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?

Hollow Victory

On the face of it, BA bloodied the nose of Unite union yesterday in the court ruling on the validity of the staff ballot to strike, making the planned 12 day stoppage over Christmas illegal.

While that may save Christmas for many BA passengers who had booked up with the airline, it is a hollow victory for the management. The staff had voted 9 to 1, that's 92%, in favour of strike action. BA's staff is overwhelmingly dissatisfied with its management to the extent it has taken the unusual step to strike. The warning bells are there that BA's tactic may seem like a victory in a battle but the war-proper has only now begun.

The union has quickly struck back to say they will re-ballot and put the case once again, properly, to the staff and now BA has the longer term uncertainty of when the real strike will begin. For BA passengers, there is now a hiatus and uncertainty - who would bother booking up new flights with BA when they don't know when the strike will be?

In fact, an argument could have been that at least management knew when the strike would be and they so could act to contain the damage - indeed, it could have worked the emotional blackmail of stranded passengers and disrupted Christmas's for many people to its advantage. But no, it just had to take a swipe at the union. In doing, so they have once again bashed the face of the staff who are so incensed at the company's actions that they were willing to kill Christmas for many customers.

BA don't get it - the staff are furious and want a compromise. BA just seems hell bent on killing its own business. As Robert Peston points out on his blog today, there are many serious issues which BA faces, not least that the hole in its pension fund is now valued higher than the worth of the company - and so it focuses on disenchanting its staff and compromising its revenue stream. They could not be in a worse place as they attempt to buy and integrate another failed airline, Iberian.

I have said it before and will bore you with it again - this is a management in no-man's land. It is killing its own business and seems to think that is a good thing. Change at the top is very urgently needed instead of the dreamer who runs it now.

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.

Like A Kipper

A fine kipper at breakfast is a rare delicacy. They are notoriously intricate and tricky to eat, fraught with the danger of choking on a bone but if you can get a good one, there is nothing like it. The only problem is that they repeat on you the whole day to remind you of the meal - that's fine unless you have a bad one.

A Kipper - An Analogy For Business?

Work with me on this one, darlings, work with me. Being invited onto an £80m yacht, moored in the Mediterranean and offered a nice stay with a businessman is a rare treat indeed. The delicacy can be awfully sweet but it is risky as it can be easily be misconstrued if people find out. The memory no doubt lingers on well after the treat but if it turns bad, it can be a haunting. In many ways it's like a kipper meal.

How such an innocent meeting will be interpreted may yet be proportional to the after taste for Lord Peter Mandelson and his liaisons with Oleg Deripaska.

The Holidays

Of course, the whole business came to light when George Osbourne considered being on the same yacht with Mandelson, then an EC Commissioner, more than a coincidence. Osbourne is pretty much a low-life himself and he made this meeting public when Mandelson was called for by Gordon Brown to be fast-tracked back into Government. The only way to get him back was to have to give him a Peerage where he shares good company with Truscott et al, then a newly created post of Business Secretary, which indeed is the powerful iron fist of the Government.

But the matter did not end there. As soon afterwards we were to learn that the coincidental meeting on the yacht was not the first time Mandelson had met Oleg Deripaska and despite telling his colleagues in Brussels otherwise, he had indeed met him prior to a crucial vote on Russian Aluminium import duties - the very element that Oleg Deripaska made his considerable fortune with. As this revelation broke, Mandelson sought to cover his tracks over the fact that the crucial days of those meetings were missing from his diary which caused the 'misunderstanding' by Brussels auditors that he had not met Deripaska before the vote which ended up in Deripaska's favour, led by Mandelson.

Fantasy World

Peter Mandelson was the Chief Architect of the New Labour Project which saw the Party move as far away from its socialist roots as to be all but conservative. The phrase 'Champagne Socialists' aptly described the likes of Blair and Mandelson who seemed to think that commerce and business revolves solely around the influence and hob-nobbing with fabulously wealthy people, yet the roots of the Party lay in its appeal to the guys on the production line. It was clear where priorities lay in the Government at places like Lindsey Oil Refinery - it had lost all touch with the very people who had constructed the Party and gave it a reason to live.

In this fantasy world, Mandelson, seems to think it is perfectly fine to be seen with Russian Oligarchs prior to crucial votes which do not just favour them but make them fabulously wealthier again. That's the kind of kipper I am talking about - the one that will come back to haunt you, a bad one.

The LDV Story

As the Government talk the talk over rescuing industry we had Mandelson preaching to us that 'The Government was not a bank', 'The lender of last resort' and that he would take this opportunity to support new green business initiatives over traditional ones. This was at loggerheads with the Car Industry and so special interest cases were talked of. As talk is cheap, there has been plenty of it and precious little action. So when Tony Woodley, joint-leader of the union Unite, spoke at the weekend of a potential car plant grinding to a halt and this being the thin wedge of up to 80,000 jobs being at risk, Mandelson did what he does best - he got on the warpath.

Mandelson got on TV and accused Woodley of rumour-mongering and scare tactics while he knew of no such car plant in such mortal danger. But there was - it was LDV Vans.

Leyland DAF Vans was the original company after DAF trucks merged with British Leyland Rover Group. In 1993, the company went into administration and it was bought by Russian car maker GAZ, who in turn are owned by Russian Private Equity House, Basic Elements Group. In turn the Private Equity house is the main investment vehicle of none other than Russian Aluminium tycoon, Oleg Deripaska. The circle is completed as it was Mandelson's department which rebuffed LDV's pleading for bridging loans as it saw sales almost halve in the last quarter and 850 jobs were immediately at risk.

We all know that Private Equity Houses have been the particular love of the Blair-Brown regime. Not only are they great vehicles to buy defunct companies but they can be used to wash profits against debts and so mitigate tax completely - and that goes for the people who run them too. They are special status companies in the UK and have been the centre of many controversies over mega-profit deals that attract no tax like MG, Mini and Rover.

The Kipper Repeats

For Lord Mandelson, it is an embarrassing reminder of that sumptuous kipper he consumed when he met Oleg Deripaska before that crucial EC vote. It is said that GAZ have ploughed millions into LDV but since December 12 it has stopped its production lines, laid off 100 staff and it employs in total 850 workers in the factory, a further 1,200 in its dealer network and around 5,000 jobs are dependent on supplying it.

They say in business 'It's not what you know, but who you know'. I have always felt this was not true, because if you do not know about the person beforehand, they may not be worth knowing like Deripaska, Sir Allen Stanford and Bernard Madoff. Lord Mandelson has become a caricature of himself, ranting at Starbucks' CEO recently in New York, larging it over trade in this country as if he knows what he is doing and then getting caught with his pants down (metaphorically speaking) yet again.

He simply cannot resist a good kipper when he sees one. This one will haunt him for a good while to come. It's time for 'Champagne Socialism' to end and remind themselves that it is those at the production lines who will suffer far more than the oligarchs and investment bankers they so blatantly favour.