WILLIE WALSH AND THE AIRLINE FACTORY
By Joe Brancatelli
March 24, 2010 -- Ten months ago, I found myself seated across from British Airways chief executive Willie Walsh in the nearly empty first-class cabin of a flight between Boston and London's Heathrow Airport. Walsh was Stateside to talk to analysts after his airline lost a record $640 million for the year ending March 31, 2009, a startling reversal from a year-earlier profit of $1.5 billion.
A compact, intense Irishman who affects an easygoing patter, Walsh was glib with the explanations and generous with BA-produced charts and other collateral. Record-high fuel prices had pummeled the airline, he said. The weak U.S. dollar, which dropped below $2 to the pound in 2008, eroded BA's revenues on crucial Anglo-American routes. The rapid disappearance of premium-class traffic after financial markets collapsed delivered another unexpected blow. He freely admitted that he didn't expect a turnaround any time soon, but Walsh wanted me and another business-travel columnist (and, by extension, you) to believe that most of BA's problems were transient and out of his direct control.
So imagine my surprise when I showed up the next day at Waterside, BA's world headquarters near Heathrow, and found the massive complex awash in angst. Screaming red headlines in the company-produced newspaper delivered a totally different message from Walsh's in-flight patter: BA's labor costs weren't competitive and indefensibly high. Jobs, maybe a lot of them, would have to go. Routes would be slashed, service would be cut, and passengers would be squeezed for new revenue. Employees who survived the inevitable bloodletting had better be prepared to sacrifice big time. And the paper left no doubt that Walsh himself would orchestrate the cuts. His in-print message to the employees was simple: The airline's survival was at stake.
I left Waterside that day in late May dazed and confused. Walsh, who deftly rallied the much-smaller Aer Lingus from near collapse in the months after the 9/11 terrorist attacks, seemed to be playing a confusing game. Why would BA's employees—who'd been hearing the same sky-is-falling rhetoric from a succession of CEOs since the airline was privatized in 1987—listen this time when the boss was telling the media and the wider world something quite different?
Apparently, I wasn't the only one confused. Walsh and British Airways is now between strikes: The Unite union of flight attendants walked off the job last weekend and Monday said it plans to do it again for four days starting this Saturday. Union officials promise to resume the strikes after Easter if Walsh doesn't negotiate changes to a package of job cuts, pay freezes, and work-rule changes that he unilaterally imposed last fall.
For his part, Walsh seems determined to keep the annual bundle of 62 million pounds of cuts intact even though some analysts claim the strike costs British Airways as much as 30 million pounds a day in lost revenue and expenses associated with keeping the airline flying through the work stoppage.
"This is how Willie works," says an admiring former colleague who is also familiar with the Byzantine inner workings of BA's labor relations and its day-to-day operations. "He believes there's one boss, and the boss leads. Once he decides, you follow. And if you don't follow, he'll run you over."
Another high-ranking former BA employee was even blunter: "I hope he fires them all and starts again. That union has been f—king with the airline for years."
Needless to say, there's not a lot of love lost between several generations of BA executives and Unite, which represents about 12,000 of the airline's cabin crew. And Unite is easy to dislike from a management standpoint. It has been strident in support of its members and their benefits won over decades of protracted and acrimonious negotiations. It is also politically connected as the largest single financial supporter of Britain's Labour Party. (Not that it has helped Unite this time. Embattled Prime Minister Gordon Brown, a Labour member who trails in a general election expected in May, demanded Unite abandon the strike and called it "unjustified and deplorable.")
o as he attempts to make BA over in his own image, Walsh was bound to clash with Unite. Several other unions caved to his giveback demands last year, but Unite resisted, and negotiations dragged on for months. Last November, he imposed his concessions and Unite promptly took a strike vote, which garnered more than 90 percent support from flight attendants. BA only averted a strike over the profitable Christmas and New Year travel period when a British court invalidated the ballot because several hundred former or soon-to-be-redundant BA flight attendants participated.
A second strike vote earlier this year garnered more than 80 percent support, but that didn't deter Walsh. When another tranche of negotiations earlier this month failed, BA mounted a costly contingency plan. It canceled the reservations of scores of customers. It rejiggered its remaining flight schedules, temporarily rehired some laid-off flight attendants, trained management staffers to work flights, and urged Unite members to ignore the union. Then it chartered a fleet of third-party aircraft and crews—the industry calls the practice "wet leasing"—to operate many BA flights.
The latter practice earned BA some scorn, especially from über-budget carrier Ryanair, Walsh's former archrival in Ireland and a current competitor at several British and European airports. Walsh wet leased several Ryanair aircraft and promised that Ryanair staffers were trained to serve the food and beverages in the BA style. "Never mind the coffee, being on time will be a new experience for [British Airways] passengers," Ryanair spokesman Stephen McNamara said about his carrier's assistance to BA.
Jokes notwithstanding, BA cobbled together enough service to fly more than half of its passengers last weekend. It even went so far as to operate dozens of flights without passengers from Heathrow to destinations around the world so that the aircraft could be used to ferry waiting flyers back to London. And by telling passengers whose reservations had been canceled to stay away from the airport, BA dodged a public-relations crisis by denying television news crew video of overflowing terminals and disgruntled customers.
Yet that wasn't enough for Walsh. His spinmeisters at Waterside released a statement on Monday excoriating the press for daring to give credence to claims by Unite about BA lapses and foul-ups during the strike.
That bit of petulance is mysteriously absent from public view on the BA.com website, but it warned that "it is extremely confusing for our customers when the content of some media reports conflicts with information we have provided." BA was also miffed that "some media reports on our flight operations during the period of Unite's strike have appeared to give equal weight to claims made by Unite."
Which, as you might imagine, puts me in an uncomfortable spot. After all, I have all these notes from my conversation with Walsh 10 months ago that are also "extremely confusing" compared to BA's current claims about the cause of its woes.
The Fine Print ...
As of Tuesday afternoon London time, there were no talks between BA and Unite, so the four-day strike is still scheduled. And lest you think British Airways is alone in battling for givebacks from recalcitrant unions, be aware that Air France flight attendants have also scheduled a strike for March 28 to March 31. Lufthansa and its pilots union are also at loggerheads. A strike at the German carrier is scheduled to run from April 13 to April 16. A one-day pilots strike in February all but grounded the airline.
ABOUT JOE BRANCATELLI Joe Brancatelli is a publication consultant, which means that he helps media companies start, fix and reposition newspapers, magazines and Web sites. He's also the former executive editor of Frequent Flyer and has been a consultant to or columnist for more business-travel and leisure-travel publishing operations than he can remember. He started his career as a business journalist and created JoeSentMe in the dark days after 9/11 while he was stranded in a hotel room in San Francisco. He lives on the Hudson River in the tourist town of Cold Spring.
THE FINE PRINT This column is Copyright © 2010 American City Business Journals. All rights reserved. Reprinted with permission. JoeSentMe.com is Copyright © 2010 by Joe Brancatelli. All rights reserved.