Business is booming.

ALEX BRUMMER: Tepid BA recovery done does not speak well of leadership

After the existential crisis for British Airways in the pandemic and the build-up of loans, it is a relief that IAG, its parent company, is making a profit again.

The lukewarm speed of recovery and reputational damage do not speak well of leadership.

Former Heathrow chairman Nigel Rudd holds former IAG chief executive Willie Walsh responsible.

Struggle: The lukewarm speed of recovery and the reputational damage don't speak well of leadership

Struggle: The lukewarm speed of recovery and the reputational damage don’t speak well of leadership

Could be. But Walsh faced almost insurmountable problems with heavy union workers. It was his successors at BA who tried to compete with low-cost airlines by cutting services.

Admittedly, with Ryanair there is no service to cut. Michael O’Leary’s airline flies from secondary airports where she has more operational control. Nevertheless, Covid’s bounce back in terms of revenue and reliability is impressive.

It’s hard to find a good word about the BA experience. A colleague who returned from Portugal on Thursday was three hours late. My summer flights to Palma have been cancelled. A son who arrived from Texas waited two hours for luggage.

Heathrow and its ownership structure don’t help. When the Spanish construction company Ferrovial bought the British Airports Authority (BAA) in 2006, people had the wrong impression that it would be a quick route to a flood of construction projects. Instead, it fiddled with a debt-funded model and has since jettisoned assets and stocks.

It seemed unaware that Heathrow was a regulated company and that every contract is subject to a competitive tender.

The result is a constant push for higher landing and other charges so that it can keep its investors happy.

BA’s plan is to gradually increase passenger capacity from just under 70 percent in the second quarter, to 80 percent in the current holiday season and 85 percent in the last three months of the year. Amid the austerity measures and deteriorating financial performance, the main bright spot is that the North Atlantic, a major driver of BA’s profitability, will be back to full capacity by the end of 2022.

The message to BA CEO Sean Doyle is that unless the fuller schedule is matched by better customer service, on the phone, online, at the airport and on board, the premium pricing model is doomed. He will then have to find an early parachute.

Pink tint

One of the takeaways from UK domestic banks this week is that, despite the barrage of headlines about a ‘cost of living crisis’, little stress is seen from personal customers, small businesses and corporations. Agriculture can be an exception.

Why is this happening? Many middle-income families are still protected by the £200 billion savings.

Furthermore, despite the eloquent demands of Mick Lynch and the unions for more and more money, British workers are not doing so badly. Data from the Office for National Statistics shows that in 2021, when we came out of the pandemic, the median household income was £37,600 after taxes and benefits.

To her credit, Alison Rose, chief executive at NatWest, prepares her clients for the worst if they’re caught by skyrocketing inflation and rising interest rates. NatWest engages with 2.7 million customers to provide advice on how to deal with the rise in the cost of living.

It has set up an emergency fund and put together a £1.5 billion loan package to support its 40,000 farmers.

Within the bank, the focus is on the largest pay increase for the lowest paid colleagues. Even the government is getting money back, as two-thirds of the £3.3bn in dividends and buybacks go to the Treasury.

Where all this would leave Tory plans for withdrawal – should Labor win the next election – is a known unknown.

succession

The departure of former Volvo chief Leif Johansson as chairman of AstraZeneca should not go unnoticed.

Along with chief executive Pascal Soriot, he was a powerful force in seeing Pfizer off the battlefield in 2014, when the pharmaceutical giant was valued at £70 billion. It is now worth almost two and a half times that – £168 billion.

Revenues are growing at a 20 percent clip, with Covid therapies helping to take the lead. Soriot will not rise as some investors hoped.

Instead, Belgian Michel Demare will take over, with a salary of £800,000.

His main task will be to identify a possible Soriot successor.

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