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Sky Talk with Mr. Willie Walsh,
CEO of British Airways in London.As the airline industry enters the New Year, we cannot yet foresee the external challenges that 2006 will present. However, what we at British Airways can do is foresee the internal challenges we face in our business. These are many and varied and we must be focused on tackling them.
For a start, we must continue to address our cost base and further our journey to a 10% operating margin. I am confident that this target is within our reach. The restructuring of the airline's management, announced last month, is an important step toward that goal. I recognize that this reorganization means an unsettling start to the New Year for our managers, but I believe firmly that the action we are taking will deliver a more efficient British Airways. It will remove duplication, simplify our core business and provide clearer accountability.
When the new structure has bedded in and we have also fulfilled our total £300m employee cost savings target by March 2007, we will be significantly better placed to carry out the investment we need to make in the coming years to deliver a competitive, efficient and growing British Airways. The cost outlook, not least on fuel, makes it impossible for us to achieve a10% operating margin in the current year, but I believe we can achieve a margin of at least 8.5% if we remain cost-conscious and have some respite from external factors.
We will shortly announce our new Business Plan for the two years to 2008. We have achieved a remarkable turnaround in the business since the worldwide crisis in our industry following the tragic events of 9/11. Everyone at BA can be justifiably proud of what has been achieved to date. While many of our competitors continue to flounder we remain focused on strengthening our financial position. We have more work to do before we can turn our attention to growth and unleash the potential that exists within BA.
There are few hindrances to achieving growth in itself. However, there are many challenges to achieving growth that is profitable and sustainable. Many of the world's airlines have embarked on ambitious growth plans. Few are profitable, indeed some are bankrupt and many will fail. BA will expand its operations to India further in 2006, doubling frequency to Delhi, and we will look at other long haul opportunities wherever practical.
On short haul, our financial and commercial performance is way better than it was five years ago when we were losing hundreds of millions of pounds. But we need to do better. We will look at our European and domestic network very closely in the months ahead to make sure we capitalize on new markets especially in the former closed shop of Eastern Europe so that we can improve our overall short haul profitability.
One element of the preparation of the business for growth is the need to tackle the £1bn deficit in our main pension scheme. We plan to begin talking to staff in the coming months about our proposals to solve the deficit &endash; for solve it we must, once and for all.
Intensifying our preparations for the move to Heathrow's Terminal 5 will be a fundamental feature of our work in 2006. There are barely 800 days left before Terminal 5 opens for business, and the clock is well and truly ticking. T5 is a once in a lifetime opportunity to transform our operations at our global hub. We cannot afford to get it wrong or to miss the opportunity that it gives us. The main benefit will be to have all our operations under one roof which will not only hugely improve the customer experience but also give our staff a better environment in which to deliver world-class service.
Another key priority for all of us at British Airways in 2006 is improving our poor performance on punctuality. Ensuring that aircraft depart and arrive on time should be a fundamental concern for everyone, right up there with safety and security. It is something our customers expect BA to get right. Our current performance is unacceptable and I am looking for significant progress in the next few months. To achieve that, we will need all departments of the airline pulling together as one team and striving to be the best in the industry.
Despite all the potential difficulties, I am confident that by the end of 2006 we will have built a stronger, fitter and leaner British Airways. In doing so, we will ensure we are better placed to overcome the never-ending challenges that face us all in this fascinating and extraordinary industry.
Willie Walsh
This interview was conducted in January 2006 by
Malcolm G of ABTNews.
feedback@airguideonline.com
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