This week’s edition of The Sunday Times features an interview with outgoing IAG CEO Willie Walsh.
Willie is due to retire from IAG this September and will be replaced by current CEO of Iberia Luis Gallego. This was delayed from March due to COVID-19.
The interview is online. It is behind a paywall. For copyright reasons, we can only quote selectively from it.
The interview was conducted last week against a background of BA negotiating redundancies with its trade unions and public criticism of the airline by the Transport Select Committee, with allegations it is using the COVID-19 as a cover to rewrite employee terms and conditions. IAG’s rivals have received very substantial amounts of state support, including €9 billion of support for Lufthansa.
Obviously, there’s only so much ground that can be covered in an interview bound by column space on paper. Being conducted by a UK newspaper, it focuses on BA, which is of course run by CEO Alex Cruz, and not other IAG airlines.
Also, as IAG is a publicly listed company, any significant announcements have to be made to the stock exchange and not via the press. As the interview is aimed at a general audience, there’s a fair amount not covered such as capacity plans for the coming years and the impact of COVID-19 on IAG’s fleets and route networks in the medium term.
Here is a summary of the main points:
BA Passenger Refunds
First, on BA passengers waiting to receive cash refunds for cancelled flights, Willie rejects any suggestion that BA has not been paying refunds to passengers who are entitled to them.
It is claimed that BA has issued refunds to 96% of passengers who have asked for and are eligible for a refund, which is about 1.3 million people.
Many passengers would point in response they’ve not been able to get hold of the airline on the phone to request a refund.
The Crisis Facing Aviation
Turning to the scale of the crisis facing aviation due to COVID-19, Willie says the worst will not be over for airlines in 2020.
Next year will be tougher:
“The worst is yet to come. People will survive this initial crisis but next year is going to be really tough, because some airlines are surviving on the back of support they’re getting and they’re not recognising the scale of the change — and they’re hoping things will recover quickly, when I don’t believe they will: 2021 is going to be the toughest year ever for the industry and 2022 is going to be really challenging.”
“It’s as serious as this: people talked about BA facing the risk of going out of business back in 2001. Well, 2001 was a doddle compared with this. Post-9/11 was a really challenging environment — globally, passenger traffic fell in October 2001 by about 18%. We’ve seen passenger traffic fall globally by 55%.
“It doesn’t matter how strong your balance sheet was when you came into this. If you’re spending money and not generating any revenues, eventually you’re going to lose all your reserves.”
British Airways Restructuring
The proposed restructuring at BA will involve potentially substantial redundancies and changes to terms and conditions for remaining staff.
This includes merging its three Heathrow cabin crew fleets into one. Whilst BA has changed its original proposals, Willie has repeated his criticism of GMB and Unite trade unions for not engaging with negotiations:
“They could have contributed to the process. They’ve chosen not to. I think they’ve done so in the misguided belief that if they didn’t engage, somehow the programme would go away. That’s complete nonsense. I’m pleased that BALPA has engaged.”
“People who say this is opportunism, that this is something we’ve been waiting for — it’s madness.”
(BALPA has denied a report in today’s Sun newspaper that it has reached an agreement with BA.)
Willie, who has always been dismissive of what he calls “noise”, says the views of MPs such as members of the Transport Select Committee are “completely irrelevant”.
Willie also denies that IAG may be about to undertake a rights issue to raise funds from its shareholders, as reported in last week’s Mail on Sunday:
“We’d like to believe we can steer our way through this without having to do that, but I’ve been very open that we want to look at every avenue available to us. But we’re not working on anything like that at the moment.”
That’s not to say it won’t happen. IAG never gives anything away in advance as far as market sensitive announcements are concerned.
Virgin Atlantic and Sir Richard Branson
Willie says it is not in anyone’s interests for Virgin Atlantic, which is seeking £900m of new funding, to fail, but:
“I don’t think they’re a particularly well-run company, given that they’ve been loss-making at a time when most airlines in the world have been profitable,”
“And they’re probably in a unique position in that they’ve got the richest shareholders ever.”
Willie Walsh has never hidden his disdain for Sir Richard Branson and he does not seek to contain it in this interview.
In 2012, Willie famously bet Sir Richard a “knee in the groin” that Virgin would not exist in five years’ time. Of Sir Richard and the infamous bet, Willie says:
“I don’t like the guy — I don’t mind saying that. He’s never impressed me. I was having a bit of fun when I said that, but yeah, if I got the chance I probably would.”
Well there we are.