This is not how the script was written.
Willie Walsh was supposed to retire as Chief Executive of International Airlines Group in March of this year.
He would have been able to claim that he had proved the doubters wrong. In ten years, IAG had become a highly profitable model of airline consolidation and “rational” disciplined financial investment. Not only that, it consistently paid dividends to shareholders. IAG was about to pull off a “transformational” deal through the acquisition of Air Europa that would turn Madrid into a major aviation hub to rival Amsterdam and Frankfurt.
COVID-19 put paid to that.
On Tuesday 8 September, as Willie Walsh steps down as Chief Executive handing over to Luis Gallego, its shareholders will be asked to contribute €2.7 billion through a rights issue.
It brings to an end 15 years of leadership of BA and IAG. Like much of his tenure, the final months have been dogged with criticism from trade unions, MPs and staff.
Willie Walsh, who has no time for “noise”, insists that he is right and that taking on considerably more debt instead of pursuing painful structural change, as Air France-KLM and Lutfhansa have primarily done, will only store up problems for the future.
Willie Walsh Joins BA
Willie Walsh joined BA as CEO in 2005, having previously occupied the same role at Aer Lingus.
He joined Aer Lingus as a pilot in 1979 and subsequently became a representative for its pilots union. Having been described by Aer Lingus management as a “really terrible bastard to deal with” he was invited to transfer to the other side of the negotiating table.
Willie’s style was a sharp contrast to his more emollient predecessor at BA, Rod Eddington.
Whilst Rod Eddington had overseen reform at BA, particularly post 11 September 2001, he was viewed by industry commentators as having avoided confrontation with trade unions and dodged the most difficult tasks.
Working practices at London Heathrow, which were no model of efficiency, had to be reformed ahead of the airline’s move to Terminal 5 in 2008.
Immediately before Willie’s arrival, there had been wildcat industrial action by BA ground staff at Heathrow, the third consecutive summer of industrial relations tensions. The Economist even speculated that BA’s move to Terminal 5 could be the aviation equivalent of the Wapping dispute of the 1980s when Rupert Murdoch took on the print unions.
There was also the issue of BA’s escalating pension deficit, which had resulted in an empty aircraft order book to replace the fleet of 57 Boeing 747-400 aircraft.
In both cases, doubters were proved wrong and the issues were largely resolved behind closed doors.
There were still volatile times. Willie Walsh stood in the early hours of the morning of the opening of Terminal 5 to greet passengers arriving on the first flight from Hong Kong, seemingly unaware of the chaos about to ensue. There were questions as to whether Willie should pay the price. Afterwards, Willie was candid in accepting that BA should not have allowed delays in the terminal’s construction to truncate testing before opening.
The restructuring of BA’s Heathrow cabin crew fleets the next year led to at protracted and, at times, unedifying, conflict.
The IAG Era
Willie Walsh left BA in early 2011 to take up the role of Chief Executive of IAG, formed as a “brand agnostic” parent of BA and Iberia, something Willie has always regarded as unique and his creation.
However, as is evident in IAG and BA’s response to COVID-19, Willie left making it clear he thought his restructuring of BA was unfinished business.
Whilst IAG has proved many sceptics wrong, there have been mis-steps. It wasn’t until that long ago that Willie was convinced that BA did not need to change its “yin-yang” layout in Club World due to its space efficiency. BA would have been spared a lot of criticism had introduced an entirely new business class seat with the Airbus A380 and Boeing 787 in 2013. BA’s high profile IT failures pointed to a lack of investment which has been addressed with a higher profile for IAG’s Chief Information Officer.
It was until only recently that IAG appears to have taken a look at the relative positioning of its brands in the market. Talk of “stretching” the BA brand a few years ago has been reversed. Staff engagement measures are also conspicuously absent from any IAG investor presentations.
Having led Aer Lingus immediately after the events of 11 September 2001 (and seen Ryanair’s blockbuster Boeing 737 aircraft order with a degree of envy) and BA during the 2008 financial crisis, Willie had always maintained that airlines must prepare themselves in the good times to withstand industry down turns.
How do you judge Willie Walsh’s tenure at BA and IAG?
Well, what would be the counter factual? Would the BA of 10 or 20 years ago survived COVID-19 without bespoke state support? Absolutely not.
Whilst IAG is better placed than most airline groups to withstand COVID-19, it remains to be seen whether it will be able to rely solely on self-help measures, let alone pull off a “transformational” deal it has always wanted to do in a downturn.
If IAG has to seek bespoke support from national governments this may fundamentally compromise IAG’s governance and structure. Should COVID-19 continue to severely impact airlines well into 2021 we may see the European governments take a more active role in the industry and much of the consolidation of the past two decades reversed.
Willie Walsh In Quotes
“Everything you hear from me is true, unlike most of my colleagues in the airline industry.”
“I take comfort from the fact that John Holland-Kaye [CEO, Heathrow] is upset with the comments that I’ve made. I’ll quote Oscar Wilde that whenever people agree with me, I always think I’m wrong, but the fact that they’re disagreeing with me means I’m right.”
On BA’s failure to merge with KLM:
“I believe the deal that BA should have done and I believe had I been involved would have done was KLM. You know, and that deal didn’t happen. I regret it and I think had KLM and BA got together that would have been a fantastic development.”
The infamous “show me the money” quote at IAG’s Capital Markets Day in 2015:
“Somebody asked me during the break there you know did I really give a speech around ‘show me the money’ in a tapas bar in Madrid. And I have to say I was insulted because those of you that know me if you can picture me in the tapas bar with a glass of wine in my hand, I didn’t say show me the money. I said show me the (expletive) money. “
On buying minority stakes in airlines:
“If you cannot get control or influence, then you are like Etihad. You think you have control, they take your money, they spend it and then they tell you to get lost.”
On Flybe in February 2020:
“I can have no sympathy for the likes of Flybe, you know, in an environment like this. You know, that’s a business model that doesn’t work with shareholders that have suddenly cottoned on that they’ve bought a dog.”
On Sir Richard Branson:
“I don’t like the guy — I don’t mind saying that. He’s never impressed me.”