IT is time for a fresh start. That was the message from Keith Williams, the new boss of British Airways, as he gave City A.M. his first ever interview since becoming chief executive of Britain’s 37-year-old flag-carrier. One can forgive Williams for wanting to turn a page: his predecessor Willie Walsh, who has moved upstairs to run BA owner International Airlines Group (IAG), will be a tough act to follow.
Famously pugnacious, Walsh took on the trade unions in his drive to cut cabin crew costs and piloted the massive merger with Iberia, which led to the birth of IAG.
But Williams, who has spent the last five years as Walsh’s chief financial officer, insists there is much work to be done. The airline, he says, is on the cusp of great things.
“BA is on the edge of some tremendous opportunities due to our merger with Iberia and partnership with American Airlines (AA),” he says when we meet in a small pine meeting room in the firm’s Waterside headquarters near Heathrow.
“BA has not grown for some considerable period of time. It’s time to put some growth back into this business.”
Williams is in a good position to take the long view. He first joined the business in 1998 as group treasurer, and helped steady the country’s largest airline during the industry slump after the 9/11 terror attacks three years later.
As CFO, he helped Walsh sell loss-making units, negotiate BA’s tie-ups with Iberia and AA, and work out a complex settlement to pay down its £3.7bn pension deficit.
He officially took over from Walsh on 21 January. But Williams is keen to explain why the business must look beyond the Walsh era.
“This has been a ten-year journey,” says Williams, a small, wiry man with an easy manner.
“Over that time the company has been shrinking. BA had not grown in an industry that, despite recessions, has grown globally at about three to five per cent a year over the long term.”
He points out that when he joined the firm it employed 65,000; he now heads a workforce of 36,000.
Over the last decade the business has sold off its German unit, Deutsche BA, its French business, Air Liberté, and its domestic business BA Connect to concentrate on what it does best – flying business and first class passengers long- and shorthaul. The business is now 15 per cent smaller that it was a decade ago, he says.
But after years of downsizing, Williams is determined to grow the airline, and has a £5.5bn pot of cash earmarked for investment over the next five years.
It has put in orders for 24 state-of-the-art Boeing 787 Dreamliners – which made its first flight yesterday – and 12 Airbus A380s. The firm is also revamping all of its first, business and economy cabins, which will include new in-flight entertainment systems in all parts of the plane.
There will be new routes as well, including a new long-haul flight to Rio de Janeiro and another to Buenos Aires.
These two routes provide an insight into how the BA-Iberia merger will work. Prior to the merger, observers wondered if BA would leave South American routes to Iberia, who are strong in this region.
But Williams is clear that if BA can run a profitable direct route from London it will do so.
“Rio and Buenos Aires are strong point-to-point routes. Demand from London to these cities is strong. But other routes to, say, Chile, may see passengers from London transfer in Madrid and then fly on from there,” he expains.
It seems that Williams’ relationship with his opposite number at Iberia, Rafael Sánchez, is set to be one that mixes cooperation with a healthy dose of competition.
“BA has its own business plan, and Iberia has its own plans, which will be reviewed by IAG. To some degree I am fighting for resources with Rafael at Iberia,” he says, with a glint in his eye that suggests he will relish the battle.
Williams will also be working more closely than ever before with American Airlines. Together the pair will run an hourly service between London and New York at peak times.
Williams’ role will be to run the airline day-to-day and improve its premium products, but the allocation of funds and mergers and acquisitions will be handled by Walsh and his IAG chairman Antonio Vazquez.
As Williams shows us around the Waterside offices, he shares a joke with several members of staff along the way and it’s easy to believe the reports that he is more easy-going than the combative Walsh. Is his management style more consensual? “I think I am fair.”
But one issue that will test his equanimity to its limits is the two-year cabin crew strike over pay and manning levels that has so far led to 22 days of strikes that cost the airline £150m.
Some of the Unite-backed strikers have welcomed Williams’ replacement of Walsh, who has become a hate figure for some workers.
Williams says he wants to establish a “working relationship” with all of the trade unions, but for those who think he will be a soft-touch he has a stark warning: “I agreed with Willie’s position on the strike. The pay and conditions of our cabin crew must be put on a equal footing with the rest of the industry.”
Unite began its fourth ballot for industrial action at the start of this month. The poll will close at the end of the month, and is expected to come out in favour of more strike action.
Williams and his negotiating team met Unite earlier this month for the first time since the vote was launched. He described the talks as “constructive.” But there seems little sign of a solution in sight. The truth, though, is that with each strike the airline is able to run increasingly more of its network. The talks did not include Walsh, but Williams says, “I can call on him whenever I like. But we have decided that industrial issues should lie in the operating companies.”
After two years of record losses, due to the economic crisis, which saw the firm lose £531m last May and £401m the year before, the airline’s finances are now moving in the right direction.
In the first nine months of this financial year, the business turned a pre-tax profit of £157m, compared to a £531m loss for the 12 months period last year.
Williams believes this puts the airline in a strong position. Global airlines tend to closely mirror the world economy. And to that end he sees strong growth prospects in Latin America, Asia and the Middle East this year, where the crisis has had the least impact and where increasing numbers are flying more regularly.
He adds that he sees “some growth” in the US but muted growth in Europe of around one to two per cent over the next 12 months.
But this still provides opportunities both at BA and its parent IAG, says Williams. “The industry needs consolidation, and I hope IAG will be part of that. The industry has to become more global.”
In the past, governments have guarded the independence of flag carriers as symbols of national pride. But Williams says governments are less willing to “keep writing cheques” in these tough economic times. That could lead to more opportunities for BA as it picks off troubled national carriers.
It has taken ten tough years but Williams is adamant that BA is ready for the next stage of its evolution. He wants it to become a predator again. If he and Walsh pull it off, we will be seeing a lot more of IAG in the years ahead.
CV | KEITH WILLIAMS
Age: Early fifties
Work: A chartered accountant at Arthur Andersen and then worked at Boots; Reckitt and Colman; Apple Europe; joined British Airways in 1998 as group treasurer and tax, promoted to chief financial officer, became chief executive in 2011
Education: Liverpool University, read history and archaeology and obtained a first class honours degree
Family: Married, with two grown up children
Hobbies: Works out at his local council gym, goes to the theatre, movies