Would BA's pilot kindly reveal the destination

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The Independent Online

Six months after Rod Eddington was handed the controls of British Airways, the airline formerly known as the world's favourite is still taxiing along the runway awaiting directions from its new pilot.

Six months after Rod Eddington was handed the controls of British Airways, the airline formerly known as the world's favourite is still taxiing along the runway awaiting directions from its new pilot.

True, the vehicle had been in sore need of repairs after the snafued stewardship of his predecessor, Bob Ayling, who bequeathed the new chief executive a legacy of plunging profits and even lower staff morale. And Mr Eddington, who had jumped ship from Australia's Ansett, had to be given time to get used to the cockpit of a far larger machine than he was accustomed to. The patient investors who have stayed aboard have allowed decisions about the future of BA's alliance with American Airlines, not to mention the plans for its no-frills subsidiary, Go, to wait.

But you can only throw so much complementary booze at grounded passengers before they start baying for some movement and Mr Eddington's time has come.

Tomorrow, when he unveils BA's second-quarter results, the City will have its first opportunity to gauge the impact of a man who was recruited on the recommendation of no less an admirer than Rupert Murdoch.

The summer months are perennially profitable for airlines so BA should be back in the black, but that is not the point. Analysts and investors want to see concrete signs that Mr Eddington knows where he is going. So far, he has kept the coordinates to himself.

"Rod Eddington is a very competitive operator but he's on a very steep learning curve," says one rival. "He comes from a much smaller business. It wouldn't surprise me if senior management are fighting like rats in a bag to get their points of view over. But his first decision is irrevocable so he's been keeping his powder dry."

BA's strategy has been in doubt since September's collapse of merger talks with KLM, the Dutch carrier. The negotiations - which were revealed almost immediately upon Mr Eddington's arrival at BA - had been presented to him virtually as a fait accompli.

What they did show, however, was BA's willingness to consider alternatives to the relationship with American Airlines which represents the cornerstone of its One World alliance.

Amanda Forsyth, a fund manager at Standard Life, one of BA's biggest shareholders, says: "I think American Airlines was always going to be a difficult deal. It's only one of many possible combinations."

The problem for BA is that the American tie-up cannot be consummated without the blessing of the puritanical US regulators. Hence the speculation that Mr Eddington has initiated talks with Air France, which brings with it a more developed alliance with another American airline, Delta. An agreement with Air France would satisfy Mr Eddington's desire to develop a second major European hub in Paris to go with Heathrow. Trans-atlantic trade, meanwhile, appears to have been put on the back-burner.

Whether Mr Eddington heads for Air France or American Airlines, he can expect a fair wind thanks to an improvement in underlying trade, much of it due to Mr Ayling's legacy.

His predecessor's decision to jettison the "backpackers" in favour of premium-class travellers has helped raise BA's yield - a measurement of the profitability of its flights.

"The big thing is yield and its improvement," says one analyst. "Bob Ayling tried to reduce capacity but increase the average price. Now, the revenue backdrop is strong, capitalising on Ayling's measures."

Analysts will also be looking for details of the performance of Go, BA's answer to easyJet, although none will be forthcoming. Go's fortunes have been hidden behind its parent's throughout its three-year existence, but it may soon be time for the impatient baby to stand on its own two feet.

The further BA goes upmarket, the more incongruous appears its ownership of a downmarket player.

"BA has created a monster which is cannibalising its own market," says one analyst. "They have to kill it or let it go."

Infanticide is less likely than an announcement, which could come as early as tomorrow, to float off the subsidiary. Mr Eddington may have been tempted in that direction by the example of easyJet, itself scheduled for a flotation later this month expected to value it at up to £750m.

"I don't think Rod Eddington expected easyJet to achieve the valuation it did," says one analyst.

BA was revving its engines last week with a jump in its share price of almost 25 per cent to 330p. Clarification tomorrow of Mr Eddington's intentions should see the stock cleared for take-off, although it may take years before it reaches 1997's record altitude of 760p. Any more stalling, however, and BA's remaining investors may decide that it's time to head for the emergency exits.

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