flying to 279 destinations (which probably does still qualify it for the disingenuous boast “the world’s favourite airline”, or at least “airline group”). It made a profit of €2.5bn (Dh10.32bn) last year (BA accounts in sterling and IAG in euros).
All of this makes it much more popular with the analysts than it does with its passengers. IAG shares took a hammering after Brexit a year ago but have regained all the lost ground since and the City loves Mr Walsh’s laser-like focus on costs, revenues per passenger kilometre, and hours in the air for each of its planes per day (13.4). The other side of that coin is a quality of service that gets noticeably worse. A former cabin services manager was quoted this week as saying the airline’s mantra has moved from the “customer is king” to “cash is king”, adding sorrowfully: “A lot of us feel like the airline is going through a gradual, painful demise and customers are noticing it.”
In the latest annual report Mr Cruz sets out his vision as “to be the airline of choice with personalised service, exceptional reliability, a digital mindset and unique British style”. After the recent debacle, he cannot legitimately claim to be achieving at least two of these: service and digital.
My latest flight, from South Africa to London on an Airbus A380 over the weekend, found the following factors: it took off bang on time and landed half an hour early (tick).
The stewardesses could not have been nicer but they are seriously embarrassed by their offering; Wash-bags, blankets, cheese boards and other little goodies (I’m talking about business class) we used to take for granted have been trimmed to flimsy tokens.
I could go on, as every BA passenger I know incessantly does. But I do not think Mr Walsh is listening. He may come to regret that. Or at least his successor will. Let us hope it is not the hapless Mr Cruz.
Ivan Fallon is a former business editor of The Sunday Times.
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