Turbulence At Heathrow

LAST WEEK BRITISH AIRWAYS posted its first losses since 1995, and its stock fell to a 12-month low. It was a low point also for Robert Ayling, who took over as BA's chief executive in 1996 after 11 years at the company. Though Ayling is respected as a steady hand at one of the world's premier airlines, he has had a rough three years at the top. In his first, he narrowly avoided a pilots' strike during the peak summer season and then, in the fall, announced unpopular _GCP_1 billion cost-cutting measures. His second year was marked by a three-day cabin-crew work stoppage, which cost the airline dearly and took a toll on employee relations. He also wandered into a public-relations mess when he sought to globalize BA's image by replacing the Union Jack tailfin logo with snazzy multiethnic designs. Ayling, 52, spoke about BA's comeback effort with NEWSWEEK'S Stryker McGuire and William Underhill at company headquarters near London's Heathrow airport. Excerpts:

NEWSWEEK: ""Putting People First Again'' is your new slogan. Does the ""again'' imply that in some way you haven't recently been putting people first, the way you once did?

AYLING: No. It implies that we have never forgotten it. It implies that we value as much today the things that we valued 13 years ago, when we started doing that program. It implies that you can always learn from your own experience, particularly things which are good about your own experience. It implies that there are a lot of people now employed by British Airways who weren't here when we did it before. Out of 63,000 employed today, barely 15,000 [participated the first time in] ""Putting People First.''

One of the strengths of British Airways has been its identity as an upmarket airline. How do you maintain that identity while at the same time globalizing, competing internationally and struggling for greater efficiency?

You put your finger on a point which is constantly raised within the company by managers and by frontline staff. Our job is to find ways of reducing expenditure but increasing the value for money that customers get. If the customer values something and you want to keep his or her business, you don't take it away and say, ""Will you please pay the same fare,'' or, worse still, ""Will you please pay more.'' They go somewhere else.

Doesn't ""Putting People First Again'' also imply that you want to reconnect with the business-class and first-class traveler?

We have seen a marginal drop-off. We don't know yet quite what that meant in terms of overall market share. I don't think that's the issue.

It's also part of the battle presumably to get the numbers back up.

Yes. The whole industry is going through a difficult time at the moment. The overriding reason is that there is an unprecedented increase in the capacity on the market. Until capacity is more in line with demand it's going to be difficult to get the figures back to where we would like them.

Do you think that the slump that the industry is in, that BA is in, has hit bottom?

As people say, you don't actually know when you've hit bottom. It's only afterwards when you look back. But some of the indicators are encouraging. I think the fact that the Thai and Korean economies are coming back is encouraging.

You've spoken of the need for consolidation in the industry. What sort of time scale are you talking about?

Well, I always say the next 10 years, though the next 10 years never seem to get started. But in an age when airlines are becoming privatized, when you have global capital systems and capital, therefore, literally has no nationality, it's increasingly difficult to see how you can sustain national airlines.

What are the reasons behind lingering national sentiment?

The first is the safety aspect. There's a correct demand by consumers for virtually perfect safety standards. The second reason is that there are still a lot of state-owned airlines. Ireland, Spain, France, Portugal to some extent, Italy to some extent, Greece. They are literally part of the state. And because they're part of the state, they kind of still half assume we're part of the state, and we're not.

What explains the inability of BA and American to merge, as you have wanted to do?

It certainly isn't culture. We've found from a management point of view that [we] work rather well together. [American Airlines is] different. They add different strengths to our strengths. But they understand us, and I think we understand them. The issue is purely a legal and regulatory one.

Is more made of the air-rage problem, the sky-hooligans problem, than should be?

I am concerned about it, even though they are isolated incidents in statistical terms. But when it happens it is frightening for other customers, and it's also frightening for our employees. We do a number of things to show our intolerance. The first is, we do have a list of people who we will not let onto the aircraft. And we do make it clear that if people break the law in the airplanes, they will be prosecuted as soon as the aircraft lands. And we make it clear publicly, as I'm doing now, that this

Turbulence At Heathrow | News