The MT Interview: Willie Walsh

MT joined the energetic but approachable British Airways chief executive on a trip to Tanzania. Despite the gruesome prospect of a meltdown in the airline industry, he was keeping a long-term promise to show his commitment to a £25m investment.

by Andrew Saunders
Last Updated: 02 Aug 2013

What on earth is Willie Walsh doing in a maternity clinic on the dusty southern outskirts of Tanzania's biggest city, Dar es Salaam? It's not as if the BA chief executive hasn't got enough to do back at the airline's Heathrow HQ, what with trading conditions he has described as the worst ever, managing the recently announced merger with Iberia and piloting his audacious bid for a transatlantic tie-up with American Airlines through what promises to be a good deal of turbulent anti-trust controversy.

Then there are some other small matters: the ongoing global financial crisis and the dramatic effect he expects it to have on the airline industry; his row with Virgin Atlantic boss Richard Branson over price-fixing; his call for 1,400 middle management redundancies within BA; and the enforced break-up of the UK's leading airport operator BAA. Not to mention the lingering hangover from the T5-opening debacle in March that cost Walsh his £700,000 bonus - and some say very nearly his job.

And those are just the highlights of the past few months. He has also had to deal with security threats, union upsets, pay disputes, a crash landing, that row over a crucifix... Like Alan Bennett's verdict on the past in The History Boys, being boss of BA is just one fucking thing after another.

Hardly the best time for a company jolly to sunny sub-equatorial Africa, then. But despite Tanzania's potential as an upscale corporate hospitality destination - Mount Kilimanjaro, Africa's highest peak, is in the north, along with the Serengeti National Park, and there are wonderful beaches and diving on the spice island of Zanzibar - this trip is no beano. Walsh is here to check on the progress of a £25m investment.

That's how much money the BA/Unicef 'Change for Good' campaign - the one where you put your spare change, of whatever currency, into the little seat-back envelopes found on all BA flights - has raised for projects like this one since it started in 1994. The programme helps fund Unicef schemes in 55 countries, most of which BA flies to. The projects in Tanzania are among the longest-established beneficiaries of one of the oldest and most successful corporate/charity partnerships in the world.

'We've been doing this for 14 years and we have managed to raise £25m just from people's spare coins,' says Walsh. 'I wanted to see for myself just how good the Change for Good campaign really is,' he adds, the caution in his voice betraying the fact that the man once dubbed 'slasher' for his job-cutting zeal is now venturing onto softer and potentially more treacherous ground than he is used to negotiating in public.

The Mbagala Round Table Home doesn't look much, just a couple of tin-roofed concrete huts around an earthen courtyard, but it's in the front line of public health here. Like so much of Africa, Tanzania has a serious problem with HIV and Aids. About 1.5 million adults are estimated to be HIV-positive, and it caused some 160,000 deaths in the country in 2003.

The home's speciality is PMTCT - 'prevention of mother-to-child transmission' of the virus. About 48,000 children annually are infected, but if HIV-positive mums-to-be can be spotted in good time, it's possible to reduce the chance of the child carrying HIV from 40% to 20%, and to treat the mother so that she remains fit, well and able to look after her family. A deserving cause by any definition.

Walsh clearly thinks so, listening intently as a group of HIV-positive mothers and mums-to-be volunteer their stories. Their simple fortitude is the more sobering because, for all their manifold troubles, these women are the lucky ones: they are receiving treatment. But he also appreciates the benefits that accrue closer to home in terms of staff morale - something that BA chief execs have struggled with. 'I have met a lot of the BA staff in the programme, and they are very passionate about it, believe me,' says Walsh.

Some 2,400 BA cabin crew are card-carrying boosters for the programme, and a handful of the most dedicated of these 'Change for Good champions' have been chosen to accompany Walsh on this trip.

From his perspective as an employer, this is perhaps the best reason of all to be here. Walsh knows he's going to need as much discretionary effort from his 43,000 employees as he can get over the difficult months ahead. 'Trading conditions are unprecedentedly bad at the moment,' he says. 'They will drive the biggest shake-up the airline industry has ever seen.' That means consolidation, reduction of capacity, bankruptcies and job-losses. It's too early to say what precise effects recent dramatic failures in the financial markets - AIG, Lehman's and the rest - will have. But for a capital-intensive business like aviation, the auguries are not good.

The oil price has tripled in a year, and even operators that are well hedged (ie, have bought forward fuel contracts at fixed prices) are struggling with the implications. BA paid an average of $70 a barrel last year; this year, it is hedged at $130 a barrel and happy to be so, he says, even though that's still a billion-pound increase in costs. 'Airlines will fail - we have seen a few already. There are plenty of airlines out there that haven't been profitable in recent years. Against this background they haven't got a hope.'

All traces of self-consciousness vanish as he returns to familiar territory and gets into his stride. He can talk shop with the best of them. 'I also think there is a real risk that one of the big US carriers will go, and straight to Chapter 7. Trading in the US is brutal and they may not be able to restructure under the Chapter 11 rules this time. I don't think the financial support for restructuring is there at the moment.'

Thirty airlines have already gone bust this year - including the UK's third-largest travel operator XL, leaving 90,000 holidaymakers stranded abroad. Walsh expects another 30 industry casualties by Christmas.

Despite the dystopian picture he paints, Walsh makes all this doom and disaster sound like a golden opportunity rather than a reason to curl up into a ball and wait for the worst. Like a polar explorer, the tougher and lonelier it gets, the more he seems to enjoy it. 'Yes, it's a challenging period, but it's really exciting too,' he says, relishing the thought of the hard times ahead and obstacles to be overcome.

Walsh is using the downturn to push through a couple of potentially lucrative deals. That contentious tie-up with American Airlines, for one. A partnership between BA and AA - two of the biggest airlines in the world - would protect both from the worst effects of market turmoil while offering potential major benefits when the recovery comes along. It has been tried several times over the past decade, but the US's strict anti-trust laws have always scuppered it.

Walsh is hoping that this time a combination of harsh economic reality and the new EU-US Open Skies deal (potentially opening up US destinations to any EU airline, reducing monopoly concerns) will calm such fears and get the deal through. His recent call for 1,400 voluntary redundancies among BA management certainly looks like anticipatory streamlining.

But rivals don't share his optimism - notably, Virgin Atlantic boss Richard Branson. Within hours of the tie-up announcement, he fired the opening salvo in what promises to be a long and hard-fought campaign. Branson had written personally, he said, to both US presidential hopefuls asking them to stop the deal going through in the event of their being elected.

Of course, spats between BA and Virgin are nothing new, dating back to the infamous Dirty Tricks campaign of the early '90s, which cost BA a reported £3.5m in fines and court costs alone and a good deal more in terms of reputation. Walsh's efforts to maintain a dignified silence seem to have failed this time, and the row is shaping up to be their most colourful for years. BA's boss and Branson are now trading insults over everything from the length of the queues at T5 to the size of their respective profit margins.

Walsh is hoping that his other big announcement of the summer - the merger with Iberia of Spain - proves less controversial. BA already owns 13% of the troubled Spanish airline. Watch out for more acquisitions, says Walsh. 'The Iberia deal isn't the end, it's a platform from which to build. We've got to be careful and wait for the right opportunities, but there's no question we'll be looking for more.'

The 47-year-old Walsh is well equipped to spot a bargain, having spent his adult life in the industry. Born the second of four children to a Dublin glazier, he joined Aer Lingus as a student pilot aged 17. He was a working-class kid who took the bus to the airport in his pilot's uniform, because he was flying planes before he could drive a car. His brothers became electricians, and 'it was the technical side of things that got me into flying', he says. 'My dad used to let me take his car apart, and I loved that side of learning to fly - finding out how engines work and all that.'

Over the years, he has learned management and become skilled at it, but at heart he's still an operations guy who likes to get under the bonnet and fix the problem. If a predecessor has already tried and failed, he's all the keener.

For someone in such a big job - this is BA, a company not so long ago regarded as an unofficial extension of the Foreign Office and whose bosses can still expect a knighthood in due course - he is exceptionally approachable. He clearly enjoys spending time with the cabin crew and other front-line staff in our party - not a prospect every FTSE-100 boss would relish.

Perhaps as a result of his years hanging around crew rooms, he does a nice line in self-deprecation. 'People ask me how I went from being a pilot to the chief exec of BA. I can tell you it wasn't by design. I didn't have a grand plan, I was just fortunate to have great opportunities along the way.' There must be a big ego in there somewhere, but for now it's well hidden.

Determination remains in good supply, however. He admits that the timing of this trip has been difficult and that colleagues pressed him to cancel, or to cut it short. But once his mind is made up, it's made up. 'This has been in my diary for a long time and I really wanted to do it. To be successful, you have to be a good corporate citizen; that means working with the communities you serve. We have a great record at BA, but I think we have been too quiet about it,' he says. Decisiveness or obstinacy? Probably both.

The standard interview description of him is 'boyish' but that's not quite it. He's compact and energetic alright, but like a featherweight boxer, not a child. His buzzcut hair and chaotic teeth complete the Barry McGuigan impression.

And like the Clones Cyclone, he can use kid gloves as well as fighting ones when the occasion demands. Across town at the Wailes primary school, on roads that are bad in the dry and probably impassable in the wet, Walsh mingles with the teaching staff and some of the 1,600 pupils who Unicef has helped provide with clean drinking water. Relaxed and garrulous, he has got his foot on the soft pedal. But every 20 minutes or so he disengages and gets out his BlackBerry or mobile phone, visibly back into CEO mode. You don't have to hear the intense conversations or read the e-mails to know that you wouldn't want to be the underling who disappoints.

Having worked his way up through the ranks of Aer Lingus at breakneck pace - co-pilot at 19, union rep at 21, management at 27 - his shot at CEO came in October 2001, just a week shy of his 40th birthday. The company was in terrible shape, losing £2m a day in the aftermath of 9/11. Few in the industry thought it would survive. 'I never applied for the CEO's job at Aer Lingus; I was offered it because no-one else wanted to do it,' he says in his soft Dublin brogue.

Even to insiders, the job looked like a poisoned chalice. 'One of the directors said to me: "Willie, are you fucking mad? You realise that if you get this wrong your career will be over?"' He took the job anyway. Relishing prospects that others dread is a Walsh speciality. Next day, he had to stand up in front of the assembled staff and announce 2,000 redundancies - 33% of the workforce. 'People say to me that it must have been hard to do that, because a lot of those people were my friends. But it wasn't, because I had no choice. Either a third of them went or all of them would have done. It was that bad.'

It was this period that made his reputation as a turnaround king and earned him that 'slasher' sobriquet - not only for the job losses he oversaw but also for his ruthless disposal of non-core assets, including several subsidiaries and the company's art collection. He left when the Irish government rejected his privatisation plans, and doesn't like his nickname much. 'It was only ever the Brits who called me that,' he retorts. 'Aer Lingus needed radical surgery, that's why I did it. I was proud we could turn it around when everybody predicted we would go out of business.'

When he got the BA job, it was the logical - if far from inevitable - conclusion of a career spent grasping nettles that others preferred to leave untouched. 'Good opportunities don't come up very often, and when they do you've got to take them,' he says. 'I tend to be the kind of guy who says yes and then thinks about it afterwards. I think I've got most of those calls right.'

His first success was a big one. He sorted out BA's £2.1bn pension deficit, negotiating tough new contribution deals with all the unions - something that predecessors had failed to do. (The deficit is climbing again, thanks to the credit crunch.) Yet despite this and other wins, a relentless succession of baggage and security crises at BA's Heathrow base stole his thunder.

Then came the revelation that senior BA execs had engaged in fixing fuel-price surcharges with rivals, leading to the hasty departure of commercial director Martin George and communications chief Iain Burns, who face fraud charges. The fact that they were apparently shopped by arch-rival Virgin in return for immunity from prosecution fans the flames of that fiery relationship. Walsh has publicly condemned all anti-competitive activity. But it is not the first time that BA execs have been caught at it - the firm had already been fined £250m by the OFT for colluding with Virgin over fuel surcharges on at least six occasions between 2000 and '06.

But all this seems barely worth illuminating the seatbelt sign for in comparison with the events of spring 2008. The disastrous opening of BA's new Heathrow base at Terminal 5 clashed spectacularly badly with its best set of financial results for years. Intended no doubt by the PR planners as a double celebration, the twin stories of superhuman incompetence, delays and chaos on the one hand and booming profits and operating margins on the other combined instead to create a perfect storm of outrage and vitriol from passengers and press alike.

Caught on the hop, it looked for a while like Walsh might be forced to quit, despite having boosted profits by 45% and upped margins to an industry-leading 10%. It took the controversial firing by Walsh of two senior staff, operations director Gareth Kirkwood and customer service head David Noyes, plus his announcement that he was forgoing his £700,000 bonus, to regain the upper hand - just. Not, as he himself has since admitted, his finest hour. But he insists that it's all behind him now. 'T5 is working great, better even than we thought it would. The impact of those first few days has given us all the encouragement we could ever want to make it so.'

Walsh - who describes his management style as 'brutally honest' - is proud of his ability to tackle hard truths head-on. But even he met his limits during T5's first calamitous days. 'I find it more rewarding to give out bad news, because you are showing people respect by being honest with them. They may not like the message but they respect you more for giving it. But standing up in front of the cameras to take the flak was a very uncomfortable thing to do, let me tell you.'

The rumour mill suggests that he came within a day or two of losing his job, that BA chairman Martin Broughton - another tough nut - was sharpening the knife in case he had to cut his CEO loose. Yet throughout, Walsh refrained from pointing the finger at the terminal's owner, BAA. 'I would have loved to point out some of its failings, but I couldn't see any value in it. We had got things wrong too, and there were a lot of angry customers out there. They buy their tickets from BA, not BAA, so we had to deal with it.'

Even now, with BAA facing enforced break-up at the hands of the Competition Commission, Walsh seems uninterested in revenge. 'We don't care who owns the airports, but a break-up would be a big distraction,' he says.

This is in stark contrast to the views of his compatriot Michael O'Leary, CEO of Ryanair, who can hardly contain his delight at the news. Over the years, O'Leary has called BAA's management 'Keystone Cops'. He has been similarly outspoken on the subject of competing with BA, saying: 'We want to beat the crap out of them.'

Walsh knows him well - O'Leary's office was just over the road from his own at Aer Lingus. 'I don't always admire the way he does things but you have to admire what he has achieved. He is abrasive in public, that's just the way he is. You're always waiting for the punchline and you have to take what he says with a good pinch of salt.'

Away from the media glare, it seems that O'Leary is not quite the self-styled 'opinionated little bollix' he would have us believe. 'One-on-one, he is a nice guy to chat with,' says Walsh, adding that the Ryanair boss was one of the first to send his support when the BA flight 38 Boeing 777, inbound from Beijing, crashed short of the runway at Heathrow in January.

The airline industry's capacity to deliver such life-threatening shocks as the flight 38 crash is one of its more dramatic quirks. 'The first phone call was bad, it always is,' says Walsh. 'The information is sketchy and you're getting less than half the picture. But if you're afraid of those kind of phone calls you shouldn't be in a job like this.'

And despite the enormous lengths that everyone involved in the business goes to in order to stop them happening, crashes - especially ones where everyone on board walks away - are exciting, raising the pulse of the organisation like nothing else. 'I don't go looking for these situations but I do relish them when they come up. It's a great test of the way you run your business - can you cope? There's nothing like seeing people pulling together towards a common goal.'

This man really loves his job, warts and all. He's probably a bit obsessed by it. He cheerfully admits to being a workaholic - less of a badge of pride in these days of work/life balance. 'I'd be lying if I said that money isn't important,' he says, 'but it's not the main thing. I do it because I love it. I hate holidays; you can only read so many books. I find it more relaxing to be at work.'

He even lives right under the Heathrow flight-path, in Twickenham. What do his wife Caragh and 13-year-old daughter back home make of it all? 'They are used to it,' he says, with a smile.

Back at the hotel, we're chatting over a beer by the pool. Given the economic climate, is he not tempted to curtail BA's involvement in Change for Good, or the £7m of other charitable projects the firm funds every year? On the contrary, he says, they must be protected. 'We have to raise the profile of our charity and community work in order to protect it. It's important externally, but also internally - to be seen to be supporting your people. The risk is that if nobody sees what you are doing then it is easy for it to get cut.'

Reflecting on this sentiment, as well as on our earlier conversation about the invigorating side-effects of plane crashes, I join the hotel checkout queue next morning. What if BA46 from Dar es Salaam should become another flamboyant exercise in corporate motivation? Ahead stands Walsh, checking his bill, querying something he didn't have from the mini-bar. I ask the standard end-of-exciting-foreign-trip question: is he looking forward to getting back to the office? Instead of the standard sardonic reply, he spins round, up on the balls of his feet, eyes flashing. 'Oh yeah, I can't wait,' he says.

He means it, too.

Find out more about Change for Good at www.unicef.org.uk/changeforgood

Three challenges facing Walsh
1. To brace BA for the coming financial onslaught, through cost control and strategic alliances
2. To make utterly certain that nothing else goes wrong on his watch at T5
3. To take his family on holiday

WALSH in a minute
1961: Born 25 October, Dublin
1978: Joins Aer Lingus as cadet pilot
1983: Pilots' union rep, Aer Lingus
2001: Chief executive, Aer Lingus
2005: Chief executive, BA
2008: Forgoes £700,000 bonus over botched Heathrow T5 opening

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