Michael Harrison's Outlook: Who will fly the plane when Rod bales out?

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It looks like Rod Eddington will be booking his one way ticket back to Oz sooner that we thought. Hopefully for him, fuel surcharges will be a thing of the past by then but you never know.

It looks like Rod Eddington will be booking his one way ticket back to Oz sooner that we thought. Hopefully for him, fuel surcharges will be a thing of the past by then but you never know. When the chief executive of British Airways introduced the £5 levy in May, oil prices were high but stable. Now they are just high and getting higher, hence the £12 surcharge that BA is slapping on long-haul passengers from tomorrow.

Even then, BA only expects to recoup a third of its increased fuel costs this year. It has some leeway on long-haul where all its competitors are also passing on higher oil prices and where the effect on ticket prices is proportionately less. But Mr Eddington's room for manoeuvre in the cut-throat, short-haul market is next to zero, which helps explain perhaps why BA no longer expects to make a profit this year on domestic and European services.

Higher oil prices coupled with the hole in BA's pension fund and a general lack of pricing power all round are playing havoc with Mr Eddington's goal of lifting operating margins to 10 per cent. Furthermore, it is now fairly clear that he only has another 18 months left at most to achieve his target if he wants to leave BA on a high.

Mr Eddington may have squashed rumours that he is preparing to bale out imminently. But he has done nothing to dispel the impression that he will be sunning himself back in his native Australia the Christmas after next.

He is still only 54 and since he is on record as saying BA will be his last job in aviation, that leaves him plenty of scope to collect a stack of non-executive directorships or spend more time with his young family as he enters the glide path into retirement.

But for BA it creates a problem. No one could categorise Mr Eddington as a lame-duck chief executive and yet the longer he remains at BA without a successor being named, the more he is in danger of becoming one.

On the day he took over as the new BA chairman, Martin Broughton acknowledged that one of his tasks would be to plan the Eddington succession before quickly adding that he could have as long as 13 years to find the right man (or woman). It is now obvious that it will need to be one of his priorities, after deciding whether BA can afford to re-instate the dividend.

If there has been no puff of white smoke from BA's Waterside headquarters by next April, then the questions about Mr Eddington's successor will only become louder. BA could do worse than follow the example of its landlord at Heathrow, BAA, which has announced its past two chief executives more than a year in advance by appointing them as deputy chief executive. Running an airline is not quite like counting the money at an airport monopoly such as BAA. But BA might find that it has one less hassle to worry about if Mr Eddington has a co-pilot next to him ready to grab hold of the joystick.

lastminute.com

Ahem. And now for some "further guidance" for the market from lastminute.com. No, we are not running out of cash. No, our business model is not bust. And yes, that was our former deputy chairman selling down his shareholding last Friday. But don't panic.

The internet travel agent cannot seem to do anything right at the moment. Yesterday's update on the outlook for this year and next was designed to "ensure the market has company data on which to make decisions" as if last Thursday's 14-page third-quarter results announcement was not enough.

Well, the markets took one look and decided they did not like what they saw and off went the share price in a southerly direction once more. If Clive Jacobs, who arrived with the acquisition of Holiday Autos and left abruptly six weeks ago, reckons the shares are a sell, then why shouldn't other investors?

It is hard to pinpoint quite why lastminute is so unloved, apart from the fact that its pin-up co-founder Martha Lane Fox, has moved on. The business is one of the few dot.com fireflies to stand the test of time and has built both brand awareness and critical mass. Admittedly, quite a lot of that has come from acquisitions, such as Mr Jacobs' car-hire business, prompting the niggling worry that lastminute is buying growth.

What it has been slow in doing is taking costs out of those businesses it has bought with the result that lastminute looks top heavy with staff for an organisation that does the bulk of its business over the web. It employs more people than Ryanair but has half the sales and none of the profits.

The more last minute the consumer becomes in making a booking, the more difficult it becomes, too, to predict how the business will fare. Hence, the need to reassure investors again yesterday on prospects for lastminute's key fourth quarter from July to September when it does the bulk of its business.

The froth of bid speculation, which had kept the shares aloft, has mostly blown away and they are now worth just a fifth of their value at the peak. But if you believe the hype then there is plenty of growth to come in the online travel market, and if you believe in lastminute then the shares ought to be a steal at last night's closing price of 94.5p, valuing Europe's biggest independent online travel business at just £318m. If it is not going bust, then why isn't it being bid for?

Manchester United

Kick-off time and Manchester United have resumed where they left off last season - trailing behind Arsenal who exhibited no charity towards their injury-depleted opponents on Sunday. Off the field it is much the same story as well with speculation (informed or otherwise it is hard to tell) on successive weekends that Malcolm Glazer, the American football magnate, is about to bid for United at last.

Mr Glazer already owns 19.2 per cent of United. His last public utterance was to the effect that he had no present intention of bidding but he managed not to rule himself offside for the usual 12 months thanks to a dispensation from the Takeover Panel. The latest suggestion is that he, or his representatives, will meet the Irish racing duo John Magnier and John McManus today to discuss acquiring the 28.9 per cent stake in United they hold through their investment company Cubic Expression.

That would trigger a full offer for the club, but after that the permutations are as long as a Premiership fixture list. Mr Glazer could buy only part of Cubic's holding. Or he could buy the lot and then re-float some of the shares so that the fans could keep a slice of the action. Or he could parcel out a stake to a private equity buyer to keep his own expenditure down since a full offer is likely to value United at close to £1bn. Or he could buy out Cubic at a price which does not attract other shareholders and end up sitting there with a 48 per cent stake and de facto control.

All inquiries to Cubic Expression have so far been met with a blank expression. Perhaps the Panel will have better luck.

m.harrison@independent.co.uk

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