Willie Walsh: 'I'm not Rod': BA's new boss emerges from the shadows

The comment came when he promised there would be no repeat of the industrial action that has blighted BA's summer schedules for the past two years. In 2004 it was the baggage handlers whose wildcat action cost BA over £40m; this year it was a strike at catering supplier Gate Gourmet that brought BA staff out in sympathy. The result: disruption and another £40m bill.

"The positive thing about what happened in August is that the vast majority of our staff wanted nothing to do with it," Walsh argues, pointing to how quickly BA got back to normal afterwards. "The same thing will not happen next year," he adds.

The suggestion that Eddington made the same promise in 2004 brings the symbolic remark: "I'm not Rod."

This is a sign that Walsh is stepping out of Eddington's shadow. And what a large shadow it was. The Australian was a popular and effective boss - making BA the world's most profitable major airline, while gaining a loyal following both within the company and without thanks to his keen sense of humour, vast knowledge of sports and enthusiastic personality. Walsh, arriving from Aer Lingus where he slashed costs by a third, is different. Standing just 5ft 6in, he appeared slightly nervous and subdued as he was revealed to investors and the media in Bangalore.

He may talk quietly but Walsh carries a big stick. The former pilot, who rose through the ranks to become chief executive of Aer Lingus, is determined to finish some of the tasks that Eddington left undone. These include cost cutting, taming the pensions fund deficit and steering BA towards the next stage of its development, when it moves all its Heathrow operations to Terminal Five in 2008.

"Costs are my favourite topic," Walsh laughs. He has a target of cutting £300m (excluding fuel) by March 2007. But in the brief time he has been at BA, they have risen, with staff costs the main problem, - up 3.3 per cent in the first half of this year. "I want to reverse that in the second half," he says, implying serious belt tightening in the coming months.

The unions - most of which he has already wooed, and a meeting is scheduled with Tony Woodley of the T&G this week - will be given the Walsh tough talk. But suppliers had better watch out too. "We can reduce selling costs, airport charges, procurement. We need to be a bit more aggressive, not only on cost control but cost reduction."

He also needs to twist the unions' arms over BA's pension fund. It has a £1.4bn deficit - something Eddington called an "elephant in the rowing boat" but was unable to resolve. Walsh wants to crack the problem, but how? BA cannot afford to pay more into the scheme - as Walsh points out, it already makes five times the contributions of its employees, more than double the average for UK industry. And putting a lump sum into the scheme, as Marks & Spencers did, doesn't work. So BA needs to get its staff to pay in more, and to persuade the trustees to pay out less.

At the same time, BA will come under pressure from the new Pensions Regulator to channel spare cash into the scheme. "The long-term viability of BA is what secures the pension fund," argues Walsh. "He might take the view that we should not be investing in new products and new planes. That might sort out the pension fund in the short term. But it won't help the company or the fund in the long term."

In the short term, moving to Terminal Five is the big issue. The "Fit for Five" programme, which he inherited, will be the big chance to get rid of many of BA's old Spanish practices, such as all crew having to visitthe "Compass Centre" to get their rosters each day before going to their flights. Although other changes at Heathrow - the demolition of Terminal Two and the creation of a £1.5bn super terminal, nicknamed Heathrow East, for some of BA's rivals - may take some of the sheen off the T5 move, Walsh clearly sees this as an opportunity to get BA into the shape he thinks it should be.

Despite his reputation as cost cutter, BA is expanding rapidly on its Indian routes. The country has just overtaken China as BA's second-biggest long-haul destination. It flies to five cities now, and is hoping to add two more, Hyderabad and Cochin. "Britishness is an advantage in India," Walsh argues. "Indian people like to fly BA."

And last week he unveiled a £100m revamp of business class - or Club World, as BA calls it. This is an important market for BA, with its rivals spending heavily, often when they supposedly can't afford it. Delta, the US airline which rivals BA on the lucrative transatlantic routes, boiled Walsh's Irish blood by announcing a massive revamp of business class only three weeks after joining many of its US compatriots in Chapter 11 bankruptcy to keep its creditors at bay. "They say on their website that they want to be the biggest carrier across the Atlantic. They should say, in big red letters: 'By the way, we're bankrupt'."

BA has argued long and hard that US airlines have an unfair advantage because of Chapter 11 and other subtle forms of state aid. At the same time, the US carriers are trying to gain more of a foothold at Heathrow as part of the Open Skies talks between Washington and the European Union. The latest talks, last week, ended inconclusively but Walsh is hopeful something might be arranged in the spring.

If a deal is reached, he would like to strengthen ties with American Airlines, BA's long-time partner. However, going for "anti-trust immunity" - a de facto merger with American first proposed by BA seven years ago - might be a step too far. "There'd be a price to pay, in terms of slots at Heathrow, and that could be too costly," says Walsh.

Eddington implied that BA might look for a merger in Europe, but Walsh pours cold water on that. "I have to be open to the fact there may be a deal, but I don't see one at the moment." In fact, he predicts there may not be a major merger of European carriers before he retires.

Retirement? He has just turned 44. But the jet-set lifestyle - he only gets home to see his wife and daughter in Dublin once a month - is already making Walsh think of a quieter life. "I am going to be retired by 55," he says adamantly, and it's not the beer talking.

Biography

Age: 44

Education: MSc in business administration, Trinity College, Dublin

CAREER

1979: joins Aer Lingus as cadet pilot

1990: captain, Aer Lingus

1998: chief executive, Futura, Aer Lingus's Spanish charter airline

2000: chief operating officer, Aer Lingus

2001: chief executive Aer Lingus

2004: resigns after disagreement about privatisation

2005: appointed chief executive of British Airways

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