Ailing airline

Robert Ayling has made several controversial decisions as chief executive at BA. If the slump in profits continues, the company may look to replace him. Lucy Killgren looks at possible successors.

The appointment of a new chief executive at an obscure national airline would not usually warrant front page news coverage in the British press. So the attention that Rod Lynch has attracted as chief executive of Greek national carrier Olympic Airlines is, on the face of it, quite remarkable.

Lynch was appointed by British Airways consulting arm Speedwing, which has won a contract to run Olympic from the Greek government. He has the unenviable task of turning round a loss-making operation, stamping out Olympic’s reputation for poor service and pacifying a workforce, already aggrieved that a British executive will be telling them what to do. Yet he left his role as chief executive of BBC Resources smiling last month to take up his new position.

There could be a good reason for his optimism. One senior airline executive says: “Lynch would not have taken on this role unless BA had promised him something.”

The belief among some observers is that Lynch is one of several senior BA executives being groomed as a possible chief executive to replace Robert Ayling. Ayling’s position is looking increasingly rocky as BA lurches from one crisis to another. Some analysts believe he could leave within the next six months.

Apart from Lynch, other names suggested for the top BA job include: Peter Owen, Guardian Royal Exchange’s group executive director for the UK and Ireland, who is former operations director of BA; Barbara Cassani, chief executive of BA-backed budget airline Go, who was instrumental in the new airline’s launch; and Charles Gurassa, a BA board member and director of passenger services and cargo business, who has experience of the deregulated American market.

There is little doubt that Ayling’s stewardship of the company has been troubled in recent times. His handling of three issues – tailfins, industrial relations and alliances – has set observers wondering how long he will remain in the position.

Public eye

A BA spokeswoman denies that he is under pressure to leave: “He is here for the duration.”

But one City transport analyst says: “I would not be surprised if he left in the next six months. The company has been in the public eye for more negative than positive reasons. Everything from the tailfins to the ground dispute to the BA American Airlines alliance he has failed to deliver on. These are areas where a more prudent stance would have stood him in better stead.”

His extraordinary tailfin “world” designs left BA looking unsure of itself. The brightly coloured tailfins were controversially introduced in 1997 at a cost of &£60m in the hope of boosting the company’s global credentials.

The move was too much for former Prime Minister Margaret Thatcher, many members of the public, senior BA managers and shareholders. Last month the Union Jack was reinstated and it was announced that BA was returning to the more traditional colours of the Union Jack on half its fleet.

A bitter dispute with cabin crew in 1997 and the ensuing strike knocked &£125m off BA’s profits for the year and has been a thorn in Ayling’s side. He has been heavily criticised for the way he handled the dispute, whose effects are still felt on company morale, which is described as being at an all-time low.

Lastly, Ayling underestimated the reaction of the regulatory authorities to his planned alliance with American Airlines, which after two years finally ran out of steam in October. Ayling was forced to scale back the alliance, limiting co-operation between the two carriers to a deal to share information on through-ticketing. This has also come under scrutiny from US officials. Previously, the airlines had hoped to pool marketing and airport handling costs.

Profits nose-dive

Pivotal to Ayling’s future, could be the next set of interim results, due in August. One City analyst says: “They are well flagged to be bad, not least because of an oversupply in the transatlantic market.” When Ayling revealed the last set of results in June – the worst for six years – he denied he was under pressure to resign, saying: “We have done very well in the circumstances.” Profits slumped by 61 per cent in the last financial year by &£355m from &£580m to &£225m, but after allowing for profits on disposals, the underlying figure nose-dived to &£177m.

Another factor is the imminent retirement of BA chairman Lord Marshall, 64, who is more and more involved with other interests, such as championing the euro. He chairs the pro-single currency pressure group Britain in Europe and is involved with the CBI. These factors, or his retirement, may tempt him away from Waterside – BA’s swanky new HQ at Heathrow.

Possible successors

“If Marshall retires, Ayling’s days look numbered,” says a former colleague. “He has made too many enemies and too many mistakes. In addition, Michael Angus (deputy chairman of BA and chairman of Whitbread) never took to him and there are few on the board who would defend him.”

Among possible successors to Ayling, Lynch looks like the frontrunner. One former colleague says: “His experience at the BBC proves he can cope with a large workforce and is capable when it comes to union negotiations. He is charismatic and carries staff with him. He is extremely well-rounded from operations to marketing and has the gravitas to be accepted by the BA board.” And with six months to a year fully immersed in the industry at Olympic, he would be in a strong position.

Another potential candidate is Gurassa, who has a high intellectual profile within and outside British Airways. One former colleague described him as a “bit of an egg-head”.

But doubts have been raised over his ability to control such a sizeable business as BA. “He was regional general manager of the Americas in the early to mid-Nineties. He is experienced in this market and strategically aware. However, he does have a tendency to intellectualise and perhaps analyse too much.”

Departure

Princeton-educated Cassani, chief executive of BA’s budget airline Go is in the running, but at 39 may be too young and inexperienced. She is credited with being a brilliant strategic thinker. An American woman as chief executive for BA would certainly be a turn up for the books.

Guardian Royal Exchange deputy chairman Peter Owen is another candidate. He left BA in 1990 and later became chief executive of Aer Lingus. He is described as a man of the people, who has come up through the ranks.

Or BA could look to the US for expertise. A senior American executive at one of the airlines would bring valuable insights from the deregulated US to Europe as it drags itself towards open skies. An American Airlines executive might even come on secondment to BA. However, this could prove risky if the BA/AA alliance falls by the wayside.

What happens at BA’s next set of interims will be crucial. When Ayling sees in the millennium at his pet project, the Dome, he may not be chief executive of BA. But if he is, he may well be wondering whether he will still hold the position in 2001.

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