ALEX BRUMMER: Tepid BA recovery done does not speak well of leadership

After the existential crisis for British Airways in the pandemic and the build-up of borrowing it is a relief that IAG, its parent, is back in profit. 

The tepid speed of recovery and the reputational damage done does not speak well of the leadership. 

Former Heathrow chairman Nigel Rudd holds the previous IAG chief executive Willie Walsh responsible. 

Struggle: The tepid speed of recovery and the reputational damage done does not speak well of the leadership

Maybe. But Walsh faced almost insurmountable problems with heavily unionised staff. It was his successors at BA who tried to compete with no-frills carriers by slashing services. 

Admittedly, at Ryanair there is no service to slash. Michael O’Leary’s airline flies out of secondary airports where it has more operational control. Nevertheless, its spring back from Covid in terms of earnings and reliability is impressive. 

It is hard to find a good word about the BA experience. A colleague returning from Portugal on Thursday experienced a three-hour delay. My summer flights to Palma have been cancelled. A son arriving from Texas waited two hours for baggage. 

Heathrow and its ownership structure doesn’t help. When Spanish construction outfit Ferrovial bought the British Airports Authority (BAA) in 2006 it was under the mistaken impression that it would be a quick route to a stream of building projects. Instead, it lumbered itself with a debt-financed model and has been jettisoning assets and shares ever since. 

It didn’t seem to know that Heathrow was a regulated business and that every contract is subject to competitive tender. 

The result has been a constant push for higher landing and other charges so it can keep its investors happy. 

BA’s plan is gradually to lift passenger capacity from just under 70 per cent in the second quarter, to 80 per cent in the current holiday period and 85 per cent in the final three months of the year. Amid the cutbacks and down graded financial performance, the main shard of light is that the North Atlantic, a big driver of BA’s profitability, will be back to full capacity by the end of 2022. 

The message to BA chief executive Sean Doyle is that unless the fuller schedule is matched by better customer service, on the phone, online, at the airport and on board, its premium pricing model is doomed. He will then need to find an early parachute.

Rose-tinted 

Among takeaways from Britain’s domestic banks this week is that, despite the barrage of headlines about a ‘cost of living crisis’, little stress is being seen from personal customers, small businesses and corporations. Agriculture may be the exception. 

Why is this happening? Many middle income families are still protected by the cushion of £200billion of household savings. 

Further, in spite of the eloquent Mick Lynch and co-union demands for ever more money, British workers aren’t doing that badly. Office for National Statistics data shows that in 2021, as we emerged from the pandemic, median household income was £37,600 after taxes and benefits. 

To her credit Alison Rose, chief executive at NatWest, is preparing her customers for the worst should they be caught out by rocketing inflation and rising interest rates. NatWest is in touch with 2.7m customers, seeking to provide advice on how to deal with cost of living increases. 

It has set up a hardship fund and put together a £1.5billion loan package to support its 40,000 farmers. 

Inside the bank, focus is on the biggest pay rise for the lowest-paid colleagues. Even the Government is getting money back as two-thirds of the £3.3billion of dividends and buybacks is heading to the Exchequer. 

Where all of this would leave Tory plans for disengagement – should Labour win the next election – is a known unknown.

Succession 

The departure of former Volvo chief Leif Johansson as chairman of AstraZeneca should not go unremarked. 

Along with chief executive Pascal Soriot he was a powerful force in seeing Pfizer off the field of battle in 2014 when the pharma giant was valued at £70billion. It is now worth almost two-and-a-half times that – £168billion. 

Revenues are growing at a 20 per cent clip, with Covid therapies helping to lead the charge. Soriot will not be moving up, as some investors hoped. 

Instead, Belgian Michel Demare will be taking over, on a £800,000 salary. 

His key task will be to identify an eventual Soriot successor. 

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