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British Airways could be spun off from parent company IAG amid efforts to make the business leaner in the wake of the Covid crisis, former boss Willie Walsh has said.
In a wide-ranging interview, Mr Walsh also hit out at the Government over its handling of the pandemic and said he would sue for peace following a war of words with Sir Richard Branson.
IAG is registered in Madrid and its top three board members are now all Spanish.
The company’s control of British Airways was repeatedly called into question in the run-up to Brexit over concerns it might fall foul of Brussels ownership rules.
Mr Walsh, who was chief executive of IAG until last year, said a spin-off of BA could not be ruled out.
He said: “There’s nothing to say that bits of IAG could not be sold off or cut loose.
“That was always my thinking when I was there. If one part of the business wasn’t performing, or was underperforming, or didn’t make sense, then you could dispose of that part of the business.
“I don’t think that will happen, but it could happen.”
Read on for our full interview with the airline industry veteran.
The prospect of Willie Walsh being at liberty to speak his mind is the stuff of nightmares for any public relations executive.
“I can say things, probably, more easily than I did when I was at BA or IAG,” Walsh says from his home in Geneva. His press officer, listening in to the video call, winces.
Walsh stepped down as IAG chief last September after 15 years leading British Airways and its FTSE 100 parent company. He admits to “feeling bad” for leaving in the middle of the worst storm ever to hit the aviation industry. And although he delayed his departure until later in the year, he knew there was no turning back.
“Had I known that everybody had known this was what was going to happen, I wouldn’t have announced my departure back in January 2020,” he says. “I’m really glad I stayed on for that extra five, six months.”
It is out of the frying pan and into the fire for the 59-year-old. He took over as general secretary of trade body Iata in April, a job that means he must represent some of his old foes. Sir Richard Branson included.
Walsh’s low opinion of Branson is well documented. A bet between the two in 2012 has led to a long-running spat. Walsh said that the billionaire would have lost control of his airline within five years. The winner would be free to knee the loser in the groin.
Is now the time to bury the hatchet and start banging the drum for Branson? “No,” he says with a trademark piercing stare. A short pause follows. “I lost my drum sticks,” he jokes. “I’m sorry. I’m not going to change completely.”
Like his good friend Michael O’Leary, the boss of Ryanair, Walsh rarely minces his words when it comes to government and regulation. And he reserves his sharpest rebuke for Boris Johnson’s administration and how it has dealt with the crisis.
It is only a minute into the conversation that Walsh lets rip on Grant Shapps, Johnson’s Transport Secretary, as “Secretary of State for No Transport”.
Shapps announced a traffic light system as the borders were reopened on May 17. Portugal was the only country of note that was available to Britons to travel abroad. Within weeks, this decision had been reversed, sparking a mad rush for thousands of holidaymakers to return home and dashing the hopes of a beleaguered travel industry that was facing a second lean summer.
“I don’t think you can describe the traffic light system as being in any way effective, you know, it’s stuck on red,” says Walsh.
“They’ve already abandoned the criteria that they had set out where they clearly stated that they would give people a fair warning if the lights were going to change.
“And they clearly didn’t do that in the context of Portugal, which I think from a consumer point of view is disgraceful. Having led people to believe that they were safe to travel, given them the opportunity to do so again, got people all excited about the fact that Portugal was probably the only realistic destination, from a tourism point of view.
“Then to pull the rug from underneath people in the way they did, I think was very, very poor, and just, you know, demonstrates that they’re really not thinking about consumers or the public.”
'No zero-risk option'
Looking further back, Walsh is incredulous at Johnson’s decision to close the borders earlier this year.
“I don’t think I could have ever envisaged a time when it would be illegal to travel,” he says. “To take steps like that, you would expect the Government to have really, really strong grounds based on evidence as to why that should be the case. And I don’t believe that has been the case.”
He continues: “We have to recognise that we are going to have to live with this virus. The idea that we could pursue a zero-Covid future – I am not a scientist, but I see no evidence to support the fact that we can do that.
“I think the UK is going to be a very strange place to live, because more and more we’re seeing the evidence now, countries are recognising there isn’t a zero risk option.
“What I see happening is that the rest of the world is going to move on and overtake the UK.”
Walsh was the architect of the merger of BA with Spain’s Iberia in January 2011 to form International Airlines Group, or IAG. Headquartered in London, the company’s registered office is in Madrid. The group also includes Aer Lingus and low-cost Iberian carrier Vueling. The Qatar state owns 25pc of the business and following Walsh’s exit, Spanish nations tightened their grip on the boardroom with Javier Ferran, Luis Gallego and Alberto Terol occupying the positions of chairman, chief executive, and senior independent director respectively.
BA dominates the group, however, generating more than half of the revenues and roughly two-thirds of its profits. This and navigating post-Brexit ownership rules has led to questions about whether the UK flag carrier would be better served operating outside of the group.
This notion of a spin-off of BA, or any other of IAG’s airlines, was at the back of Walsh’s mind while he was in charge. “I don’t think you can rule out things like that,” he says. “It is the reason we created IAG. We saw the synergies from having a central core operation … But each of the airlines had to stand on their own two feet.
“They all have their individual balance sheets and could in effect be sliced off and sold off, if that were the right thing to do. It was important that … [each airline] retained an element of independence and autonomy within a group structure, and that we only did things at the centre that added value.
“There’s nothing to say that bits of IAG could not be sold off or cut loose. That was always my thinking when I was there as the CEO. If one part of the business wasn’t performing, or was underperforming, or didn’t make sense, then you could dispose of that part of the business.”
He adds: “I don’t think that will happen, but it could happen.”
Diverging flight paths
As IAG is becoming an ever more Spanish-looking operation, BA has flown in the other direction, with Sean Doyle, the Cork-born former boss of Aer Lingus, taking over from Alex Cruz last October.
Although formally appointed by Gallego, Walsh reveals that Doyle’s selection had been in the pipeline for some time. “When I put him into Aer Lingus as CEO, it was part of a plan that I had identified him as a successor for the BA chief executive role.”
Cruz endured a difficult four years running BA. He inherited a decision to remove free food from short-haul flights. Although a logical decision commercially, it prompted a furious backlash from customers. A year later, a power outage grounded hundreds of flights and left more than 75,000 passengers stranded. And in 2018, BA’s website was hacked with details about 500,000 customers harvested. Worse was to come as the pandemic hit in 2020, with Cruz overseeing 10,000 job cuts.
Walsh is torn over appointing Cruz in the first place. “If it was [a mistake], it was my mistake,” he says. “You’ve got to look at what people do and how people do it.”
Insisting that “I don’t want to be critical of Alex”, Walsh adds: “He did what he thought was right. But I think if I was maybe to be critical, it would be more around his style than what he did.”
Cruz’s successor is different, he adds. “Sean has a very different style, much more open. He’s Irish. It helps.
“He is very approachable … Alex was probably a bit more guarded.”
Doyle does have one glaring flaw in Walsh’s eyes, however. His support for Manchester United puts him at odds with the Iata boss, who is a die-hard Liverpool fan.
“He drinks Guinness so he gets bonus points on my list. I sort of counter [Doyle’s supporting] Man U with a pint of Guinness. Whereas, I don’t remember Alex ever drinking a pint of Guinness, but I’m not gonna hold that against him.”