Two Irishmen, two airlines and a dogfight
Mark Milner
Tuesday October 4, 2005
The Guardian
Willie Walsh
The new chief of British Airways wants a smooth move to Terminal 5
New British Airways chief executive Willie Walsh yesterday sought to shrug off his reputation as a ferocious cost cutter as he settled into his first day in the job.
Mr Walsh came to fame by slashing Aer Lingus costs by 30% when he took over the top job there in 2001, after the 9/11 attacks in the US, but he promises a different approach at BA. Instead he is aiming to orchestrate a smooth move into the new Terminal 5 building at Heathrow and commit himself to the profitability targets set by his predecessor Sir Rod Eddington.
"Aer Lingus was bankrupt. Radical action had to be taken and was taken. I make no apology for what I did at Aer Lingus, the challenges it faced were extreme," Mr Walsh said. "That's a completely different position from the one I'm in today. I will do what is right for British Airways. Just because I did something at Aer Lingus people should not automatically assume I will do the same at British Airways."
Yet costs will have to be cut if Mr Walsh's stewardship is to meet the target of a 10% operating margin set by Sir Rod, but undermined by the dramatic rise in fuel costs. The move to Heathrow's new Terminal 5 in 2008 will have a crucial bearing on BA's operational efficiency. Some in the industry are already anticipating a clash with the trade unions over the issue of working practices and manning levels.
Mr Walsh said that the issue of working practices would be addressed in a structured way, with the involvement of the unions. It was much too soon to put numbers on any job cuts - though suggestions that up to 15,000 might go are met with outright derision.
Nor is the new chief executive yet prepared to start totting up the benefits BA expects to reap from operating out of one terminal rather than two. "There are going to be efficiencies, that's clear to everyone."
Mr Walsh acknowledges that the business plan does involve keeping up the pressure to contain costs. "It's a question of looking everywhere, picking up every rock and stone and seeing what's happening underneath."
But that pressure will be balanced by investment in the business. Alongside the money going into Terminal 5, BA is promising significant investment in its Club World business class cabin, in-flight entertainment and in the ba.com website.
Mr Walsh acknowledges that the low-cost carriers, including Ryanair, run by his fellow countryman, Michael O'Leary, present a challenge, but one he argues BA has shown it can meet. He professes great admiration for his rival. "I think he [O'Leary] deserves massive credit for what he has achieved at Ryanair. I think the industry is a better industry as a result of competitors such as Ryanair and easyJet."
But does Mr O'Leary's constant sniping at BA ever irritate? The response is an uncharacteristically monosyllabic "no".
Mr Walsh is keen to stress the degree of continuity involved in the handover from Sir Rod, whom he spent five months shadowing. He confesses that he was nervous about the extended handover. In the event "there was never a time when I thought 'Jeez, Rod, are you never going to go'."
Mr Walsh acknowledges that the airline industry will see consolidation, though not without a change in the regulatory environment. "The regulatory environment will change and we want to be ready. The point is that it won't be consolidation for the sake of consolidation but because it makes sense for the business."
The CV
Chief executive, BA started this week
Age: 43
Education: Trinity College, Dublin
Career: Aer Lingus cadet pilot 1979; Aer Lingus management 1989; MSc in management and business administration Trinity College, Dublin 1992; CEO of Futura, an Aer Lingus Spanish charter company, 1998; chief operating officer Aer Lingus 2000; chief executive Aer Lingus 2001; chief executive British Airways 2005
Family: Married, one daughter
Interests: Sport generally, especially golf and football
· Michael O'Leary
Irrepressible Ryanair boss rarely shies away from a verbal sparring match
Whatever challenges face Willie Walsh as chief executive of British Airways, one of the biggest will be a fellow Irishman called Michael O'Leary.
The boss of Ryanair delights in verbal confrontation and has enjoyed taunting BA, crowing that his airline carried more passengers than the UK flag carrier in August and launching a series of blistering attacks on BA's use of surcharges to offset rising fuel costs. "Skyway robbery" is among his more polite descriptions of BA's approach though Mr O'Leary is clearly not underestimating his new sparring partner at BA.
Asked yesterday for a comment on Mr Walsh, the Ryanair boss was, perhaps for the first time, keeping his own counsel. "We have no desire to give free publicity to a rival," was the explanation from a Ryanair spokesman.
Normally Mr O'Leary likes to take on all comers. He is at loggerheads with the Irish government over its plans for the development of Dublin airport. In Britain the Civil Aviation Authority and Cornwall county council have been recent targets for the O'Leary invective. Mr O'Leary fought a bruising battle with the European commission over his airline's links with Brussels Charleroi airport. Nevertheless it is clear that alongside the Irish government, BA is Mr O'Leary's favourite target. He recently dubbed it the fat cat's favourite airline.
Mr Walsh is no stranger to Mr O'Leary's competitive streak. He was at Aer Lingus as Mr O'Leary was building Ryanair from an airline which in 1985 employed 51 people and flew 5,000 passengers into Europe's most profitable airline with 250 routes across 21 countries. This year it expects to carry 35 million passengers.
Critics argue that Ryanair's rise during the 1990s was ignored until too late by the management of the Irish flag carrier, which underestimated first the low-cost model and later online booking. Ironically, it was Mr Walsh who as Aer Lingus chief had to knock his airline into shape with a package of job and capacity cuts which earned him a reputation for toughness.
Unlike Mr Walsh, who was a pilot first and businessman later, Mr O'Leary professes not to be interested in the cockpit. He was once quoted as saying "I am not a cloud bunny, I am not an aerosexual. I don't like aeroplanes. I never wanted to be a pilot like those other platoons of goons who populate the air industry."
His preoccupation is with low fares. Anyone and anything which threatens to add to the cost can be certain of facing the O'Leary firepower and flair for publicity.
Though Mr O'Leary's resolute pursuit of low fares has brought frequent air travel within reach of millions, it has brought criticism from environmentalists. That too has drawn a robust response from Mr O'Leary. If customers are worried about carbon emissions they can sell their cars and walk, he says.
The CV
Chief executive, Ryanair since 1994
Age: 44
Education: Clongowes Wood College; Trinity College, Dublin (did not graduate)
Career: Tax consultant at KPMG 1984-86; Dublin property developer and financial adviser to Ryanair's Tony Ryan; director of Ryanair 1988-91; deputy chief executive 1991-93; chief operating officer 1993
Family: Married Anita Farrell, a Dublin banker, in September 2003
Interests: Riding, farming, watching rugby