As I pointed out in this column last month, calls for the head of Willie Walsh, the British Airways chief executive, have come from all over, but never from the Square Mile. And that’s where you find the people who own the company and get to say whether Walsh stays or goes.

The reason why big shareholders love Willie was laid bare last week when he unveiled a sparkling set of results. BA just about looked like a normal company; a 10% operating margin, bonuses for staff, and for shareholders a 5p dividend, the first in seven years. Walsh hit all the targets he had set, and in the process laid to rest any thought that the debacle at terminal 5 would lead to his departure.

Walsh can’t rest on his laurels just yet, however. As we point out in Dominic O'Connell's article, airlines are the most fickle of businesses. Having had one of its best years, BA is now facing one of its most challenging. When oil passes $120 a barrel, BA’s operating margin shrinks to zero.

Depending on your view of oil prices, that means BA might make no profits this year or even next. Come October it will be grounding planes, and in the meantime its passengers can still expect cheap basic fares eclipsed by high fuel surcharges.

BA’s rivals tell me the transatlantic market is dire – as bad, nearly, as the wipeout after the September 11 terrorist attacks. Sir Richard Branson, the owner of Virgin Atlantic, expects one of the big US airlines to go bust this year, and analysts say United is favourite in the betting. That is not surprising when you consider the impact of absorbing the soaring cost of fuel. Virgin Atlantic’s own bill has jumped from £250m to more than £750m.

Branson said if rising fuel precipitated a downturn “it is going to be very tough”.

For BA, the big difference this time is that it is reasonably well placed to weather the storm. It has £1.8 billion of cash, the pension deficit has been greatly reduced, and it has banking facilities in place to cover all planned aircraft purchases. If rivals get into trouble, it will be in a good position to clean up. It may be the end of cheap travel, but that doesn’t mean that hard times won’t bring opportunity.

Rights and wonga

THE WAVE of rights issues and placings from overleveraged corporates has started. Last week it was Johnston Press, the newspaper business, and First Group, the transport company, and there are plenty more to come. You just have to look at any company that overpaid for deals at the peak of the bull market or took on too much debt like Yell, the classified directories publisher. A lot of these firms are still trying to trade out of their difficulties but, if the going gets tougher, more cash calls are inevitable. With credit so expensive and hard to come by, the only way of avoiding a painful restructuring is to tap investors for cash.

But the wave after that will be more interesting. This will be the reequitisation of all the highly leveraged takeovers of the past three years. Many of them are struggling, the equity has been wiped out and, unless the debt is cut, the owners face an uphill task. In many cases, the only way out is to wait until the equity markets are again receptive to new issues. Then there will be a deluge of private-equity firms desperate to offload companies. On a lot of these deals they will have to take a financial haircut, but the stock market will be one of the few solutions to their problems.

Lies and damn lies

DURING a lecture at Harvard Business School a professor started a debate by asking when is it acceptable to lie in business? To kick-start it, he used an example from the second world war, asking his audience to imagine they were a Frenchman who was hiding three Jews in the attic and had the Gestapo knocking on the front door. It was not a business example, but it did trigger a discussion about ethics and management.

As journalists we are frequently lied to, but it doesn’t mean we accept it. And when lies are discovered, as they inevitably are, we are not amused.

Five weeks ago we ran a story correctly pointing out that Bradford & Bingley, the mortgage bank, was considering a rights issue, but on the Sunday morning the bank denied it in no uncertain terms. It made us look silly. After last week’s u-turn, however, it is Steven Crawshaw, B&B’s chief executive, who looks really silly. He misled the market and his investors, and it is very probable that either he or his chairman, Rod Kent, will go in the near future.

This does not answer the question of when it is acceptable to lie in business – and it is not a discussion I wish to encourage. But the mauling Crawshaw received last week shows it is a matter that chairmen and chief executives should grapple with, because if they are found out to have misled the markets, the stakes can be very high.

What’s in a name?

IT is a perennial question asked of all entrepreneurs about what happens when they leave the company they built. For Sir Richard Branson the question is even more relevant and in a question-and-answer session hosted at his home in Oxfordshire last week he was asked whether his name and image were bigger than Virgin and what would be the consequences if he retired.

Branson said when he ran a record company he had the same concerns when one of his biggest artists, Roy Orbison, died. In the event he had nothing to fear because sales of the singer’s records tripled. Whether the same would happen with airline tickets remains to be seen.

john.waples@sunday-times.co.uk

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