A whiff of Wapping?

British Airways

Mar 10th 2005
From The Economist print edition

The man who rescued Aer Lingus becomes boss of British Airways

BRITAIN'S newspaper industry changed for the better when Rupert Murdoch broke a labour stalemate by moving the Times from London's Fleet Street to Wapping, a new site in the city's Docklands. The move, a mere few miles, was more symbolic than geographic. It enabled the Times to leave behind the over-manning and ancient working practices that had brought most of the country's national newspapers to their knees. Other newspaper proprietors soon followed. Will British Airways (BA) “do a Wapping” as it moves its operations at London's Heathrow airport to Terminal Five when it opens in 2008?

That may be the message behind BA's choice this week of a new, young chief executive. Willie Walsh, aged 43, a former pilot, made his name by converting Aer Lingus from a deadbeat, state-owned flag-carrier into a profitable low-cost airline. He slashed costs, cutting one-third of the Irish airline's workforce. BA has already shed more than 13,000 jobs since 2001 and cut costs by £1 billion ($1.9 billion) a year. But the departing chief executive, Rod Eddington, wants another £300m squeezed from running costs in the next couple of years (details were being outlined to investors as The Economist went to press).

Last year a team of BA executives spent months studying how to change working practices, and when. Mr Eddington, who hands over to Mr Walsh in September, concluded that, ideally, the changes should be made before moving to Terminal Five, as the logistics of moving will be hard enough on their own.

Mr Walsh will inherit the task of changing the culture of BA's ground staff and support operations. There have been problems with absenteeism and time-keeping. The aim is to shorten aircraft turn-round times and to have a more flexible team in the terminals so that in quiet periods employees are not sitting around doing nothing. There could be more outsourcing. Change will not be easy, given the tendency of BA employees to strike. But Mr Walsh, in the words of someone who knows him well, sees airline management as constant guerrilla warfare with the unions.

BA sold its own low-cost carrier to concentrate on fighting the likes of easyJet and Ryanair by using some of their techniques (internet booking, cheap off-peak fares) in its short-haul network. Its European business went from a £300m loss to break-even, as BA's operations at Gatwick were trimmed drastically.

Mr Walsh will inherit an airline ten times the size of Aer Lingus and with a premium long-haul business as well as short-haul. Unlike Mr Eddington, his background is entirely in the public sector. Although Mr Eddington steered BA profitably through the multiple crises that all airlines have faced in the past four years, the going is still tough. American long-haul competitors and European rivals have all enjoyed huge government support; BA is subsidy-free. In the past, most of BA's profits have come from its transatlantic service. But American carriers, such as United Airlines, sheltered from creditors in Chapter 11 bankruptcy protection, are adding capacity and driving down prices, while many premium business passengers, since Concorde was grounded, have discovered the joys of time-sharing corporate jets.

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