Flag-carrier in eye of storm

BA OWNER IAG’s new chief executive Luis Gallego, who takes over the pilot’s seat from Willie Walsh, has a weighty journey ahead.

The Anglo-Spanish airline group’s pandemic finances should be stabilised by £2.5bn of new equity supported by investors including the group’s biggest shareholder Qatar Airways, which has a 25pc stake and took its full allocation.

What a pity that Walsh allowed his last bow to be disturbed by an investor revolt over his pay.

There is much for his successor Gallego to address at Heathrow and in Madrid.

The biggest threat to the carrier’s future is the closed London to New York corridor. A bit more effort by Transport Secretary Grant Shapps to get this reopened, with more testing and shorter quarantines, would be a huge advance.

Instead, Shapps seems obsessed by opening and closing routes to the Greek islands and the Algarve while London’s role as a great entrepot city is strangled. BA provided 7m seats across the Atlantic last year connecting the City and Britain’s service industries to the USA.

It is disconcerting that BA, its chief executive Alex Cruz and the departing Walsh have taken punishment from the Transport Select Committee during the pandemic.

Walsh’s decision to cull 12,000 jobs is enormously painful. The speed of BA’s retrenchment means that it is one of the few global carriers to retain its credit rating and not to rely on the billions of euros of state aid holding up Air France-KLM and Lufthansa.

IAG retains its credit rating, which will give it advantage when buying next generation aircraft – hopefully with RollsRoyce engines.

A curiosity is why Tory Huw Merriman thought it appropriate, during lockdown, to side with Unite, label BA a disgrace and threaten the divestment of take-off and landing slots, which would undermine the nation’s flag carrier. It is already the case that, of slots allocated at Heathrow over the last seven years, 95pc have gone to competitors, with upstart Chinese carriers acquiring most of them.

Gallego still has a mountain to climb in Spain. The posts of some 14,000 laid-off staff at Iberia and 4,000 at Vueling are being supported by Spanish government cash. That will likely run out by year-end, requiring permanent job losses.

There is also unfinished M&A. IAG wants to proceed with the €1bn purchase of Air Europa and its fleet of Dreamliners but needs a post-Covid lower-priced deal.

BA also has interest in acquiring bailedout Norwegian and there may be no better opportunity than in a pandemic. Much of this looks unachievable while IAG’s North Atlantic money-spinner is shut down.

Low energy

THROUGH the most turbulent market conditions over the last century one of the few certainties for investors is dividends from big oil.

In the UK, Shell and BP have cut dividends while they adjust to a slump in demand as they seek to position themselves for a zero carbon world.

Now, after a steady recovery in the oil price since the spring, it is on the slide, dragging global energy shares down with it. A spike in coronavirus cases in the US, India and, on a lesser scale, Britain, raises fears of a second demand shock.

Crude prices slumped 5pc in London to below $40 a barrel, the lowest level since June. Falling prices may be good for UK motorists (at least until Rishi Sunak ends the freeze on fuel duty) but are terrible for investment returns.

The next oil major to trim the dividend could be the biggest beast of all, Exxon Mobil, amid analyst calculations that big bets on shale oil and global expansion have gone horribly wrong resulting in a potential cash shortfall of £37bn in 2021. A once-sacrosanct payout could be a victim.

Bad hair day

RUNNING a global consumer group in a pandemic is tough enough without marketing blunders.

Unilever is at the centre of a storm in South Africa after a commercial for hair brand Tresemme clumsily contrasted a black person’s hair as ‘dry and damaged’ with a white person’s ‘fine and flat’.

South Africa’s Clicks chemist chain has come under siege.

After a row in India over a skin whitening cream, this is a farrago chief executive Alan Jope doesn’t need.