BA boss on flying to the money
British Airways’ Keith Williams was promoted from CFO to chief executive in January 2011, as Willie Walsh took the reigns of the newly formed holding company, IAG. Since then the former Apple man has presided over British Airways at a time of turbulence for the aviation industry.
Keith had just returned from Sri Lanka when Bdaily spoke to him. He was in the country to mark the relaunch of BA flights there, following a withdrawl of operations due to the Sri Lankan civil war. It’s just one BA’s expanding destinations list, including the likes of Seoul in South Korea and Chengdu in China.
Nearer to home, Keith has been busy with BA’s investment in Terminal 5 and the integration of BMI last year. So, what does it take to steer an £11bn business like British Airways?
“We have around 100,000 customers a day, and my job is making sure that runs smoothly. I often say to people that for every individual’s journey, you need about 80 things to happen in sequence. That’s everything from printing off your boarding pass to getting your bag at the other side - so I’ve got eight million events that can potentially go wrong every day,” Keith quips.
On top of this, Keith is constantly looking at the strategy for BA, across the coming weeks and months.
In the summer the carrier will take delivery of several A380 super-jumbo aircraft, and 24 of the Boeing Dreamliner over the next three years. Such enormous capital investment requires careful preparation.
Keith explains: “It’s an exciting time because these are the first big aircraft orders we’ve had for some time.
“We were first supposed to get the Dreamliners back in 2010, so the fact that they’re a few months later due to the publicised battery issues, doesn’t make much difference. The important thing is that all aircraft are operational from the first day we have them.”
Debate around UK airport capacity, and air infrastructure continues to rumble on, and BA is not immune to the outcomes of this. Keith suggests that “hubs” are the fundamental component.
“The role of hubs in airport planning and British Airways planning is really crucial. If you look at British Airways in London, that is London Heathrow, Gatwick and London City; on any typical day 40% of the traffic going through is transfer traffic,” he explains.
“A lot of that is coming in from the regions, and its that transferring traffic, together with originating traffic, that makes the network viable. If you look at some of the places you fly to, you need combination of originating passengers and transfer passengers to make the destination work.
“That’s the same for all airline, and it’s why you see the major hubs appearing around the world. In Europe you’ve got London, Charles de Gaulle and Schipol.
“For some locations there’s enough point-to-point traffic to make a direct flight work, and clearly from a customer perspective, a direct flight is better than travelling through a transfer point.”
And the question as to where this hub should be? British Airways will always fly out of Heathrow, come what may, says Keith. The question is one for the UK he suggests, and that includes the regions.
For now, British Airways’ key concern is where UK people want to go. The business goes where the wealth is.
Keith explains: “If you look at where the world is growing GDP - that’s where we’re going to. Seven or eight months ago we acquired BMI, and we’re pointing those slots, over time, at where the market is growing,” he continues.
“If you look at BA’s traditional market it would be North America, and to a degree Asia and Africa. Now we’re seeing growth in South East Asia, and consequently, we’re pointing planes at places like Seoul in South Korea.”
Air passenger duty is another headwind the industry has had to face, and BA are not immune.
When the tax was established in 1998, it was £5. On longer BA routes today, it can be anything upto £190.
“It acts as a disincentive to travel, and I think generally it’s negative to the UK. The duty raises around £3bn for the exchequer, and at the moment, we pay about £50m a year. It’s more damaging to the economy though,” adds Keith.
“For regional travel it’s also an issue. Travelling within the UK you get a double charge; once on the leg out, and once on the leg back. You don’t get that in other countries.”
Keith also notes the barriers caused by the UK visa regime, particularly for visitors from the Far East. Both Lufthansa and Air France are carrying more traffic to and from China, because the visa and air passenger duty setups are less restrictive.
So, what are the future preoccupations for British Airways? Keith’s computing background with Apple has informed some of the technological innovation going on at the airline.
As passengers now how a wealth of information about flight statuses, times and pricing, at their fingertips, it’s important for BA to manage.
“Technology is both a great advantage for the customer and a cost-saving tool for us. For instance, printing off your own boarding pass gives passengers confidence and control, and for us it’s less intervention at the airport.
“We need to appreciate the media that’s out there. We have programme called ‘know me.’ This is where we can engage with our customers.
“If you go back 30 or 40 years, you were recognised as a journey, not as a customer. Travellers were what is known as a ‘P&R’ number. You’d get off and we’d lose track of you.
“Now we know what you like as a customer, so we can relate to you and your prioritise.”
As IAG is poised to take control of Spanish low-cost carrier, Vueling, Keith is thinking about how his brand sits alongside the low-cost bunch.
He says: “We need to provide the service that our customers want, at the price they’re willing to pay. To this effect we’ve just introduced a new fare for people just carrying hand luggage.
“A significant portion of our business is short haul, and that might be short haul that feeds the long haul. We’re never going to be comparable to the low-cost operators who tend to fly point-to-point.
“It’s important that we get our prices out there so that people can decide how our all inclusive price shapes up against the competition.”
Keith Williams is set to speak at Teesside University Business School Conference on Monday May 13.