BA attempts to talk its way out of trouble

July 14, 2009

British Airways has become a real chatterbox of late.

Chief Executive Willie Walsh is attempting to stage a recovery from a year of record losses and a business-class focus that has proven rather ill-suited to a recession. He has been scaring staff and shareholders rigid with his ‘fight for survival’ rhetoric, but how does he plan to wage this battle?

By talking.

He talks to pilots, he talks to engineers, he talks to ground staff and cabin crew. He talks to trade unions, he talks to shareholders – and apparently he talks to his allies over at Spanish rival Iberia. Today’s annual general meeting was dominated by news of these talks – they are making progress, apparently — all of them are making progress.

But are they really? It is true the pilots have been amenable to Walsh’s silver tongue. On Monday they agreed to pay and productivity changes in order to help save the airline cash, in return for some future equity. But that’s about the limit of the carrier’s achievement to date.

Trade union members representing cabin crew loitered outside the London meeting, handing out leaflets to attendees. These detailed proposals — rejected by BA – for a 2.6 percent pay-cut, plus 4,000 job losses so long as they are voluntary. We don’t know what BA has offered in return — Walsh uncharacteristically  keeps saying he doesn’t want to talk about it — but as the deadline for these negotiations was the end of June it’s safe to say things are not going well. “We don’t know what else we can do,” said one 20 year cabin crew veteran. Strike action is a distinct possibility.

Then there are the talks with shareholders. These ones centre on plans to raise more cash. BA is hoping to have 1 billion pounds in the bank by next March, but this would involve burning money at a slower rate than some analysts predict. It wants to raise money in the bond market — something that will no doubt involve plenty of late night discussions in the City.

Then there are the merger talks with Iberia. These chit-chats have been going on so long they are about to celebrate their first anniversary. And the way things are going we could be blowing out two candles before anything gets decided.  Last week Iberia CEO Fernando Conte resigned, meaning Walsh will have a new friend to talk to — something he is very excited about. ‘Splendid chaps’ – ‘known them for years’ – went the tone of his comments after the meeting. We’ll see about that.

British Airways has long been full of fine talk. It’s time for some action.

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