Words: Tom Ward
Alex Cruz, the man who has captained British Airways through possibly the worst period in the company’s history, announced this week that he would be stepping down from his role as CEO. The news comes after a string of misfortunes on Cruz’s watch, none of which has been helped by the coronavirus pandemic.
Despite Cruz taking a one third pay-cut during the coronavirus pandemic, he told MPs earlier this month that the airline’s outgoings are still around £20 million per day. Cruz also criticised the government’s short-sighted refusal to allow coronavirus testing at airports, as well as its policy of releasing new travel restrictions each Thursday. “The weekly [quarantine] announcement is incredibly disruptive – primarily for our passengers,” he said. “If we could start [testing] tomorrow, it would help the British economy.”
Cruz had held the CEO title since 2016, having left a similar role at Spain’s second largest airline, Vueling, in 2015. Replacing him is Sean Doyle, former CEO of Aer Lingus. Now 49, Doyle has history with BA, having joined the company at 27 in various roles before being promoted to director of network, fleet and alliances. He moved into his role as chief executive of Aer Lingus as recently as January last year.
With his history at BA – not to mention the fact that both airlines are owned by the International Airlines Group (IAG) – Doyle will be hard pressed to fare worse than his predecessor. Luis Gallego, CEO of IAG explains, “We’re navigating the worst crisis faced in our industry and I’m confident these internal promotions will ensure IAG is well placed to emerge in a strong position.”
Upon announcing the news of Cruz’s replacement, shares in IAG temporarily dropped 0.7% to 102.9 pence. With coronavirus taking an unavoidable toll on the airline industry, the stock has lost 75% of its value this year. It’s vital, then, that its subsidiaries – including BA – begin to turn a profit again.
In its attempt to do so, BA has drawn criticism from staff, unions and MPs after cutting 12,000 workers with Huw Merriman, chair of the Transport Select Committee, claiming the airline is a “national disgrace” and following a “fire and rehire” policy.
With air travel through Heathrow airport down 82% this September compared with the same period in 2019, it’s clear the coronavirus has tanked the airline industry. Virgin Atlantic, for instance, has been much criticised for its response and just about muddled through, now operating at 6% of its pre-pandemic capacity. The question now is whether Doyle can course-correct in time – or will BA be permanently grounded?
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Before BA, Britain was spoilt for choice. Prior to 1974, British Overseas Airways Corporation, British European Airways, and regional airlines, Cambrian Airways and Northeast Airlines, claimed ownership of the country’s skies. Following decades of disputes between the airlines, all four were (briefly) brought together under one banner as a public-owned entity before the Conservative government privatised British Airways 13 years later, in 1987.
It was BA – along with Air France – that operated the supersonic Concorde flights from the late ‘70s until flight BA002 from New York-JFK to London-Heathrow served as Concorde’s swan song on 24 October 2003.
But BA could not command the skies for long. Its longstanding rivalry with Virgin Atlantic has been well publicised. Founded in 1984, Richard Branson’s airline was seen as a direct competitor to BA. The two airlines exchanged tit for tat until Virgin sued BA for libel in 1993 over claims it had carried out a “dirty tricks” campaign against Virgin which allegedly included poaching customers, tampering with Virgin’s confidential files and undermining the company’s reputation in the city. BA apologised, stumped up £110,000 in damages as well as £500,000 directly to Branson.
BA shook off the conflict and, from the early ‘90s, rapidly expanded its reach, incorporating the troubled Dan-Air (a move which gave BA a larger presence at Gatwick) as well as acquiring a 25% stake in Quantas. In 1998, the airline expanded even further, partnering with American Airlines, Cathay Pacific, Qantas and the now defunct Canadian Airlines to form the One World alliance, which today is the third largest airline alliance in the world.
A partnership between BA, Iberia and American Airlines led to the formation of the International Airlines Group in 2011. As part of the merger BA was said to save £230 million annually. The IAG quickly grew to incorporate a total of seven subsidiaries, with its 2019 revenue reported at €25.506 billion. With 243 planes delivering passengers to 183 countries BA is – pre-corona, at least – the country’s second largest airline behind EasyJet with a 2018 revenue of just over £13.3 billion.
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Yet, while IAG was flying high, BA itself was struggling to reach the same heights. When Cruz was appointed to the CEO role in 2016 he was told in no uncertain terms to reduce costs across the airline. First to go were long-serving members of staff who had signed favourable contracts back when BA was ruler of the roost with little competition. Likewise, the expectation of a free meal and alcoholic drink on medium-haul flights, or a complimentary gin and tonic on certain short haul routes, was deemed outdated.
Naturally, customers weren’t happy with these changes. As a former national airline, BA, they reasoned, belonged to them. What’s more, as an emblem of outdated ideas of what it meant to be British (many of the airline’s first routes travelled to former British colonies), BA was betraying its position in the world by cancelling gin o’clock.
The furore was small fry, however, compared to the significant IT blunder that happened under Cruz’s watch in 2017. The company’s entire reservations and operations system was accidentally turned off, making mincemeat out of a bank holiday’s worth of reservations. In total, 75,000 customers lost their flights and, alongside the public relations disaster, the incident cost BA £80 million.
As a one-off blunder, this was bad enough but just a short while later a data breach allowed the credit card details of over half a million customers to be stolen. Last year the Information Commissioner’s Office announced it intended to fine BA a record £183 million after the security breach. To date the ICO and BA are still debating the fine.
Also in 2019, BA’s pilots staged their first ever strike, which led to 2,325 flights being cancelled at a cost of £124 million. With or without this year’s pandemic, it’s obvious BA has not been operating at full capacity for some time.
As it stands, Sean Doyle has the grim task of resurrecting a British institution, beginning with overseeing the firing of around 12,000 loyal staff during a national pandemic. It isn’t an enviable position for anyone to be in (although Cruz must surely be happy that the burden no longer rests on his shoulders).
With BA currently uncertain whether it will even resume service at Gatwick, and the announcement this July that its entire 747-400 fleet would be retired four years earlier than planned in favour of more fuel-efficient aircraft, it’s clear this is a time of drastic action for the airline.
Despite this, there are some clear signifiers of hope for the future. Doyle’s hiring shows that IAG is serious about turning the airline’s fortunes around. In fact, prior to the pandemic, Doyle’s previous airline, Aer Lingus, was IAG’s best performing.
Perhaps most optimistically, in July of this year BA announced long-term intentions to completely eliminate carbon emissions by 2050, a sure sign that it still has an eye on the future. Hopefully it won’t achieve its zero emissions goal by going bust in the meantime.
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