Rod's Words of Wisdom

[brabazon]

The following is from a BA press release issued today. So, what's BA going to do?

Rod Eddington looks at the elements which underpin a successful business

As British Airways continues to conduct a "Future Size and Shape Review" of its operations, Chief Executive, Rod Eddington, looks at the elements which underpin successful companies.

"What are the characteristics of a successful business? This is on all our minds as we continue the work to decide on the best future size and shape of British Airways. Among the things we need to do is make enough profit to compete with other successful businesses, whether they are airlines or not.

"We need to be able to offer shareholders as good a return on their money as they would get if they invested it elsewhere. We also need to make enough money for capital investment.

"Most other successful businesses, including the best airlines, aim to make a £10 profit for every £100 of revenue they generate - an operating margin of 10 per cent. At the moment we don’t manage that even in good years.

"If we are to reach that goal, we will have to have the right products matched to the right fleet and routes, and continue to offer excellent customer service. Our costs will have to come down.

"The work being carried out under the Future Size and Shape Review at the moment is aimed at helping us put the building blocks in place to achieve this competitive level of profitability in the future.

"That way, British Airways and those who work for the airline will have a far more secure future."

January 24, 2002

[Amazon man]

Running around like headless chickens is a phrase that comes to mind.

The word airline and management shouldn't be used in the same sentence, still what does Rod Eddington care, if it all goes tits up I've no doubt he'll walk away with a tidy sum, enough to put down as a deposit for a nice little retirement place in Australia.

[Roobarb]

I think I might be able to help you here, Rod.

"What are the characteristics of a successful business? This is on all our minds as we continue the work to decide on the best future size and shape of British Airways. Among the things we need to do is make enough profit to compete with other successful businesses, whether they are airlines or not.”

A successful business has a product that people want to buy at a price they are prepared to pay. They don’t mind paying more if they believe they’re getting real value for money. For a product to be a premium product, it must be of exceptional quality and stand alone in the market place. You have a duty to operate efficiently to best serve the interests of both customer and investors.

"We need to be able to offer shareholders as good a return on their money as they would get if they invested it elsewhere. We also need to make enough money for capital investment.”

Maximising return on investment comes from constant attention to detail, ensuring that your product remains ahead of the pack, and constantly reinvesting in the product. At the same time you must keep operating costs to the absolute minimum. Your business should be cheap to run but lucrative at the same time. Borrow only to invest.

"Most other successful businesses, including the best airlines, aim to make a £10 profit for every £100 of revenue they generate - an operating margin of 10 per cent. At the moment we don’t manage that even in good years.”

Unfortunately, you seem to be blind in one eye when it comes to your staggering costs.. . . ."If we are to reach that goal, we will have to have the right products matched to the right fleet and routes, and continue to offer excellent customer service. Our costs will have to come down.”

You won’t do that by paying subsistence wages to miserable staff. Invest in customer service and operational staff – get rid of administrative staff. Structure your business to be lean and mean. Use the best of modern IT to streamline your management to the minimum possible. Reward your employees to attract and retain the best possible individuals. INCENTIVISE.

"The work being carried out under the Future Size and Shape Review at the moment is aimed at helping us put the building blocks in place to achieve this competitive level of profitability in the future.”

Before 9/11 BA employed more people per aircraft than any of our competitors, after 9/11 you employ even more. You have the biggest, most unwieldy, most internecine, most conservative, most introspective, most inertial, most political, most feudal, most reactionary, most EXPENSIVE management in the business. Do yourself a favour and bin them.

"That way, British Airways and those who work for the airline will have a far more secure future."

It’s up to you Rod. Your move.

. .http://www.sausagenet.freeserve.co.uk/roobarb/roobarbanim1.gif

[topman]

Well said Roobarb, I couldn't have put it better.

When Skippy arrived I thought that he would make the changes needed.

He certainly said all of the right things.

Unfortunately he seems to have been hoodwinked by the existing senior management.

[Fourpuffs]

Subsistence wages to miserable staff!!!!!!

That's us in BA CitiExpress. Unfortunately see what Rod has done to us. He took us (a small but profitable airline), mixed us with Brymon, (another small and profitable airline), and then produced the master stroke, he mixed us with BAR, which has all the high cost base associated with the admin and non-productive staffing levels of mainline, and hey presto:

Six months later, we're losing a fortune.

Hoo****ingRay.

[ 24 January 2002: Message edited by: Fourpuffs ]</p>

[fox_trot_oscar]

And then there's the previously very profitable Cityflyer merged with huge loss-making EOG situation..... but that has rather been PPRuNe'd to death...!

<img src="wink.gif" border="0"> <img src="rolleyes.gif" border="0">

[Baron Harkonnen]

I think I'd rather be Ppruned to death than suffer the death of a thousand cuts associated with BA which is all we've got at the moment.. .Bases to close, jobs to go, yeah, life is really really good in what used to be BRAL - not that it was ever great you realise.

[fox_trot_oscar]

Fair comment...

[chimbu warrior]

I've got my doubts as to whether RE has any idea how to run an airline.............chop it up into small pieces yes, come up with fancy names for the latest slash-and-burn scheme yes, but actually get out there and run the show day to day - that he has never done. Look at the carcasses he has left behind; CX, AN.. .I think the man just fancies himself as a strategist, and it has never occurred to him that all these computer models and outlandish schemes might actually affect real people..........both customers and staff........

[Fat Tony]

Nice one Roobarb...

This is what we've been telling our esteemed leader for some time now... Rod, please wake up and do something about Waterworld. We are not saying this because we're looking after ourselves instead of them. We are saying it because it is fact! We, as an airline, have far more office staff than any one else! That can't be good. So ignore what those idiots who brief you are saying... and do the right thing. Controlling costs is good, but we as pilots are subject to the airframe x y = pilots. (With y being variable depending on the shorthaul/longhaul mix.) This, put soimply means that when you have the most productive pilots of any major airline worldwide (I stand to be corrected if anyone knows better...) then you cannot make them work harder!!!! The law prohibits it!!! So, you work it out.

Currently we have cabin crew who work extremely hard... ( and I am careful about my choice of words here... because they do spend a lot of time at work which is tiring!) Sadly, due to the insanity of their rostering rules they are ridiculously unproductive and yet still always tired! You need to sort that out Rod...

Morale is at an all time low since I joined (about 5 years ago...) and it's not all post Sep 11.

As our ultimate boss- although I don't report to you directly- I expect you to LEAD. You don't seem to be doing that. With my job title comes responsibility (SFO Shorthaul fleet) and I cannot escape that. (Not that I would want to!!!!) You bear the responsibility for the airline's ultimate outcome. I am pleased to read in your statement that you seem to acknowledge that fact, because there is no escaping it.

So please Rod, when FSAS reports back, although I'm sure you're well in the know as to their findings so far... (if you're not then you should be...) then please consider very carefully whether what they are proposing is what is best for us all... Because what is making me nervous in seat 1R (that's a window seat) isn't terrorists coming into my flight deck- My maglite has that covered- but filling out form UB40 in the benefits office. And I think I probably speak for many of us. We're normal people Rod, who just want to fly aeroplanes for a good employer.

Right, I've said enough!!!!!

Best Wishes all,

Fat Tony

[1A_Please]

Sounds like RE has recycled his famous "great airline, bad business" speech he gave at AN when he ordered the CRJs. Once again he stressed the need for a 10% return on sales. He never made it but was gone before the sh*t hit the fan.

[h'AIRBRAIN]

This is the scariest thing I have ever heard, what planet is Rod living on. Even the Governor could spout better Cr%p than this. It is complete investor talk, it sounds as though he is trying to butter up the shareholders before he announces another un-thought, weak, macro, big plan, hair brained, non airline scheme. This man is out for the BIG BANG, either a KLM or American deal that will make him look good to the Murdoch’s of this world.

Yes, the airline industry is the same as any other business; you collect revenue and make sure your cost’s reflect this by being lower (i.e. profit). But you need to make sure you understand the fundamentals of the business you are in. Plainly Rod does not, as mentioned not wanting to flog a dead forum, but he has royally screwed LGW and is on his way with the other regional bases.

The conclusion, unless you are within commuting distance of LHR, LOOK FOR ANOTHER JOB!

[relapse]

Heard it all before..

The last incumbent of Rods seat used the same philosophy, except he used ICI as a comparison and stated that 17.5% was considered a reasonable return on investment. Curiously, having set ICI as a benchmark, BA are indeed matching ICI in share performance! CR@P!

Highland Division only made 12.5% (after contributing to LHR support services)and look where they are now...routes operated by franchisees.

Looks like Rod has no ideas of his own and will follow in Bob's footsteps.

[slj]

Element which creates an unsuccessful business

Having Rod Eddington at the helm?

I hope Mr Ed takes notes of some of the excellent postings especially from Roobarb and Tony and perhaps he could take lessons in management from Herb Kellerher

[A and C]

BA have to grasp the nettle of cabin crew pay as the reward for these staff is 2-3 times the industry norm.

The cabin crew unions have skilfully played sucsesive week managments to elivate the TOTAL reward package for a cabin crew member with six weeks training to above that for the licenced aircraft engineers who have taken years train.

Untill this wage bill is bought in line with the rest of the industry BA will not stand a chance.

[flt_lt_w_mitty]

Yes - excellent posts, particularly Roobarb's.

The sad news is, guys and girls, that I do not think that RE reads pprune, (some parts of his 'PPRUNE CV' are less than pretty!) and since none of his senior management/advisors are likely to be seeking 'more time with their families', not one of they who 'lurk' here will be recommending the necessary actions.

I am assured that the city gurus are well aware of the required action and that if a downward spiral in flying activity is the perceived result, (rather than in overheads - ie in support rather than operational costs), any prospects of support from the city will be on the 'dream sheet' and RE will be spending more time with HIS family! (Albeit well provided financially).

It appears that his announcement that BA is not going to 'compete with the low-cost carriers' and the recent news from FR and Easy will probably trigger a retreat from short-haul, with a resultant hike in overheads for the long-haul business.

NB MOL and Stelios: start talking to Boeing and AirBus (or the Guvnor!) NOW about wide bodies. Cash in on the 'invisible leader' while he lasts.

Apologies to the good Captain P,

!HUGE! thread creep but....

Where IS the 'guv'? Awfully (read 'beautifully') quiet round here, ain't it?

Is he where he belongs, in a cage in Guantanamo Bay, or has HE decided to spend more time with his family?

Heaven help them!

[ 25 January 2002: Message edited by: flt_lt_w_mitty ]</p>

[Minhaj Atwah]

If Rod Eddington is going to withdraw from shorthaul because he can't compete with the low cost carriers, what will he do when Stellios buys 767's? Withdraw from longhaul as well?

At least BM have made an attempt at meeting the cheap and cheerfuls head on. These is still a market for full service short/medium range. It's not the market's fault that BA can't make any money at it.

There is room in the market place for both ends of the scale. All BA have to do is work out how to it within their means, and it's not really difficult to see how is it? In an age of Kia Prides and Ladas, people still buy BMWs and Mercs.

[mainfrog2]

I might have misread this a few weeks ago, I think it was in Skyport at Gatwick but there was an article in there where BA was providing language courses in France for french kids. This is the kind of drivel we need to get rid of. Oh and skim about 20% off the top of management, if their as good as they say they are they shouldn't have problems getting new jobs. It pobably won't have to be a business they know anything about because they've coped so far.

Also I don't think BA needs to go the route of lo-cost because everybody else is jumping on it, sooner or later there are going to be too many lo-costs all trying to outdo each other there is still a market for some kind of premium service in short haul.

[ 25 January 2002: Message edited by: mainfrog2 ]</p>

[spang]

Interesting reading

Market for some kind of premium service in short haul.

Hmmm, how big certainly not as large as the economy market, that has implications.

Isnt the real value in BAs short service haul the routes she owns. Prime destination. How much is that worth?

But really there is only one option, compete.

People vote with their pound-euros first.. .Then they look for quality out of that. We all do.. .ie Safety, service, airport.

Hows it achieved, its obvious isnt it.

The Markets There make use of it people.

[Amazon man]

Dear Mr Eddington,

Its quite simple if you can't beat them (low costs ) join them, but lets do it quickly you've already sold off one golden opportunity.

But for christs sake start managing and lets start seeing some results so far a lot a talk and little else.

[Minhaj Atwah]

Strangely enough, I've just seen a clip from Sky News about people in Goma, Congo trying desparately to stop the threatning flow of lava by throwing fruit at it.

How long have BA management had consultants in Goma? I think we should be told.

[euroboy]

A and C

I`ve only been at BA for a short time but when issues regarding T&C salaries come up the cabin crew are always out to be hammered.. .I know there are the "Old" contract crews which do earn high salaries, and if you or anyone else feel the need to comment on cabin crew`s why not use the term Old contract cabin crew, because the new contract crew do not earn huge amounts.. .My basic salary is just over £9000 pa. Yes the allowances are good, but need to be, and only there when we are at work. . .Now, leading on from this crew have to live no more than 1hr 30 mins from their base. Based in the Southeast-LHR/LGW, I`d love to know where I could live/buy a place to live for £27,000. (£9K @ 3X salary).. .If T&C are erroded away, I have seen the results.. .Short staffed, crews don`t give a dam, higher training costs, staff turn over greater, which makes a company very unattractive to work for, in what ever industry. In the end all departments are effected, by inexperience at all levels. . .The UK 2nd airlines suffers all these problems, and after well over 10 years there, could give examples of not how to treat staff/crews.. .I am NOT getting at anyone in particular. It just others reading this think BA cabin crew earn wonderful amounts-on new contract its livable (for me), but there again I brought over 15 years ago, and live in the South Midlands.. .BA is/was the airline which crew inspired too, because the way the work force is treated.

[ 25 January 2002: Message edited by: euroboy ]</p>

[Jamie]

it's going back to BOAC then....get rid of the franchises, european operations and even Gatwick. Build T5 and run long haul from LHR, bet ya! 3 years I reckon

[Jet II]

I don't think that all the blame can be placed on poor old Rod's shoulders, after all it was the board that appointed him and his predecessor. The senior management has been below par for years - the head of strategy who left the other month (I'm sure he was a very bright boy) was about 35 - methinks he was still at school last time the industry had a downturn so what exeperience did he have? The last change in strategy to focus on premium traffic because BA cannot make any money on the economy customer came in because BA's costs are so high, there was never any discussion about lowering costs to compete - just back out of that market. Rod 'talks the talk' but does he 'walk the walk' - judging by the remarks on this forum from people who knew him before I have my doubts.

[ShotOne]

How come flight crew costs seem to be the only expense that is ever examined by BA?

Why don't they start by clearing out their flash offices of highly paid HR consultants, feng shui masters and titles like "Manager- Bread rolls, Europe".

[climbs like a dog]

A quick note to ShotOne. You obviously don't understand the airline industry. Pilots are like fleas, there are loads of them and you can always get another to jump in.

Now good HR consultants..... they're a different thing altogether. Feng Shui Masters are very hard to come by and attract top dollar. As for bread roll managers. Could you, as a pilot, pushback without your catering? Honestly now?

No you've got it all wrong. <img src="redface.gif" border="0">

[Hot Wings]

"Pappa Doc" Rodderick has crashed and burned at 2 airlines already. I am amazed that he can still get a job in this industry. Words of wisdom from Rod include:

"Pilots are million dollar morons" said at CX.

"A great airline but a poor business" said at CX, Ansett and now BA.

"Oh c**p I'm off - it wasn't me!" said at CX, Ansett and, shortly, at BA.

[zoru]

after rod has hosed a few more millions on the future size and shape review..... .well its gonna be smaller and er... still pear . .shaped. . .wow!

[Cayman]

I used to work for a BA franchise. Meets with BA used to be myself and about eight BA people, till I got wise and took someone with me.

The amazing thing is that all the people at the meet also had assistants. There was rarely a decision made at the meets as it had to go though various other departments before being agreed.

This needed at least one onboard trial with a nightstop, incl at least 3 BA people to see pax reaction on th flight etc.

Suggest you look at waterworld for cost savings first.. . . . C

[keepin it in trim]

Can someone in BA management please explain how the company expects to make money from "premium" business traffic when most of it seems to be heading for the low cost sector? Really, I am genuinely interested, perhaps I'm missing something.

The full scale retreat when faced with competition in the short haul market is not going to save the company ( are those big Yen loans still hanging over them). They need to get bums on aircraft seats NOT office chairs. I am led to believe that when Dan Dare sadly died several years ago one of its few (only?) profitable routes was LHR-INV. BA took on the route but couldn't make it pay and handed it on to BRAL, who appear to have run it, albeit now to LGW, quite successfully.

BA senior managament need to wake up and smell the coffee, the people who are going to save them are their frontline staff, on the ground and in the air. I get the impression most of them feel insecure and undervalued right now, unsurprisingly. Expensive gin palaces, strategy groups, steering committees etc are part of the problem and definately not the solution. Perhaps a "back to the floor" experience would be educational right now?

Apologies for rambling and best of luck to the frontline staff at BA, I think you might need it.

[twistedenginestarter]

[quote] Can someone in BA management please explain how the company expects to make money from "premium" business traffic when most of it seems to be heading for the low cost sector? <hr></blockquote>

The low cost sector is only European as distinct from international and then is still rather limited to relatively few business destinations compared to leisure destinations.

Business by comparison is global and doesn't have a major presence in Malaga.

There is still a very big market for BA's proven business services even if it were to lose a lot of European and UK routes.

[Roobarb]

The difference between the low cost carriers and BA is not the cost of flying aeroplanes, filling them with fuel and operating them at big airports. The difference is that RyanAir fly 6000 passengers per employee and BA fly 900.

BA management don’t understand the problem because BA management and their multitude IS the problem.

http://www.80scartoons.8k.com/roobarb3wee.gif

[whatbolt]

ROOBARB-having been on the receiving end of many decisions by the same-I agree whole heartedly-problem is that for every manager that does understand cost control there are dozens who dont and will never.

[King Kee]

Well so far they've screwed up 3 opportunities to get them out of the cr@p as far as short-haul costs are concerned:

1) Integrate CFE (profitable, low-cost) into EOG (non-profitable, high cost).. .2) Sell GO just as it was well and truly established in the low-cost market.. .3) Merge BAR into BRAL/Brymon and saddle a once profit-making BRAL/Brymon operation with more mainline costs. Another master-stroke of genius.

I am eagerly awaiting their next move!

King Kee

p.s. Rhoobarb....you're a star. Your posts are spot-on. Couldn't agree more!

[ 27 January 2002: Message edited by: King Kee ]</p>

[overstress]

King Kee and others - 'saddling BRAL/Brymon with BAR mainline costs' ??

BAR is not mainline (although pilots are seconded from there) and we (at BHX anyway) make money despite the bests efforts of the accountants at Fortress LHR.

Please don't tar us all with the same brush - our infrastructure at BAR is practically skeletal and the front-line staff work FAR harder than any at LHR (with apologies to those -400 crews unable to bid this month due to the 900hr rolling limit)

. .Aim your guns elsewhere, Roobarb for CEO!

[ 27 January 2002: Message edited by: overstress ]</p>

[basil fawlty]

When I was at BA I built up a considerable shares holding via the profit share scheme. These were appropriated to me at the 500-600p a share level. They are now worth approx 220p a share...The best thing that can happen now is a takeover bid, and then perhaps some of us who believed in the company will recover just some of our losses!! Bring back John King...all is forgiven!. .I agree with Jamie, I'm sure that the airline will eventually go back to a longhaul, one base operation, using interline agreements with "new" shorthaul airlines to supply feeder traffic.. .(BOAC/overseas division was the only profit making section the airline originally had anyway!) . .We all know about the problems at BA, they have been flogged to death on these forums, top heavy management etc. etc. However I think that the issue of staff (flying or non flying), some on "old, A scale" contracts and others on "new, B scale" contracts is totally unjust. The salaries, T&C's etc. for a particular job should be consistent. However we have BALPA et al to thank for creating a completely UNLEVEL playing field. Pay and conditions do NEED to move with the times, but the unions have looked after those in the top half of the seniority list (after all their 1% is worth a lot more isn't it?) and sold out the new guys. The modern BA, and airline industry in general, strikes me as a land of extremes...senior people raking it in, and the new guys struggling to make ends meet. Yes, the experienced people should earn more money via increments, but the differentials that now exist due to different contracts are quite frankly obscene!

[The Original Geeza]

Listen to this Rod ive had an amazing brain wave, instead of shafting the whole of LGW in one foul swoop, why not reinstate the old CFE.. .We are still paying for old portacabins, stores vehicles etc, etc , the list goes on. why not seperate the cityflyer fleet and utilise the already existing infrastructure and run a low cost airline. Wow was it just me or did anybody else think of that.. .If BA had any sense they would issue a set budget and let CFE govern itself as BA are obviously not able to do the job satisfactorily enough.. .How long will size and shape take before they realise it is to late to turn back and try and recover some of the loss. Just think Rod you used to have a guaranteed 15 million pounds coming in every year, how come now we are EOG we some how manage to make a massive loss, it aint rocket science.

Good luck every one at BA hope size and shape doesnt ruin to many lives, something management should keep in mind. <img src="rolleyes.gif" border="0"> <img src="rolleyes.gif" border="0"> <img src="rolleyes.gif" border="0">

[Pandora]

Maybe Rod should read his own in-flight business mag. On a recent positioning tour of Europe I read an article on the successful management style of Jack Walsh, CEO of GE (I think). Every year he required every manager to rank their staff in order of performance and then the bottom 10% were cut. It didn't matter if the company was already successful - in order to make it even more successful he still cut the bottom 10% every year. . .I was surprised to see this article in th BA Business Highlife. It seems so obvious that cutting poor managers is the way Rod needs to go and yet his advisors are telling him that the most productive staff are the ones who need to be cut, not the least productive ones. I seriously thought about tearing the article out and sending it to him.

[Final 3 Greens]

Pandora

Be careful what you wish for or it may come true - do you really want your MANAGERS to cut the bottom 10% of their STAFF every year? <img src="wink.gif" border="0">

[tech...again]

Geezer,

Too late to re-instate CFE now, there's next to nothing left (no infrastructure) and the cost-base has soared.

<img src="frown.gif" border="0">

[RICH BOY SPANNERS]

BA management will never solve the problems of the airline because they themselves are the problem. The company needs to become more meritocratic instead of being a home for dead wood and those who haven't done anything useful for years.. .Unless there is a radical change BA will be just a rather sad shadow of it's former self in the years to come, and it will deserve it.

[In trim]

Pandora - Totally agree.....but make it the bottom 30% and you might start getting there!

tech...again - Hope you're not in that 30%. Let's do beers!

In trim.