BA calls on adviser to step down - FT.com
BA calls on adviser to step down
British Airways has asked Lord Jones of Birmingham to step down from his advisory role at the company after joining the board of regional airline Flybe, because of potential conflicts of interest.
The UK flag-carrier’s concerns highlight its increased exposure to short- and medium-haul routes following its purchase of BMI. BA had originally assured Lord Jones, a former trade minister and CBI director-general, that a directorship at the Exeter-based regional airline on top of his role as chairman of BA’s international business advisory board would not constitute a conflict of interest.
But it changed that position last week, days after its parent company International Airlines Group completed a deal to buy lossmaking BMI and its constituent regional and low-cost airlines – both of which IAG had hoped would be sold separately.
“While there is no particular conflict, they just think it’s too close for comfort,” said Lord Jones. His position at the company was unpaid and due to finish at the end of this year.
IAG holds 14 per cent of Flybe shares. But the concerns appear to have less to do with that stake than with possible overlapping markets, and suggest IAG holds little hope of selling both BMIbaby and BMI Regional in the immediate future. It is expected to close them if it cannot find buyers.
The company’s main interest in BMI, which made pre-tax losses of €181m under Lufthansa last year, was its take-off and landing slots at Heathrow airport, many of which BA hopes to use for high-margin long-haul routes to emerging markets, particularly in Asia. Still, BA is integrating BMI’s mainline operations, including about 1,500 workers, and intends to continue flying some BMI routes for the long term.
“We’re keen to strengthen our regional network in the UK,” said a BA spokesman last week, referring to routes between London and the regions. While Flybe has some slots at Gatwick airport, it overlaps little with BA and BMI mainline flights. But it does compete with BMI’s smaller regional and budget airlines.
Analysts at Liberum estimate that a BMIbaby closure would add £37m to Flybe’s top line and £6m of incremental earnings before interest, tax, depreciation, amortisation and aircraft rent.
Lord Jones said on Friday that “BA is a great airline and I fly them a hell of a lot and I’m sure we’ll stay very much in touch”.
Andrew Crawley, BA’s commercial director, said: “Digby [Jones] has been a great supporter of British Airways and a formidable chairman of our International Business Advisory Board. I’d like to thank him for his valuable contribution and wish him every success.”
Wonder why BA would bother asking for this advisor to step down due to a conflict of interest (also working for Flybe) if they were going to dispatch of bmi regional in the next few weeks?