Death Wish?

The second planned strike by Unite has gone ahead and BA reckon that 75% of their scheduled flights will go ahead.

The two statements within that one sentence should be the most terrible things a world class airline could possibly imagine but for Willie Walsh, the CEO of what was once 'The World's Favourite Airline', it seems to be music. He has been described recently as being 'macho' in the face of an unreasonable Union but the reality is that the fight with Unite over changes to Cabin Staff contracts is only one area of failure amidst a whole plethora for the CEO. In fact, about a year before the recession, he was voted one of the Executives of the Decade, right now he is about the biggest chump. Having lost the hearts and minds of some of the best and most loyal staff a business could have, it seems that the Board of BA are 100% behind his absurd actions but this cannot be good for shareholders.

In the grip of the first strike, I had to travel to Germany. Our agency got quotes for the required travel times and BA came out at £800 for the planned journey vs Lufthansa's £237 - standard economy fares on a standard route. OK, so that was in the middle of the strike, but last week I flew to Milan and Lufthansa again came in at around £325 to the similar flight of BA's at over £700.

All along, it has never been about the cost cutting for me - it's been Walsh' abject lack of strategy and business acumen. How can you have a business that is going to succeed when it is charging such prices at recessionary times against its main rivals? Lufthansa is cleaning up - full planes each trip, efficiently run, on time and with decent service with real technological advantages like Boarding Cards via SMS. BA is lost in the wilderness between premium class and low cost. So what does it do with the cash injection it got? It buys the second largest loss making airline in Europe, Iberia, who is similarly placed and tries to combine them. Iberia is perhaps worse off - all its old premium roots into Malaga, Valencia and other cities are dominated by low cost airlines who fly customers in waves - supposedly cheaper - for no frills. BA inherits few new profitable roots, a heavy cost based business and a management equally defunct of ideas from an airline that does not yet lose as much money as BA.

But that's not all - less than a year after two decent airlines flying all business class service to New York went bust (and both were excellent), BA launches one from City Airport which flies just 32 people via Shannon for around £5,000 each. The target customers are City Bankers, the most hated part of society since the recession and credit crunch - Walsh could not have made a bigger PR and business blunder.

Yet he survives. The lack of strategy is almost childlike, the tackling of Unite is pathetic. You can feel it happening again as the whizz kids at Royal Mail found out when capitulating to the Unions for a cost much higher than originally asked for, that modern businesses cannot take prolonged industrial actions and Walsh will have to relent or let his business die. Why would you do that?

BA is basically ruined. It will never rise again to be the airline it was but maybe the world wants something different. The trust and belief that the loyal staff had prior to all this has been ruptured and will never be regained. Walsh has put a sword through the heart of what was one of Britain's best companies.

It takes some skill to be that incompetent; to make a once loyal and much loved staff strike to kill their own company. When BA was the world's favourite airline, it was all about the staff.

He simply does not get it, does he?

Working Nine To One

Willie Walsh, CEO of BA, is a perennial target of mine but, in fairness, he makes that easy.

I have described BA as a strategically lost company before and there has never been a worse moment for what was once the 'World's Favourite Airline'. It is being squeezed by low budget airlines at one end who consistently out perform expectations in terms of profit and by higher service airlines at the other end who focus on their niche market and make enough to survive. BA's two major 'strategic' moves in the last year have been to make a series of reactionary, 'knee jerk' slashes of its costs, with no real impact or direction, and then make arguably its biggest blunder, to buy another airline in the same strategic 'no man's land', Iberian.

In all of this, the backbone of the company has stuck with Walsh until yesterday when the staff who man the airlines voted nine to one in favour of a strike action, to leave the course of action in the hands of the union, Unite. Walsh seemed to suicidally want to fight his staff, having asked them to make sacrifice after sacrifice to the point when they finally made their stand over the 'dumbing down' of their roles. The company now faces a 12 day period of strike action over one of the busiest travel times of the year - Christmas. It could not have been a worse result for BA - it could not have been a more stupid move by management.

The recent BA history is a litany of business cock ups. Terminal 5's opening was about as inspiring as it got as a superb terminal was project managed in a schoolboy fashion, stress testing the unprepared systems with hordes of real passengers. Then we had the series of staff cost cuts that played with the fantastic loyalty of the staff only to shaft them by trashing their worth in the latest move. In between were two attempts to buy a dying airline in Spain, the first ending in farce as BA's market worth fell below that of their target at the crucial moment, and the launch of a business class only airline out of the City Airport with a capacity of just 32 seats which pandered to the whims of rich bankers when two similar services to the US had failed less than a year earlier.

The message in that service alone could not have been worse to staff, the shareholders and the public - BA was prepared to service rich bankers ahead of paying its staff with a service already proven to be unprofitable by two other companies.

I don't know what the shareholders think of Walsh as they seem to support him grimly, but we now know what the stakeholders think. The once highly vaunted air crews of the once great airline have voted categorically to fight him - and you know instinctively that he has lost his best weapon to survive because he has undervalued and disrespected it.

It's not as if you could not see this coming. It has been a quick process of losing the confidence of the staff and laying a scene for the battle. Walsh calls the action of the union 'cynical' but that's what you get when you lose the support of your staff. From a union's point of view there is no point striking when the airline does not fly - their tactics are generally to hit you were it hurts most as it quickly sparks negotiation, at a battlefield very much with the terrain in their favour. There are no surprises that this is exactly what has happened and it was about as obvious as the cock up at Terminal 5 as it all unravelled.

BA seems to be managed by fools. The strike action is not at all helpful. We can see the Royal Mail happening all over again with the one tragic ingredient for Walsh - the customers do have a choice. There are other airlines to fly - in fact, to Walsh's edification, the skies and airports are full of them. His strategic plan has been a series of schoolboy responses to a business game exercise.

I would say that BA needs a rapid change at the top to survive.

Oh Willie, You're Not So Fine

Oh dear. In a week where the union, Unite, launched a legal action against BA in order to try and stop the imposition of new contracts, the news has just got worse.

Far worse.

BA's results to the end of September showed a £292m loss - far greater than had been predicted by most analysts. Revenue was unsurprisingly down by 13.7% and Willie Walsh, BA's clueless CEO, could only forlornly point to the fact that there is a recession on - a real 'no sh*t Sherlock' moment. Lord Sugar would surely have slapped him about the face for saying so, not least as Ryan Air had only released their figures a week before with excellent profits buoyed by a 40% decrease in fuel costs over the same period.

If that was factored into BA's results as well, it makes these results not just grim but catastrophic.

Confidence in the airline was not helped in the period as Walsh himself was involved in the high profile launch of what many believe to be a 'white elephant' new all-business class service between London's City Airport and New York, carrying just 32 passengers and stopping in Ireland on the way to refuel. Given much of BA's woes have stemmed from a dramatic decline in business class sales on other services, this seemed like either monumental madness or callous hubris in the face of the sacrifices made by staff in a desperate bid to save costs. It just seems a huge waste of money on a service almost certain to make a loss in the short and medium term - if ever - given two previous attempts to have a business class only service went belly up in happier times about a year ago and at least they had more passenger capacity and flew non-stop to their destinations.

I really am stumped over BA's strategy. They continue to just try to reduce costs and do the same thing when the industry has moved on. They are caught between offering premium services but trying to compete at the budget end and are failing at both.

I also find it hard to believe that shareholders grimly keep the faith with a CEO who is so clearly out of his depth, obsessed with using his dwindling funds to buy another struggling airline, Iberian, as his last, desperate and hopeless fling of the dice.

He really needs a strategy that hangs together before he spends so much wasteful money. At this rate he needs to horde as much as he can as BA is going nowhere fast.

Free Willie

Oh will someone put poor Willie Walsh out of his misery.

I blogged last month about an article in BA's HighLife magazine about how videoconferencing was 'perceived' by users as not to replace the benefits of flying to meetings. It was a piece of wanton propaganda as clearly they had taken slim evidence from middle managers and not looked at the issue from the point of view of the recession, the cost, high management's viewpoint about extensive unnecessary travel within their companies and the environmental issues. It basically said that videoconferencing and the like did not replace business travel - a sweeping statement.

Poor Willie - after just launching a new Business Class-only service for a £5,300 flexible round trip from London City Airport to New York on which only 32 people can travel, he asserts business people only fly because they have to. That much may be true, but if they have to travel, what on earth would compel them to take such a flight, at such a cost when it has to stop at Shannon on the way as it cannot get off the ground with a full load of fuel to make the full trip? I would argue, that long before a businessman would consider such a trip, they would have exhausted the far cheaper options out of the main airports by all other airlines, assuming that videoconferencing does not cut the mustard for their purposes at the start.

It seems he misses his own point. Such a service is pure luxury and the domain of the super rich firms who have no regard for money - like City banks. While we may bleat about bonuses, the range of travel options to such elite are ultra-luxurious whether they lose money or make it, good times or bad. That service really is only for the too-rich and stupid. The fact it uses Concorde's old flight number is a terrible lack of knowledge as to why Concorde was meant to be effective - it got there faster than anything else. This service arrives after normal ones.

Two major attempts in the last few years to tackle the Business Class-only market failed dismally at a time when there was more money around. This really is a dreadful use of BA's valuable resources at a time when staff are being squeezed for every penny of saving and customers are having parts of the offering withdrawn and being sold back to them at premiums.

Willie really is not doing a good job for his airline.

From BAd To Worse

It seems not a day goes by without another tale of woe from BA and I have blogged before about an airline that is dying a death of a thousand cuts.

It turns out I was wrong - it's around 1,700 cuts, of jobs that is plus a pay freeze. Well that's just the latest round. Further, this is just a week after BA launched an ill-fated new Business Class only service to New York from City Airport when two such airlines operating similar models have gone bust inside the last 12 months. Despite CEO Willie Walsh claiming that this service would be profitable in a year, all indications are that it was dead before it took off. In the launch interview he even claimed BA was on the verge of buying another airline that is slowly dying, Iberia. I have said it before but I think Walsh is BA's problem - he just seems to lurch, punch drunk from one bad idea to the next and just does not seem to have in his mind a cogent strategy for survival. And that is the key here - after a £401m loss last year, the biggest since it privatised in 1987, BA will announce another loss this quarter and it is battling for survival. In many respects, an ill-starred takeover of another ailing airline is about the worst way to spend precious cash.

But Walsh soldiers on. Amidst several petty ways to save cash he is now taking on the Unions in promoting the idea that many staff should take early retirement or voluntary redundancy. There is also an issue over the roll of cabin crew for the future where the proposal is to drastically change the current roles, slashing their status and pay and bringing on new recruits at rock bottom prices. The staff are up in arms as, rightly, the former 'World's favourite Airline' had a good reputation on service and that's what kept customers loyal. But it seems that BA is losing itself in a 'Neverland' as it is caught in the vanilla whirlpool of budget airline menu-style services and high quality class service that customers pay a lot of money for. BA is a strategic dead duck and that flows right the way to the top. The final straw could be a strike of any sort - a prolonged one would almost certainly bring a failing airline to its knees.

Central to BA's woes has been the depletion of the higher class cabins as customers book more economy flights in the face of a recession. The passenger figures in that category are 13% down year on year and falling. Despite several silly offers to get people to upgrade by offering a free ticket when buying Club of First Class, or if you buy at economy ticket you are offered to buy an upgrade on one or more legs for idiotic prices considering you have usually just paid over the odds for a higher priced ticket anyway, BA has not stopped the exodus from the higher class seats. This means that these seats at the front of the airline are going empty.

But BA have several other problems, to my mind. The first is a silly rigidity about changing tickets once bought. If you arrive for a flight early and want to see if you can get on an earlier flight, BA, unless you have paid stupid money for a fully flexible ticket, do not allow such a useful thing. It means that seats go empty on the early flight but had they been filled, the later flight would have empty seats which BA would then have time to sell. And at any price, as it would be incremental money. Not so with BA (many airlines suffer from this dumb logic). They actually try to charge more for these newly freed up seats and so they remain empty whereas simple logic would say as long as you are covering the cost of the meal and and the fuel, you are making some money rather than cutting off your nose to spite your face.

Further, it remains to be seen whether Walsh and his management team understand where the future lies for BA. You can cut costs easily in a business like that without thinking hard and the biggest issue will be the Unions. Given that you think that you can handle the Unions, what is it you want to the airline to do after you have cut all the costs and ditched the staff? Do you want to be a flagship, high service carrier or do you want to be a low budget, menu-service airline? If so the latter, you are in the wrong place today as your hubs are the two most expensive of airports and you have a purpose-built terminal to handle customers. Yet that's what seems to be the plan - as BA sequentially withdraw simple things like meals and seat booking to charge for them but they do not lower the prices of the ticket in return.

In the middle of all this remains the staff - loyal and capable people who love the airline and give the service that the company was once famed for and proud to advertise. Effectively, Walsh is trashing their skills and abilities and looking to replace them with 'Easyjet-style' crew. The result could be tragic in terms of service - make no bones about it. The difference in the levels of ability and skill of cabin staff between low budget and BA is enormous and there is an immense confidence factor involved. If an incident occurred in mid air, I know who I would want to be running the plane - I think I best summarise it as that. On the last Easyjet flight I was on, we were served by a young man wearing a stewardess's outfit bought from a joke shop with his boxer shorts sticking out from his mini skirt as the staff laughed at the unwitting groom-to-be and took photos. Good fun but airlines are, in fact, serious business.

I wonder why the investors in BA carry on with the current management. From the Terminal 5 total fiasco to the series of knee-jerk, almost fag-packet attempts to save the business to a total lack of strategy, the airline is slowly dying and Walsh seems powerless and witless to do anything about it. The enduring image I have of him of late is his interview on the converted Airbus 318 taking off from City Airport, refuelling at Shannon and going on to New York running an already dead Club-only service for just 100 passengers talking of his new attempt to take over an equally dying airline, Iberia.

It was all wishful thinking.

Is Willie a Willy?

So there is a recession on and a credit crunch. Two ‘all business class’ airlines failed in the last year, both did not use ‘hub’ airports and carried limited amounts of passengers to the US.

I used Silverjet and I loved the service – flying from Luton with a great purpose-built terminal of its own, the service was great for a £1,000 return flight to New York. I was not the only one to think so – as I bumped into Martin Johnson’s knee and Mark Blundell too on two separate trips.

But it crashed, so to speak, and burnt. Even with a nice big Boeing, it did not attract the customers and Luton is one of the more accessible of airports with lower cost, nearer parking – Silverjet offered valet parking service too.

Now BA has launched a new service. From the short take off airport at the City, it has a specially converted Airbus 318 to carry only 100 passengers in total and only 32 in equivalent flat beds of Club Class to New York. Ah, there is a catch too. The A318 cannot take off on the short runway with a full load of fuel that would get it to New York and so it has to refuel on the way which means a stop at somewhere like Shannon.

I have criticised Willie Walsh, CEO of BA, before for his dreadful lack of strategy and his series of knee jerk reactions to the market conditions. But this folly in the face of tried and tested failures in the same sector will go down badly with all those staff who have taken early retirement, worked harder or taken a salary holiday in order to pay for his whims. This is a real humdinger of a poor idea and it frankly deserves to fail in the face of much better thought through services by smaller companies that he harried to put out of business.

Easyjet have criticised it also as a shuttle service for rich bankers which sort of puts it into perspective as we all are now commanded to hate such people by our Supreme Leader who has now issued laws and ultimatums to bankers and all Tories for causing the financial mess we are in. Poor old Willie has taken a good aim at his foot and blasted at it with gusto. Perhaps the resultant pain will wake him up.

At a time when BA has called for an extra £600m in cash and tried nonsensical cuts to try and compensate for the horrendous losses of last year, this was one investment that could have waited or have been binned.

But nope Willie is a real willy, for sure.