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British Airways needed a new pilot but IAG remains grounded

A change of management follows a challenging 2020 for all airlines, but a number of problems specific to BA in recent years

International Consolidated Airlines Group -

The changes at the top of British Airways announced by International Consolidated Airlines Group SA (LON:IAG) were hoped to help the British flag carrier make a new start.

These changes were not that surprising, City analysts said, considering group chief executive Luis Gallego has been in charge since early September.

READ: IAG says British Airways boss to step down with immediate effect

In his first public change since taking charge, Spaniard Gallego has forced compatriot Alex Cruz to step down as BA CEO and brought Irishman Sean Doyle over from the group’s Aer Lingus airline to replace him.

After an Irishman, Willie Walsh, was replaced at the helm of IAG, this change at BA may have balanced the proportion of Northern and Southern Europeans in key roles in the boardroom.

Gallego also promoted Fernando Candela, with whom he worked closely with at IAG’s budget carriers Iberia Express and LEVEL, to a group-wide role of chief transformation officer.

The changes are, said analyst Susannah Streeter at Hargreaves Lansdown, a sign of the new boss “flexing his muscles and trying to demonstrate he’ll make the changes necessary to lead a sustained recovery for the airline group”.

While it partly reflects Gallego “styling the group”, analysts at Peel Hunt said a change of management style was needed as BA had faced “a number of airline-specific problems in the last few years, including a pilots strike and IT issues”.

With more than 6,000 BA workers having accepted voluntary redundancy, Cruz received severe criticism after the airline then let another 4,700 staff go in August.

The Commons transport select committee accused BA of making “a calculated attempt to take advantage of the pandemic”, saying the behaviour the airline and its parent company towards its employees was “a national disgrace” and “falls well below the standards we would expect from any employer, especially in light of the scale of taxpayer subsidy, at this time of national crisis”.

Cruz argued that the airline was in a “fight for survival” and was not expecting passengers to return in the same numbers for some time.

Trade union Unite said Cruz’s departure was unsurprising, with assistant general secretary Howard Beckett saying “the handling of industrial relations through this crisis has been unnecessarily confrontational and at times heartless”.

“The harsh reality is that BA’s fire and rehire policy, exposed by Unite, caused untold and unnecessary misery to thousands of loyal employees. These brutal industrial practices has seen the reputation of BA damaged on an international scale.”

The union said it hoped Doyle “will begin a new chapter of constructive relations with staff and unions, repair the reputation of the airline and boost the morale of staff”.

Doyle will certainly have his work cut out to make immediate progress, said Streeter, given that BA is “facing the toughest challenge in its history as demand for international travel has plummeted and quarantine restrictions continue to constrain bookings”.

Doyle worked at BA during most of Walsh’s reign before he was promoted to CEO of Aer Lingus, which had performed well prior to the coronavirus pandemic.

It was interesting, suggested analysts at AJ Bell, that IAG hasn’t appointed someone from outside its group to lead the British airline subsidiary as that really could have introduced radical thinking.

“By promoting an internal candidate in the form of Doyle, IAG has opened the door to new ideas but also kept the safety blanket of someone who already knows the group inside out and is unlikely rock the boat when it comes to business culture,” the AJ Bell analysts added.

“British Airways has historically relied on business travellers for a large part of its revenue and it now faces the prospect of significantly reduced demand from this customer base.

“The fact video conferencing has become second nature to people at work thanks to lockdown means that companies will be taking a hard look at their travel budgets and questioning whether meetings in different cities or countries is worth it.

It was suggested that Doyle will have to take dramatic measures, such as slashing prices, to lure these business travellers back or find a new way to keep its planes full once the coronavirus pandemic abates.

Quick facts: International Consolidated Airlines Group

Price: 160.85 GBX

LSE:IAG
Market: LSE
Market Cap: £7.99 billion
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