British Airways Highlights Record Year

Keith Williams, chief executive of British Airways, talks new routes, new aircraft and the perfect airline CEO. Graham Newton, Editor of our official route development magazine, Routes News, reports.

How was 2014 for the airline? Are you optimistic that the industry is returning to steady growth and profitability?

It was a good year for British Airways. It started well with the strength of our brand being recognised when we won the Consumer Superbrand for 2014 – beating the likes of Apple, Coca Cola and BMW. Other things that stand out for me are the sheer scale of aircraft delivery and change. We received 22 new aircraft and changed the cabin configuration of 51 A320s. This stands us in good stead for 2015 and was a vital pre-requisite for continuing growth at the airline.

We launched six new routes from Heathrow, five from London City and four from Gatwick and we carried more customers than in any year since 2001.

What are your priorities for 2015?

In short, making sure we deliver on our promises and fulfil our profitability targets in both long and short-haul. We have exciting opportunities to increase profitable flying from all our London airports and to work together to really focus on delivering a punctual, reliable operation and outstanding customer service. Life in today’s globalised economy doesn’t allow anyone to rest on their laurels. The journey toward establishing and maintaining a consistently successful business has no finishing post. Change is the new constant.

Tell us about your route development strategy. What is working well and what destinations are on your wish list?

Our route development strategy is, on paper, quite straightforward. We analyse the markets we don’t currently serve and look at what our customers and competitors are doing. We then crunch the numbers and analyse the commercial and operational requirements that need to be in place to make the route a success. Our route to Austin illustrates this quite nicely. We started operating there in March 2014 after extensive investigations. This route is doing very nicely and we are pleased with its performance. In terms of our wish list destinations, well, that would have our competitors rubbing their hands with glee! However, we’ve made no secret of the fact that we’re interested in the emerging economies and always looking for opportunities to add to our network.

How does the alliance and your various partnerships affect the way you develop your network?

Being part of an alliance is essential to expanding the BA network while retaining our customers. It means that customers can continue to be rewarded for their loyalty to us while flying on partner flights to destinations, which are not in sufficient demand for us to fly to directly. A good example of this is the codeshare we announced with our oneworld alliance partner Qatar Airways last year. We have put our code back into Pakistan and Tanzania via Doha, both places to which we no longer fly. And it works both ways – any expansion of our direct flights will similarly benefit our partners. We need only look at the previously mentioned route to Austin to illustrate this: American Airlines customers now have a direct link from Austin to the UK and beyond with the start of this new route.

Are the A380s and B787s performing as well as you hoped?

Introducing new aircraft can be challenging and the B787 and A380 arrived just days apart. But we’ve been pleased with their performance. We’ve had some excellent customer feedback, particularly for the A380, and we continue to introduce the 787 on new routes to great acclaim. This year, we will be introducing one new A380 to our fleet and five 787s – including our first 787-900, which will boast one significant addition; our next generation First cabin.

Give us an insight into the infrastructure at Heathrow – what does T5 give you and what does the lack of a third runway take away?

Terminal 5 is a wonderful facility – and it’s not just us that thinks so. It is the current holder and five-time winner of the Skytrax best terminal award. While Heathrow has lost ground to competitor hubs such as Dubai, it still remains one of the busiest airports in the world and despite its well documented shortcomings, we make the best of it. Yes, its lack of runway capacity makes it vulnerable to disruption after even minor incidents but with IAG’s acquisition of bmi, we still have growth potential.

We have always said that there is an overwhelming need for additional, affordable hub capacity in south-east England. This is imperative if the UK is to maintain its position as a leading global competitor. However, what we are lacking is the political conviction to act in the national interest and expand capacity where it is most required, and at a price that is worth paying.

At least progress has been made on airport charges at Heathrow. What is your relationship with the airport like?

As a tenant of the world’s most expensive hub airport, we are always going to be a demanding customer. We want value for money for all our passengers and we want to get an excellent service for our considerable outlay. Having said this, we have a good working relationship with Heathrow – this is an essential pre-requisite for achieving our needs.

How important is Gatwick to your strategy?

Our operation at Gatwick is on an upward trajectory, even in the face of stiff competition. We have put the foundations in place for sustainable growth, with new routes and new aircraft. Customer numbers are growing and we’re making huge strides towards a more competitive cost base. By the end of 2016, we will have a new home in the airport’s South Terminal – this is an exciting opportunity for us to ensure our customers have state-ofthe- art facilities as well as direct access to trains that run to and from central London. Gatwick is our second biggest base and, as such, it is hugely important.

Air Passenger Duty (APD) in Scotland will be halved before being abolished entirely. Where does this leave the rest of the UK?

The Scottish Government has got it right. It is estimated that APD costs Scotland £200 million per year in tourism alone.

APD is a ridiculous tax and the sooner it is abolished, the better. And it’s not just tourism that’s affected – trade connections and wealth generation is curtailed by this self-defeating tax. But removing or reducing APD from

Scottish airports would see passengers travelling across the border from northern England to take advantage

of cheaper air fares. This will distort competition and you would see airports in Newcastle and Manchester demanding similar freedom from APD. And the Welsh Assembly would want it for Cardiff, which would upset Bristol. There could be a domino effect that starts in Scotland and ends in Westminster with a total wipe-out of APD – an Absolutely Pointless Duty.

Does the UK government understand the value of aviation? Why is there is no coherent aviation policy?

The value of aviation is quite clear to anyone who wants to listen. It is a sector which contributes £52 billion to UK GDP, pays nearly £9 billion in tax and supports upwards of 200,000 jobs. It is also an industry that is acutely aware of its responsibilities, particularly towards the environment. However, it seems to have become a political hot potato that successive governments are reluctant to encourage, unlike virtually every other national government. Nevertheless, we will continue to beat the drum for aviation, delivering a great service for our customers, all the while seeking ways to improve our environmental and financial performance.

Tell us a little bit about the British Airways brand. Do you keep it consistent across the globe and multiple platforms or do you take a “horses for courses” approach to each market?

Our brand values are not diluted or changed to fit different markets for the simple reason that they are universal: To Fly. To Serve. These words describe the passion and expertise that we demonstrate to our customers every day, everywhere. Of course, certain aspects of our marketing or communication are adapted to suit different countries and cultures – for example, food and drinks choices, social media platforms, and new technology roll-out. But our core standards and iconic British style remain the same.

What makes a good airline chief executive officer? Do you think it is important to have specific knowledge of the aviation industry or is it the same as running any other business?

One part soothsayer, one part financial whizz kid, plenty of customer insight plus a dash of optimism – and you’ve got your perfect airline CEO. Aviation is not the same as any other business. It is very heavily regulated, there are severe restrictions on where you can trade, it is uniquely vulnerable to external shocks and, historically, profit margins are low. That’s why the optimism helps!