BA pays the price for end­less cost cuts

The National - News - Business - - Front Page - Ivan Fal­lon Ivan Fal­lon is a former busi­ness ed­i­tor of The Sunday Times

There used to be a time when Bri­tish Air­ways could boast it was “The World’s Favourite Air­line”. The slo­gan was cre­ated by Saatchi & Saatchi in the late 1980s, as Mar­garet Thatcher was pri­vatis­ing what for many years had been the world’s worst air­line. Some bright spark in the agency worked out that BA flew “more peo­ple to more places than any other air­line”. Other air­lines flew more peo­ple and sev­eral flew to more places – but only BA could put the two to­gether.

When Mau­rice Saatchi pre­sented it to Lord King, the larger-than-life BA chair­man, he whooped with de­light. It was just what he needed to lift the spirits of de­pressed BA stew­ards and pi­lots and recre­ate loy­alty among pas­sen­gers who had gone ABBA – any­thing but Bri­tish Air­ways.

And it worked. The air­line emerged from the bonds of state own­er­ship to flour­ish in the new era of open skies and dereg­u­la­tion, with new planes, new uni­forms and even a trendy new paint job on the tail to re­place the Union Jack – an up­date that Mrs Thatcher was so ap­palled by she hung her hand­ker­chief over the model. Lord King left be­hind a modern, ef­fi­cient and highly prof­itable air­line that for a time stood as a flag­ship for the success of Mrs Thatcher’s whole pri­vati­sa­tion pro­gramme.

Not any more. Sel­dom has a com­pany done more to dam­age its rep­u­ta­tion and good­will than BA, now part of the um­brella com­pany IAG, which also owns Ibe­ria and Aer Lin­gus, did this past week­end. The best test of a com­pany’s man­age­ment is not the way it han­dles success but the way it copes with dis­as­ters. Last week­end BA’s man­age­ment was tested – and failed lamentably.

It took three days be­fore Alex Cruz, the Span­ish busi­ness­man put in by IAG to take the helm at BA a year ago, gave his first live TV in­ter­view and apol­o­gised. The un­for­tu­nate Mr Cruz has the de­meanour of a ban­dit about to rob the pay­roll, and I don’t ex­pect we’ll be see­ing very much more of him. He may be great at cut­ting costs, but he is clearly not very good with peo­ple. At a re­cent BA investors’ day, the BA chief, ac­cord­ing to an an­a­lyst who was there, chose to “hide be­hind the food buf­fet talk­ing to an Air­bus rep­re­sen­ta­tive”. This, he went on, “failed to make a pos­i­tive im­pres­sion with investors”.

Mr Cruz was pre­vi­ously the boss of Vuel­ing, IAG’s bud­get Span­ish air­line, where he is said to have “Ryanaired” it, cut­ting costs to the bone. He now stands ac­cused of ac­tu­ally cut­ting into the bone at BA, do­ing ir­repara­ble dam­age to the brand. In the space of a year, he has out­sourced jobs, faced a new dis­pute with cabin staff over money, and taken the con­tro­ver­sial step of re­mov­ing free food and drinks for econ­omy pas­sen­gers fly­ing around Europe and re­plac­ing it with Marks & Spencer prod­ucts (ac­tu­ally, I don’t mind it – it’s a lot bet­ter than what we had be­fore).

Some­one has to carry the can for stranding 75,000 pas­sen­gers and clearly it’s not go­ing to be his boss, Wil­lie “Slasher” Walsh, the man who cre­ated IAG in the first place by putting three national air­lines to­gether and dec­i­mat­ing the cost base. Only three weeks ago, Slasher was boast­ing to an­a­lysts about his lat­est cost cuts, which he claimed were hav­ing no neg­a­tive ef­fect on the UK flag car­rier.

IAG shares, which were at 380 pence ear­lier in the year fol­low­ing a post-Brexit prof­its warn­ing, surged to an all­time high of 619p last Friday, just a day be­fore the grem­lins struck, tak­ing the mar­ket value to £13 bil­lion (Dh61.4bn). That is still well be­hind Mr Walsh’s most hated ri­val, Ryanair, which is cap­i­talised at £21.8bn, a gap the IAG boss seeks to close in the one way he knows how – slash­ing even more costs.

The an­a­lysts of course love him for it, or did un­til this week­end, and the shares dropped 4 per cent when trad­ing re­sumed yes­ter­day.

But there comes a point when it can all go too far. I reckon I take on av­er­age 50 flights a year, one a week, half of which are on BA. I have been fol­low­ing and writ­ing about the air­line since it was cre­ated in the 1970s and don’t think I’ve ever known a time when there were more com­plaints about the qual­ity of ser­vice, the shabby planes, the food and the en­ter­tain­ment. Like many fre­quent fly­ers, I choose Qatar or Emi­rates or Eti­had, even if it means chang­ing planes in the mid­dle of the night and takes much longer.

This week­end, how­ever, I’m back on the long-haul BA flight from Cape Town to Lon­don – and I’m not look­ing for­ward to it.

Last week­end BA’s man­age­ment was tested – and failed lamentably

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