BA pays the price for endless cost cuts
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