Jeremy Warner's Outlook: Aer Lingus man finally finds his charge at BA

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Willie Walsh's achievement at Aer Lingus was to keep the airline aloft. As a reward he has been given a crack at one of the biggest jobs in the industry, which may go some way towards compensating him for the Irish government's refusal to privatise his former employer.

Willie Walsh's achievement at Aer Lingus was to keep the airline aloft. As a reward he has been given a crack at one of the biggest jobs in the industry, which may go some way towards compensating him for the Irish government's refusal to privatise his former employer.

At Aer Lingus, the name of the game was to re-invent a bloated, state-owned full-service airline as a low-cost and low-fare competitor to the likes of Ryanair. In this he has had a fair degree of success, as the €100m or so profit Aer Lingus will report for last year bears witness.

The task at British Airways will be quite different. In his new job, the challenge will be to persuade passengers to pay a premium price for what BA still perceives to be a premium service, even though most business passengers these days put the price of a ticket a long way before an in-flight meal and choice of fine wines.

The legacy left behind by his predecessor Rod Eddington is not a bad one. BA is still also in business and making money, despite receiving not a penny in government support, even in the dark days which followed 9/11. But the share price has gone nowhere in his five years at the controls, the goal of double digit margins looks as distant as ever and the geopolitics which control the airline industry continue to make profitable expansion difficult to achieve.

If Michael O'Leary is correct then Ryanair will overtake BA, Lufthansa and even Air France/KLM as Europe's biggest airline in a few short years, not on a diet of premium service but relentless fare-cutting. The rising cost of environmental demands on the airline industry may cause a little turbulence along the way, but it is hard to see the low-cost business model crashing.

Mr Walsh will be tempted to see his main job as luring traffic back to the transatlantic bankers' shuttle which BA has historically relied on for profits. In an age of growing tele-conferencing and corporate jet travel, that might not be as easy as it seems. Yet the bigger challenge is to get to grips once and for all with BA's endemically loss-making short-haul operation without losing the support of the staff.

With the departure of Mr Eddington, it's the end of an era. He was recruited by Lord Marshall, part of the triumvirate who were around when British Airways was first privatised. Now there's an entirely new team at the joystick in the shape of the former BAT chief executive Martin Broughton as chairman and Mr Walsh as chief executive. It's a much tougher environment they face than the one that so effortlessly floated the world's favourite airline all those years ago. A touch of the blarney might come in handy.

BHP Billiton/WMC

Chip Goodyear, chief executive of the mining giant, BHP Billiton, must be a believer in the "super cycle". This is the theory that unlike previous commodity cycles, which broadly follow the ups and downs of the world economy, it's different this time because of China's and India's new and almost limitless appetite for raw materials.

Most of us will adopt a wait and see approach on this. Mr Goodyear doesn't have that luxury, and though he isn't quite betting the ranch, he is putting a very sizeable stake on the theory being right. To pay top dollar at this stage of the cycle for WMC Resources, an Australian zinc, nickel and uranium miner - and in cash too - would in the past have been thought of as the height of folly. It is a measure of how far perceptions have changed that BHP's share price fell barely more than 1 per cent on the news yesterday, despite the 12 per cent premium over Xstrata's bid Mr Goodyear is being forced to pay to secure his prize.

Up until quite recently, the general assumption had been that the cycle would be brought to a traditionally painful end by a hard landing in China. But actually the Chinese superjumbo has remained airborne and with India close to take-off too, the outlook for commodity prices continues to look excellent. Believe it or not, there is some reason in the madness of speculative interest that surrounds the natural resources sector, even if the present frenzy of activity among the minnows is bound to end in tears.

As one of the leviathans of the industry, BHP is above the lottery of the AIM flotations. Furthermore, the A$9.2bn BHP is paying for WMC is only a tenth of its market capitalisation. The main assets are also based in a politically stable region - Australia - close to their big growth markets in China and India. None the less, there is an element of gamble here, and it lies primarily in bullish predictions for the future of nuclear energy. In the Olympic Dam mine in southern Australia, BHP processes the world's third-largest known reserves of uranium and on present predictions will be accounting for some 20 per cent of the nuclear feed stock's supplies by 2012.

China is about to embark on a programme of more than 30 new nuclear power stations. There are equally ambitious plans in India and Russia while even in Britain the energy debate is beginning to swing back towards the nuclear option. Privately Tony Blair already accepts that nuclear's share of the energy mix will have to be at least maintained at the present level of about 20 per cent if Britain to stand any chance of meeting his ambitions on green house gas emissions. The Government is also waking up to the strategic need for maintaining diversity in energy supply.

The synergies alone don't come anywhere near justifying the premium Mr Goodyear is paying for WMC. Rather, he's buying only for the purpose of under exploited assets. Quite why it took four months of hostile interest from Xstrata, a foreign concern, before BHP was able to appreciate the value of all those wonderful assets sitting right there on its own front doorstep is a mystery known only to Mr Goodyear. Perhaps it has something to do with the fact as an American living in London he's too far removed from the action. Still, better late than never. If the commodities cycle turns sour over the next few years, he'll be out on his ear. But at this stage the bet he's making on continued buoyancy fed by Chinese demand looks reasonably sound.

Debut by Redrow

Most housebuilders were sarcastically dismissive when old two jabs Prescott in his inimitable style stumbled into the housing debate by saying he couldn't understand why it wasn't possible to build affordable housing for first-time buyers. The challenge set by the Deputy Prime MInister, to much derision, was £60,000 for a 700 square foot property. As ever with Mr Prescott, it was never entirely clear what he meant by this, but if it was the costs of construction, then the challenge is being more than met by Paul Pedley, chief executive of Redrow with his new "Debut by Redrow" programme.

Mr Pedley yesterday announced a new range of first-time buyer homes that will sell at between £50,000 for the smallest, one bedroom cupboards and £110,000 for the larger, three bedroom concerns. However, the costs of construction, even for the larger properties, will be only £40,000 a piece, easily falling within Mr Prescott's challenge. How does Mr Pedley do this and still make a profit? The answer lies partly in lightweight steel frame housing, but please don't call them pre-fabs, of the "homes fit for heroes" variety that were constructed after the War and lasted hardly any time at all.

Rather these are state of the art, eco-friendly, high-quality homes of the type all mortgage providers will lend on, or that's what Mr Pedley claims anyway. The secret lies in the efficiency of construction, together with the fact that the cheaper properties are part of a larger development which contains more expensive housing. Up until now affordable social housing has tended to be built only for the rented sector as a quid pro quo for planning permission. The missing element of the market has been affordable housing to buy.

The 103 properties Mr Pedley plans to build on a two acre site in Rugby will hardly solve the problem of affordable housing for first-time buying. But it's a start and with first-time buyers, traditionally a third of all housing market transactions, now largely priced out of the market, Mr Pedley is tapping into a potentially huge gap in the market. The company was inundated with inquiries when the initiative was publicised yesterday. Good luck to him.