British Airways (BA) is led, it appears, by a man who could be accused of being both delusional and irrational. This subjective comment follows BAs server crash and subsequent shutdown which stranded more than 75 000 people across the globe on Saturday May 27th 2017. I say delusional because Willie Walsh is quoted as saying the criticism of the airline is, believe it or not, unfair. He’s CEO of the International Airlines Group of AIG. More about this lot later.
The evidence against BA is incriminating to say the least. It’s own customer research from December 2016 showed the airline had slunk to a new low of 67% satisfaction from over 80% in two years. That was before Walsh’s Woe-begones symbolically slashed and burned its customers in the recent long weekend disaster. Walsh had overseen that fundamental of operational strategies under profit duress, the cost cut. That means jobs lost, including IT, where BA suffered a meltdown earlier this month.
But to understand what’s happened in Aviation, we need to probe this British Airways PR disaster from various directions. Direction one is BA’s parent company, IAG or International Airlines Group. The other is cost-cutting Tzar, Alex Cruz who has overseen a host of what’s being called “slash-and-burn” projects which start at cancelling meals on short-haul journeys to reducing by the hundred its IT engineers and outsourcing operational components.
BA’s cost-cutting could actually turn into a small bonanza for passengers, with the airline facing around £150 million in claims caused, apparently, by a technician unplugging a power cable. The major question is this :
For a sector that relies on redundancy in all aspects, how come BA didn’t have backup or redundancy in crucial booking systems?
Aviation 101 planning comprises the following. Build a system, then back it up with something else in case the premium system fails. Artificial Horizon? Use secondary source power to allow for limited panel operations when power fails. Sparkplugs? Put two in each cylinder in case one magneto fails. Engines? At least two, one of which must be powerful enough to allow the plane to continue flying when the other fails.
But Mr Walsh is now saying that its unfair to point out that BA didn’t have a proper backup system in place in case of power failure?
And he’s the CEO of an airline holding company which ferries millions around the world? Note to self. Don’t fly BA into the UK or anywhere until Mr Walsh is fired/resigned/or-wonders-off-this-mortal-coil. As an ex-pilot of Aer Lingus he should be ashamed of himself. What other operators could possibly be tainted with this careless CRM brush? Go check IAG for answers.
Other interesting things to mention. Qatar Airlines owns 20% of BA, along with a significant shareholding by Capital Research and Management Company at 10%. Deutsche Bank, that rock of ethical financial management (sic) holds just under 3% and Landsdowne Partners which holds nearly 6%. Always watch the hedge funds linked companies and Lansdowne are two examples.
The amazing thing about modern incorporated companies is that BA holding company IAG is actually incorporated and listed in Spain. For tax reasons. To reduce tax, which the shareholders love to hear. Along with cost-cutting. Are we starting to get a clearer picture of just how British Airways operates?
If I was an IAG or BA shareholder at this point, the word “sell” may escape my lips. Yes, the share price recovered after its bad weekend, but this is not the end of the story. As this aviation company moves further away from customer service towards financial windfall, its threatening to eat itself alive. The hungry shareholder mob orders the CEO and others to increase profits annually which leads eventually to the Amadeus software system failing due to cut back in IT support and planning as some lightweight with an access card to the crucial server room reaches out and cuts 48 hours of operations. World Airlines spend an average of around 2.7% of their REVENUES on IT – and many regard this expenditure as an burden on their resources and to be managed “creatively”. Shareholders love corner-cutting, it makes the brackets disappear from spreadsheets.
Then along comes Brexit. What happens to BA’s Spanish Fly connection? You can bet your bottom dollar that AIG is making plans and planning makes as we speak. One option is that it reincorporates in the UK… actually no. Tax cuts there are unlikely even with the Brexit Bandits considering various options in order to lure big business back.
Qatar is in it’s own dark place with the national Airline forced to fly longer routes in the Middle East around a bunch of countries like Saudi Arabia, thus driving up operational costs. The Saudi Arabian dopeslap means a lot more cash to cover extra costs in operations until that operator finds some kind of negotiated solution after the costly embargo.
BA is still in a good place, despite the initial shock over its bank holiday long weekend fracas. It holds over 50% of the prime spots at UK airports for example, meaning passengers (if they really do take off on their allotted flights) walking a shorter distance from plane to baggage and so on. While IAG, Cruz, Walsh and the other one percenters walk away from the customer relations crash, there are voices being raised warning the company that its entire culture is warped.
Paying passengers back their money when some had their honeymoon’s cancelled is just not good enough. Cost effective, but hardly customer based. Virgin Airlines owner Richard Branson probably cracked up when he heard about the server shenanigans. His plan has always been to steal BA’s lunch at some point which may not be far away. It’s no surprise that in the early 90’s BA paid him half a million pounds as part of an out of court settlement when it became clear just how far the legacy airline had gone in order to demonise the startup. False stories, hacking emails. I mean, what were the executives of BA thinking ?
Probably that they could get away with it.
So BA’s culture of operations has hardly changed then.
But there’s a bigger picture here which has to be analysed. As the interesting change in politics sweeps Europe starting with Emmanuel Macron’s emergence in France, the culture of the shareholder 1% versus the rest of us is going to be scrutinised by more citizens who’re voters. That’s the moment the very culture underpinning BA and its cohorts will appear both anachronistic and antagonistic to Jo and Jill Soap.
Branson, who’s own Virgin Records IPO was marred by London investor miscalculations, will attest to the blindness of the elites echo chamber and is ‘making plans for Nigel‘.* But is IAG making plans for Willie?
*”Making plans for Nigel” by XTC, a British band which released this song in 1979 and was signed by Virgin Records.