Walsh accentuates the positive
Willie Walsh was in upbeat mood as he led a delegation of trade and travel industry leaders and journalists on a trip to India to mark BA's official opening of its new London Heathrow-Hyderabad service.
Though the economic storm clouds seem to get darker every day, not least in terms of the affect the downturn is having on the airline industry, BA's ceo found plenty to be optimistic about.
His own diagnosis of the economic ills was while the price of oil had significantly eased, the banking system was not operating and there was a lack of consumer confidence. He was, he said, not surprised by the third profits warning from Air France-KLM
, issued last week, and his view was that the global economy had not yet reached the bottom and it was in for two difficult years before things began to improve.
BA was already feeling the brunt of this as demand for its premium class dropped by 12.1% in December. Figures for January and the coming months are not likely to be much better.
But against this grim backdrop, Mr Walsh was resolutely confident. The new five times a week service from Heathrow to Hyderabad was already attracting load factors around the 60-70% level and on some occasions, the flight has been full.
Hyderabad is India's sixth largest city with a population of eight million and a rapidly expanding economy in textiles, pharmaceuticals and IT. This is witnessed by a vast area of new buildings including factories, offices and hotels to the north west of the city and a few miles from its new airport. This opened last year and there are plans to expand it to take up to 40m passengers a year.
The new service is an example of why Mr Walsh believes so strongly in the need to expand Heathrow with a third runway and sixth terminal. The UK and the US are the two biggest countries for passengers to and from India. These are both people visiting friends and relatives and, increasingly, business travellers.
Mr Walsh said many of the business travellers using the new service were from cities in America like Houston, Los Angeles and San Francisco who transferred at Heathrow.
"This is how Heathrow works. Without these passengers, you could not justify a direct service," he said." That is why we have argued that Heathrow is so important. Heathrow is not just about just serving London. There is a massive demand for services from the UK to India and we are offering direct services."
To pursue his case for the third runway, which has been controversially approved by the UK government, Mr Walsh said he is meeting Colin Matthews, ceo of BAA, the owners of the airport, to discuss an earlier start to the new work. He would like it finished by 2016, rather than the more likely 2019 or 2020 but in view of the massive opposition already gathering this may be unduly optimistic.
More immediately, Mr Walsh said BA has been in talks with Indian carriers over possible codeshares although nothing so far has come of them.
More relevant to BA's longer term growth, Mr Walsh said all the finance to pay for the newly ordered Boeings and Airbuses was in place and delivery would start in 2012.
BA's new service business class only service from London City to New York Kennedy would start in September although the exact date has yet to be announced. There had been a hiccup, he said, when the service was reviewed in the light of falling demand but the decision to go ahead was influenced by the "overwhelming" support for it from City-based companies.
The downside might be that BA cuts New York-Heathrow capacity but no decision has yet been made on this.
But Mr Walsh acknowledged that one hurdle facing BA was the merger talks with Iberia. Back in September, Mr Walsh had confidently predicted that they would be successfully completed by this March. There are no such hopes of this now, indeed no deadline at all.
First BA was forced to admit that it was also in parallel talks with the Australian carrier Qantas, a move that infuriated Fernando Conte, Iberia's ceo who knew nothing about them. These have now ended. Secondly there was Iberia's understandable confusion over BA's pension scheme and its possible ramifications for the Spanish were any merger to take place
Iberia has called in consultants to study this and they are due to report by the end of the month. But the confusion led to a suspension of other aspects of the mergers although these have now resumed.
Third and perhaps most ominous is that Mr Walsh made clear at a press briefing in Hyderabad that he would not accept the mooted 53-47 share division in BA's favour. "We would not do a deal on that level. I would not be prepared to go that way," he said.
Mr Walsh said the weakening of Sterling against the Euro was a factor in the adjustment of the ratio. "This is something we have to come to terms with. The Euro has significantly strengthened against the pound and I would have difficulty in discounting that," he said. "But a 53-47 ratio - I would not be prepared to go that way."
Mr Walsh said he thought Iberia's current share price was too high. "We will look at that but I am clear that that ratio is unacceptable. I don't think the BA shareholders will accept that," he said. "I am not all concerned about not doing a deal with Iberia. I have always said we would only do a deal if it makes sense. I would have no concern about walking away. We will only do the deal if the deal makes senses," he said. Mr Walsh declined to say what ratio he would accept.
Mr Walsh is due to meet Mr Conte next week. It should be an interesting encounter.
Where any failure would leave BA in terms of European consolidation is hard to see. Mr Walsh said he was not in talks with any other carrier although he suggested there were options. Not many come to mind.
But the optimism re-surfaced as he spoke confidently that the US department of transport would sanction closer transatlantic ties between BA and its oneworld partners American Airlines (AA) and Iberia. Previous applications, relating only to BA and AA, had been rejected but Mr Walsh said circumstances were now sufficiently different to win approval.
If even half of Mr Walsh's hopes come to fruition, like, say, the success of the Hyderabad service as well as of the new London-City New York, BA will be doing well. If they all come to pass, we shall be seeing in operation much of the airline Mr Walsh aimed to build when he arrived at BA in 2005.