'We walk a fine line,' says the boss whose airline tripped up

Rod Eddington, BA's beleaguered chief executive, tells Jason Nissé about the problems that have caused havoc at the airports

After one of the most embarrassing weeks in British Airways' history, the recriminations begin tomorrow. Rod Eddington, the airline's gregarious Australian chief executive, says he will mount a full investigation into the problems which caused more than 30 flights to be cancelled on Monday, stranding 8,000 passengers, and further disruption to carry on through the busiest week of BA's year.

This probe means some of the group's senior executives face a worrying few days. The disruption, coming so soon after BA managed to avert a strike by agreeing a pay deal with two main unions early last Saturday morning, is expected to cost BA over £10m in direct costs and more in damage to its reputation.

Mr Eddington, who went down to Heathrow Terminals 1 and 4 to meet passengers on Thursday and yesterday, admitted to The Independent on Sunday that the company's aggressive cost-cutting policy was partially to blame. But no, he added, the rationalisation would not stop.

BA has a strategy, called Future Size and Shape, which has seen the airline eliminate 13,000 jobs so far. Further staff cuts are planned as it aims to save another £300m a year.

Mr Eddington defended Future Size and Shape but admitted that some points needed to be addressed. "In the broad, have we gone too far? No," he said. "We walk a fine line here." But were there specific issues about cutting too deep into the ground staff at Heathrow, BA's largest airport hub. "Yes," Mr Eddington conceded. "We had in the system 200 new check-in staff being trained." However they were not ready and a pared-to-the-bone BA tripped up when a mixture of technical problems and bad weather closing Heathrow runways for 20 minutes stretched the company to breaking point.

It has emerged that two internal problems created BA's crisis. The first was that under its voluntary redundancy programme, more cabin crew had taken the money and run than BA wanted, so it needed to recruit new crew. As at all airlines, these are often taken from the ranks of the ground staff, and to fill the hole that created, the company had to train new check-in staff, and their training was not complete.

The second issue was BA's horrendous absenteeism problems. Of the 180 staff rostered for the Tuesday morning shift, 20 called in sick. This is only slightly above BA's expected absenteeism level of 10 per cent, which itself is more than five times the national average.

"Absenteeism is a problem and has been a problem for many, many years," Mr Eddington admitted. "We have close to 20 different attendance management policies. Along with our sensible settlement on pay, which we agreed last Saturday, we agreed a common policy on absenteeism. We've talked about it [with the unions] and we want to resolve it."

Amid the troubles of the week was some good news, when BA was able to extend the three-year pay and conditions deal it agreed with ground staff to its engineers and pilots. However, the airline failed to persuade the unions that staff should contribute more to the spiralling cost of BA's £1bn pension fund deficit. The company's payments into the scheme have more than doubled to £250m a year.

Another piece of good news came when oil prices turned back from their near $50-a-barrel level a week ago to close in New York on Friday at around $43. This will take some of the pressure off BA, which will spend £1.1bn this year on fuel - £225m more than last year.

BA has hedged the costs of about half of its fuel, buying at $28 a barrel. However, Mr Eddington admits that 75 per cent of this hedge runs out at the end of this year and the rest early in 2005.

"We are looking at a substantial increase in our fuel bill," he said, though he denied it would be as high as the £500m some analysts have predicted.

Mr Eddington will leave BA and return to Australia next year. It is clear that the battle to turn BA around has been tiring. "I've been chief executive for four and a half years, the worst period in aviation industry," he said. Let's hope his flight home to Australia isn't cancelled.