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British Airways gains a new Chief Executive Officer and Chairman this week as its current CEO Keith Williams, who has occupied the role since January 2011, has retired.
Keith will be replaced by Alex Cruz. Alex was previously CEO of Vueling, the Low Cost Carrier with its principal hub in Barcelona and smaller hubs around mainline Europe.
Alex’s appointment is an internal move as both British Airways and Vueling are (along with Aer Lingus and Iberia) part of International Airlines Group (“IAG”). The two airlines do co-operate with codeshares on each other’s short-haul flights.
What are we to make of this move and what does it mean for the future of BA?
Alex is certainly not the first CEO of a LCC to be appointed CEO of a full service network airline. Alan Joyce headed up Australian LCC JetStar before being appointed CEO of Qantas Airways Group.
At BA, in many respects it will be business as usual. This is because BA’s strategy and investment decisions are set by its parent company, IAG.
The past five years have been BA grow substantially at London Heathrow through its merger with bmi. It has added new long haul routes to Chengdu, Seoul, Kuala Lumpur, Austin and San Jose.
BA has also added the Boeing 787 and Airbus A380 to its fleet. Its operations at London Heathrow have been relatively stable compared to some extremely volatile periods in the run up to the opening of Terminal 5 in 2008 and industrial conflicts following the financial crisis. It has also avoided some of the high profile PR blunders and crises of the aforementioned periods.
Whilst the airline has grown profitably, the tight cost control that has in part driven the growth in profitability is often in evidence to passengers – particularly in the area of in-flight catering. This has also resulted in some truly absurd decisions, like removing eye shades from Club World amenity kits.
Also, for an airline known for innovation and being the first to install fully flat beds in first and business class, it has not delivered any significant in-cabin innovation in the past ten years. It has, so far at least, committed to keeping its “yin yang” Club World business class seat which is fundamentally unchanged from when the current seat was introduced in 2006. This is in spite of the fact that all aisle access seating is becoming standard in business class on most long haul airlines.
There has also been no major innovation with ground services at London Heathrow. A recent refurbishment of the Terminal 5 lounges was a modest refresh, rather than an opportunity to introduce new services. Again, this is in spite of the fact that many rival airlines such as Cathay Pacific and Qantas are making significant investments in their London Heathrow ground facilities.
What should we expect from Alex Cruz?
Well, we don’t expect the regime of tight cost control to change. We suspect Alex has in part being recruited in this role to bring in new thinking to increase the efficiency of BA’s operations.
On a positive note, Vueling has achieved a very high growth rate and is known for being very responsive to market opportunities and launching new routes quickly. We await with interest to see if Alex brings an injenction of greater fleet footedness to BA.
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