WILLIE WALSH tells a story about moving his desk during his first days as boss
of British Airways. Previously tucked away behind some partitions in a wing
of Waterside, the airline’s Heathrow headquarters, he shifted it so it was
the first thing people saw on stepping out of the lift.
Disconcerted by being confronted by the chief executive, staff scuttled
sideways looking for cover. Those with reports or messages for the boss
looked round for an intermediary to pass them to - until he sprang up and
took them himself.
The story says much about Walsh, a 46-year-old native of Dublin and former
commercial pilot. He is unflinchingly direct, confident in his own
abilities, and not afraid to upset old ways of doing things. He is also,
thanks to the shambles that followed the opening of Heathrow’s Terminal Five
10 days ago, the business equivalent of public enemy No 1.
Since the flagship facility’s baggage system imploded on day one, criticism of
Walsh and the company has been relentless and vitriolic. Politicians and
business leaders have lambasted the company’s failings, while passengers
caught up in the turmoil have made regular television appearances swearing
never to fly BA again. This week Balpa, the pilots’ union, will join the
chorus calling for Walsh to resign. “We want confidence in our leadership,
not arrogance,” said Jim McAuslan, Balpa’s general secretary.
One key constituency, however, has remained silent. In the week when large
City shareholders forced a climbdown at Marks & Spencer over Sir Stuart
Rose’s elevation to chairman, no voice has been raised against Walsh.
The company’s biggest shareholders have pointedly stayed silent, and those who
have spoken have at worst been neutral on Walsh’s future.
Invesco, BA’s largest shareholder with a 10% stake, declined to comment on
Walsh’s performance. Richard Marwood, fund manager at Axa, which holds 4.2%,
said he was concerned at the damage done to the reputation of the company,
but that talk of resignation was “going over the top”. A senior executive at
Insight, which holds 2.3%, said Walsh’s future was “not on our radar”. Legal &
General and Standard Life (each with 4.2%) also declined to comment.
A look at the BA share price makes it hard to understand why fund managers
haven’t joined the antiWalsh clamour. BA has been one of the
worst-perform-ing stocks in the FTSE 100 in the past year. It closed the
week at 235p, having fallen from a 12-month high of 519p. In the process it
has underperformed the FTSE All-Share by a whopping 48%.
The Terminal Five debacle, however, has had nothing to do with its descent. On
Thursday, the company estimated the cost of the problems at £16m,
insignificant against an annual turnover of £8.5 billion.
Instead, a triple whammy of high oil prices, looming US recession and crisis
in the financial services industry has laid the shares low. BA is highly
sensitive to the fortunes of Wall Street and the City. At least 75% of its
profits come from its flights between London and America. Its powerful
position at Heathrow makes it ideally positioned to exploit the rich stream
of business traffic between the business capitals.
Big shareholders will not be happy that the value of their stake has fallen,
but they are prepared to give Walsh the benefit of the doubt. They respect
him for having tackled difficult issues that were facing BA when he took
over, in particular the pension deficit, which threatened to cripple the
company.
Crucially, he is close to hitting a target that has eluded his predecessors –
a 10% operating margin for the airline. Analysts say he will come close, but
probably just miss, when he reports results on May 16 for the last financial
year.
McAuslan said the City should change its view. “Banks, institutional investors
and analysts need to wake up to the fact that there is something very wrong
right at the heart of this company that is making our once-great brand a
laughing stock. The margins may look good, for this industry anyway, but the
financial establishment’s preoccupation with the bottom line has glossed
over the warning signs,” he said.
Walsh arrived at BA in 2005, a surprise successor to Sir Rod Eddington, the
cerebral but matey Australian who was hired, in the words of one BA insider,
“to put a smile on people’s faces” after the gloomy end to the reign of
previous boss Robert Ayling.
The Irishman did not seem a choice designed to keep the smiles in place. As
head of Aer Lingus, Walsh averted financial disaster by engineering a
radical overhaul and ditching hundreds of staff. It was a spectacular
turn-round, but one that left him with a reputation as a hatchet man.
He did not see much similarity between the companies, telling The Sunday Times
in October 2005: “The only lesson you can learn from Aer Lingus is don’t
allow yourself to get into that crisis scenario in the first place. I will
do what I believe is right for BA, but that doesn’t mean I will do what I
did at Aer Lingus.”
Walsh tackled other areas that Eddington had been unable to resolve, such as
making the airline’s nonHeathrow operations pay. He has sold routes from
Bir-mingham and Manchester and drastically slimmed down the business at
Gatwick. He has also looked for growth elsewhere, overseeing the creation of
a base at London City airport and placing BA’s first order for wide-bodied
aircraft in more than a decade, a deal that includes the Airbus A380
superjumbo.
Along the way he has upset people. BA’s pilots, traditionally the airline’s
most powerful workers’ group, are on the verge of their first strike in 30
years in a dispute over Walsh’s plans for a new “airline within an airline”
that will fly to America from the Continent.
The City, however, remains content - for the moment. In reflecting on Terminal
Five, Walsh might want to bear in mind the fate of Ayling, who also upset
pilots and cabin crew during his reign. He suffered calls for his departure
for more than two years and seemed to have weathered the storm. It was only
then, in March 2000, that he was persuaded to go.
ALITALIA UNDER THREAT
AFTER years of financial disasters, Alitalia may go under this week. The board
will meet on Tuesday to decide whether it should go into administration.
The Italian airline has lurched from crisis to crisis in recent years and been
repeatedly bailed out by the Italian government.
This latest flirtation with bankruptcy stems from the collapse of a takeover
bid by Air France/KLM, which pulled out of talks last week, saying that the
demands of the Italian unions were too great.
While there is a strong likelihood the airline will seek court protection from
its creditors this week, there are signs that it could yet escape closure.
The government has said it wants to keep it flying and Silvio Berlusconi,
tipped to become Italy’s next prime minister, has called on business to come
up with a rescue plan.
I fly regularly, on average 50 times a year, and used to book mainly with BA but in the last few years the decline in service, attitude, baggage delivery, punctuality, etc, etc ,etc means I actively seek alternative airlines who seem to value my custom.
BA's downturn in performance under Walsh's reign is reason enough for him to be sacked let alone the national disgrace that T5 has turned out to be.
D.Heath, London, England