Walsh spells out cost-cutting drive

Thursday, 25 Jan, 2006 0

British Airways chief executive Willie Walsh has pledged to relentlessly strip costs from the business as he vowed to aggressively target direct sales.

In a speech to the Guild of Travel Management Companies, Walsh said he “made no apology” for wanting to drive 50% of its business online.

He told agents that agencies must “live with the financial consequences” of an industry in which “competition has never been so intense and consumer choice never so great.”

But he assured the GTMC that BA was still committed to working with its members.

Walsh revealed that cost cutting remained his number one priority at BA and warned that rising fuel costs would continue to hammer the industry.

“Our fuel bill has gone up a third this year, in cash terms £500 million, and it is almost certain to rise significantly again as hedging benefits unwind,” said Walsh. “The blunt truth is that there is very little we can do.

“We must bring down costs that are within our control if we are to maintain a profitable business and that means evaluating everything we do, assessing whether activities can be done more efficiently or done at all. Costs do not leave a business – they must be driven out.”

He said a recent 35% reduction of senior and middle managers would save £50 million.

“To put the cost battle in perspective that represents just 10% of the growth of this year’s fuel bill,” he said.

BA’s escalating pension fund deficit was a major focus, he added.

Turning to sales and distribution, Walsh said it remains “a very significant cost” despite seeing sales through the travel trade fall from 85% to 65% in four years.

“I make no apology for saying that our objective is to raise ba.com’s share to 50% and to use the website to market our products directly and enhance customer service by completing check-in and other airport processes online,” he told agents.

But it still left the trade “a great deal of business,” he added.

“Air travel consumers owe no-one a living,” continued Walsh. “All of us, airlines and agencies, have to live with the financial consequences of an industry in which competition has never been so intense and consumer choice never so great. We must all change to survive.”

Report by Steve Jones