‘Slasher Walsh’ facing turbulence in bid to pull BA out of a nosedive
Published 27/08/2009 | 07:22
Apart from a giant Swarovski-bejewelled Union Flag on show in Heathrow's Terminal 5 and a display of historical photographs, British Airways' 90th anniversary this week passed in relative obscurity.
Prime Minister Gordon Brown provided the obligatory encomium to its “pioneering spirit”, but otherwise celebrations were muted — perhaps no surprise given the 18 months of maelstrom in the aviation industry that has sent 80 airlines out of business and pushed another slew into the arms of others.
But BA's shape-shifting history — from the first air transport and travel flight to Paris in 1919 via an endless whirl of mergers, nationalisations and privatisations — well illustrates the case for drastic change that its chief executive Willie Walsh is currently trying to make to his 40,000 staff.
The former Aer Lingus boss has been accused of being unduly bearish about the crisis, firstly by saying last year that airlines faced the toughest trading environment ever; then in July he said BA was “fighting for survival”.
There are now some glimmers of light. Last month was one of Heathrow's busiest ever. And BA's passenger numbers went up in July — albeit by only 1% (although first and business-class travel was still down by 11%).
But Mr Walsh remains sceptical.
“Some people see the slight growth in overall travel as being a green shoot. But it is clearly not,” he says.
“The decline in premium traffic tells you the general business environment is still pretty weak, and that's going to remain the case for some time.”
At best, the rollercoaster may not lurch any further downwards.
“There might be some evidence that we've reached the bottom,” Mr Walsh said.
“Traffic has stabilised and looks better in the peak summer months, but it is far too early to say that there are signs of recovery. We have a bit to go before we see that, and quite a bit more to go before we see the recovery meaning something.”
In the face of such pressure, the only successful strategy is to respond to the new trading environment.
“The airlines that go out of business are the ones that say ‘oh well, we'll wait for it to come back',” Mr Walsh said.
“I've been in this business long enough to see repeated situations where people thought things would come back, but they don't.”
“Long enough”, in this case, means 30 years. As a child, young Willie had a passion for the mechanical.
“I loved cars, televisions, radios — anything I could take apart and put back together again,” he said.
His plans for university were left in the dust when Aer Lingus advertised for pilots and, on a whim, Mr Walsh applied. In little more than 10 years, he was a captain; and a six-year stint as a negotiator for the Irish pilots' union brought him into such prolonged contact with the management that when he stepped down they promptly offered him a job.
“Like most things in my life, I started by criticising somebody else,” he said wryly.
Aer Lingus made a good call. By 2001, Mr Walsh was the chief executive, rapidly gaining a reputation for ruthless cost-cutting while turning a loss-making basketcase into a soaring success with €107m (IR£94m) in profits.
In many ways, Mr Walsh is a typical FTSE 100 chief executive. He is straight-talking, strong-minded and quite clearly in love with his job. He is also hugely energetic.
“I have no problem taking the weekend off,” he said.
But the last time he had a whole week away was early 2005.
“I don't like being inactive. I can sit and watch sport or read a book for a couple of days. But to do that for seven days, let alone two weeks? To me, that's torture.”
But Mr Walsh's energy is not the kind that is ambitious for power or prestige.
“I never set out to become a pilot or to go into management, and never, ever had an ambition to be a chief executive,” he said. “But these are opportunities you can't say no to.”
The airlines need all the love they can get at the moment. BA dropped £124m into the red this summer, its first-ever high-season loss, and ended last year with a shocking £400m loss, compared with record £922m profits the year before.
That said, the company is in a better position than it was. It has amassed a £2bn cash pile, helped by last month's £300m convertible bond.
And it is cutting costs with a vengeance: carving out 6.6% so far this year thanks to 2,500 job cuts, capacity reductions and a pay deal with pilots and engineers.
But attempts at similar deals with cabin crews, administration and ground staff have been mired in talks since June.
Unusually in such disputes, both sides seem to agree on the seriousness of the situation.
“What is different this time is that there has been no threat of strikes,” Mr Walsh said.
“This is different from anything we have faced before, it is about making changes to reflect structural changes in business and everyone can see the size of the problem.” That may be so, but discussions are still making little obvious progress. With the formal 14-day cooling-off period now two weeks expired, and a meeting due with Tony Woodley and Derek Simpson — the joint general secretaries of Unite — to discuss what happens next, Mr Walsh is coy about the options.
“We may agree ways of re-starting discussions,” is his best shot.
Negotiations with Mr Walsh are not likely to be easy.
Critics describe him as intransigent, confrontational — even bullying — and the turnaround at Aer Lingus produced the nickname “Slasher Walsh”.
But he is keen to put the other side of the story. “The bit that people don't write about Aer Lingus is the benefits of changes we made,” he said.
“It wasn't just about being aggressive, it was about being realistic and changing the business for the sake of the business.”
At BA there is no shortage of opportunities for change. Alongside the somewhat stalled merger talks with Spain's Iberia, BA is also hanging out for the US regulator's verdict on its proposal for closer co-operation with American Airlines, expected in October.
Despite the rumpus from Richard Branson, who claims the proposal will compete unfairly with his own Virgin Atlantic, Mr Walsh is confident the plan will go ahead.
“If it doesn't, there will be a very interesting dilemma because the market share of other alliances is even greater,” he said.
BA is also about to launch a London City to New York business-class-only service to tap into the counter-intuitively resilient demand from the finance services industry. So there is no time for a holiday — unless it is cruising up the Shannon in Mr Walsh's native Ireland.
“I think it is the illusion of doing something while actually doing nothing that appeals to me,” Mr Walsh said.
“And the pubs along the way.
“And if I got bored, I could always nip down and have a look at the engine.”