Willie Walsh: High and mighty
The chief executive of British Airways took on the cabin crews' union and won. But for how much longer can he keep things airborne?
It has been a roller-coaster week for British Airways boss Willie Walsh – the kind of ride that chief executives use to justify their six-figure salaries.
On Monday, after months of negotiations, the trade union representing BA cabin crew announced plans for a 12-day Christmas strike. Catastrophe threatened. Walsh himself talked of the ruin of a million Christmases. Others predicted that the PR disaster and costs estimated at £30m a day would cost him his job. But BA's management launched a legal challenge immediately, claiming the ballot counted votes from people who had subsequently taken redundancy. By Thursday the dread turned to elation when the High Court ruled in BA's favour, putting any industrial action back to late January at the earliest.
For many it would be the stuff of nightmares. But for Walsh it played to his strengths. The 47-year-old former pilot is renowned for two things. Above all, he has a reputation for dogged negotiation of industrial disputes. More than three decades' experience, on both sides of the table, have created a formidable operator. And he has the obduracy of someone who believes they have no choice. The other precedent is his use of a crisis to push through deeply unpopular reform.
The second-eldest child of a Dublin glazier, Walsh spent his childhood tinkering with engines and took to flying planes before he could drive a car. Childhood friends remember him as "rather angelic", and though the boyish looks remain they are belied by the intransigence for which he is known. "A reasonable man gets nowhere in negotiations," he is a quoted as saying. And though he has denied it ever since, it rings too true to be quite shakeable.
When he arrived at BA in October 2005, he was already nicknamed "Slasher Walsh". In his previous job as the chief executive of Aer Lingus, the Irish state airline, he seized the opportunity of the near-collapse of the airline industry after the 11 September terrorist attacks to reinvent a loss-making anachronism as a profitable budget airline. He cut costs by an eye-watering 30 per cent, laying off more than 2,000 people and raising £350,000 selling off the Dublin headquarters' art collection. It worked. By 2004, Aer Lingus was back in profit, and Mr Walsh says it still would be if the subsequent management team had followed his lead.
"There was no way around it," he said afterwards. "It was adapt or die." Arguably, the same is now true of BA – and many say Walsh is reaching for the same medicine. There is no doubt that aviation is in chaos, hit by sky-high fuel prices and nosediving passenger numbers. This time, it is even worse than after 9/11. In 2001, airline revenues dropped by 6 per cent in three months and took three years to recover. This year they will collapse by more than 15 per cent and are not expected to recover until 2012. More than 80 airlines have already gone bust and Flyglobespan, the Scottish airline that collapsed this week, is likely to be only the first of the tricky winter season.
Just as the scale of the crisis in the industry is bigger, so is Walsh's challenge at BA. Commercially, airlines never really made much sense. But, of the big boys, BA's troubles are worse than most. Despite being privatised more than 20 years ago, too much still belongs to the lost world of state-run "flag-carriers" and is out of step with leaner rivals. Its long-haul cabin crews, for an apposite example, earn nearly twice the pay of their counterparts at Virgin Atlantic. BA has tried to address the issue obliquely, pushing the idea of a high-quality service for which travellers will pay more. Until recently, it seemed to be working: in 2007 BA made record, £922m profits. But the recession has wrecked the first- and business-class travel the company relied on, sending it diving to £401m losses last year and anything up to £800m this year.
Walsh has not shrunk from spelling out the problems. In autumn 2008 he was already warning that airlines were facing the toughest trading environment ever. By last July he was claiming that BA was "fighting for survival". Walsh says he prefers to give bad news because of the respect that unflinching honesty buys you. But cynics accuse him of talking BA down to put pressure on staff – and their unions – to accept the vicious cost-cutting plans he has in mind.
He appeared to be having some success. BA has cut its costs by nearly 10 per cent so far, no mean feat for a multibillion-pound behemoth with 245 planes and more than 38,000 staff. The equivalent of 2,500 jobs went last year, through a combination of reduced overtime, part-time working and voluntary redundancy. Another 4,900 will go before March, some 3,700 of them in the UK. Walsh has also made gestures himself, giving up a month's salary – some £61,000 – in May when he gave staff the option to do the same. But while the pilots and engineers agreed in the summer to accept pay cuts and changes in working practices, cabin crews baulked at proposals to slash £140m by reducing staff numbers on flights, freezing pay and cutting allowances.
Walsh has unusual experience at such negotiations. He joined Aer Lingus as a 17-year-old, straight from school, forgoing plans for university to enrol on a pilots' training course. Within 10 years he was a captain. But he also spent six years as a negotiator for the pilots' union, and when he stepped down the management offered him a job - either impressed by his grasp of detail or preferring to have such belligerence on their side, depending on whom you talk to. By 1998 he was chief executive of Futura, the airline's Spanish charter, and three years later – a week before his 40th birthday – he took the top job.
Whatever the reason for the promotion, the journey from the cockpit into management broke the mould, and Walsh has a different relationship with his workforce as a result. In many ways the archetypal workaholic, Walsh last took a holiday in 2005 and admits that the prospect of two weeks off would be "torture". But his hands-on experience sets him apart from the usual run of driven bosses. He also has a famously low-key lifestyle – living with his wife and daughter in Hampshire and driving an unpretentious car – and has used the BA top job, which is still viewed by many as a fast track to knighthood, to try to "demystify" the airline, repeatedly emphasising that it is a service industry.
It is neither the money nor the power that motivates Walsh. He never deliberately chased the top job, either at Aer Lingus or BA. Rather, he has been driven on by a fascination for the airline industry and the sense of chances too good not to take. "I never set out to become a pilot or to go into management, and never ever had an ambition to be a chief executive," he has said. "But there are opportunities you can't say no to."
For all the criticism of his confrontational style, Walsh sets the same standards for himself as his staff. The last time his position was under such pressure was the disastrous opening of Heathrow's Terminal 5. Eighteen months later, T5 is a success. But for nearly a week in March 2008, problems with the baggage handling system caused chaos. Walsh was publicly vilified and nearly forced to resign. But he clawed back some credit for taking direct responsibility for the debacle. "I think the buck has to stop with me," he said in an unscripted television interview. "I'm not going to try to point the finger at other people."
With the shattering prospect of a 12-day Christmas strike called off, the T5 opening remains Walsh's toughest moment so far. But with BA still facing spectacular losses and running a pension deficit several times its value, his slashing is far from over.
A life in brief
Born: 25 October 1961, Dublin, Ireland.
Early life: Spent childhood taking things apart and rebuilding them – televisions, radios, even his father's car. Left school at 17, responding on a whim to an Aer Lingus advert for trainee pilots and giving up university ambitions. Became a captain within 10 years and spent six as a representative for the pilots' union.
Career: Went into management roles in 1989 and became Aer Lingus chief executive in 2001. Hit the headlines as "Slasher Walsh" for pugnacious negotiating and mass redundancies in forcing the company back to profits. Poached by British Airways in 2005. Narrowly avoided cabin crew strikes in early 2007. Publicly vilified for disastrous opening of Heathrow's Terminal 5 in March 2008.
He says: "I never set out to become a pilot or to go into management, and never ever had an ambition to be a chief executive. But there are opportunities you can't say no to."
They say: "He's the first BA chief executive that's recognised the importance of staff. Instead of commanding them, he's gone out and talked to them. You never permanently succeed, but he's gone further than any other CEO in the post-privatisation time." Howard Wheeldon, senior strategist at BGC Partners.
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