British Airways celebrates its centenary this year. But the glory days of the 1980s when it dubbed itself “the world’s favourite airline” have receded into history and its reputation is no longer flying high.
Even the airline’s chief executive has no illusions about the company after 20 years of cuts and sporadic debacles, including a worldwide IT failure that grounded flights and an enormous data breach that affected nearly 400,000 customers.
“There’s a lot of people . . . who have become disenchanted,” said the airline’s boss Alex Cruz, who took over as chief executive in April 2016. But over breakfast at the Langham hotel in central London, he is carefully optimistic.
“Ever so slowly, we’re moving in the right direction, finally,” he said, as a £6.5bn investment programme, which includes new planes, lounges and seats with direct aisle access in its long-haul business class, bears fruit.
“We understand what the past has been, we understand the net effect of really bad events like the power disruption or the hack attack . . . but this is not stopping us from continuing this investment programme.”
It is not just the big disasters of last year’s hacking scandal or the worldwide computer failure of 2017 that have undermined the airline’s reputation.
Ageing aircraft, the end of complimentary meals on some short-haul flights, the packing-in of seats in its long-haul business class and even the removal of fresh flowers from the bathrooms of first class, a decision that has since been reversed, have hit the airline’s standing.
Some of BA’s leading former executives, including Sir Rod Eddington, who ran the airline between 2000 and 2005, and ex-head of public affairs David Burnside, have echoed Mr Cruz’s concerns over the company’s decline in the eyes of its passengers in interviews with the Financial Times.
Sir Rod, who now lives in Australia, said he has “always resisted the temptation to pass judgment on what’s happened since I left, since I’m so far away”.
But he does note that BA “has slipped quite substantially down the rankings” of top global airlines as it has been overtaken by carriers such as Middle Eastern groups Emirates, Qatar and Etihad from wealthy Gulf states.
Last year it did not make the top 20 airlines for business class services, which it had built its reputation on in the 1980s, according to worldwide rankings by consultancy Skytrax. Since 2011, its highest position in the world’s top 100 airlines rankings has been 17th. The last time it won the consultancy’s World Best Airline award was 2006.
Mr Burnside said: “I don’t see the advertising, the excellence, I don’t see the excitement in BA. The Middle Eastern airlines ooze quality. BA has ended up six, seven out of 10.”
This is a far cry from the 1980s. David Kershaw, who helped devise BA’s advertising campaigns for 23 years, first at Saatchi & Saatchi then at rival M&C Saatchi, said the dynamism of 1980s chairman John King and chief executive Colin Marshall matched the UK’s economic confidence, boosted by the deregulation of London’s financial markets in 1986’s Big Bang.
BA’s booming business class reflected and embodied this mood. “It wasn’t empty swagger,” said Mr Kershaw. “It was swagger with substance.” In 1987, on the first day BA was privatised, its shares gained 68 per cent.
But this swagger veered into overconfidence and landed the airline in court.
British business tycoon Sir Richard Branson, who built up Virgin Atlantic to rival BA in the 1980s, successfully sued the carrier for a “dirty tricks” campaign in 1991-92 against Virgin. BA gave in and paid £610,000 in what was at the time the largest uncontested libel settlement in Britain, hitting the airline’s reputation.
Sir Richard said of the campaign: “It was brutal and they went to extraordinary lengths to put Virgin out of business . . . They were behaving like a national airline that nobody should have the right to compete with.”
It was just after this time that the low-cost carriers, such as Ryanair and easyJet, started to squeeze BA in Europe.
Sir Rod, who took over from Bob Ayling as chief executive in May 2000, said: “When I arrived, it was a break-even business: its long-haul business made about £300m a year and its short-haul lost about £300m a year.”
Under Sir Rod, BA began to learn the lessons of the “no-frills carriers”. He said the company started to make better use of technology, with a user-friendly website, and refocused on the “simplicity” of being a full-service network airline, cutting loose random subsidiaries and repairing its balance sheet.
By the time he stepped down as chief executive in September 2005, pre-tax profits stood at £620m and a cost-cutting programme, which he had inherited and overseen, was having a positive impact on the finances of the company.
This cost cutting has put the company on a stable financial footing today and ahead of some of its rivals in terms of profit margins. BA’s operating margin in 2017 was 13.7 per cent, whereas the Lufthansa Group’s was 10.3 per cent.
“Compared to 10 years ago, BA is in a better place, it is much more profitable than it was and it is delivering that profitability in the face of a competitive market,” said Andrew Lobbenberg, analyst at HSBC.
But critics say successive BA chief executives, including the current boss of BA’s parent group IAG Willie Walsh, went too far with the cuts. Mr Walsh was even dubbed “Slasher” for the enthusiasm with which he wielded the axe.
Rory Boland, travel editor of consumer publication Which?, said BA “feels like it’s an airline almost in search of an identity these days”, declaring itself premium even as it pinched the pennies.
Mr Cruz defends “the decisions BA rightly has taken over the last 20 years, guaranteeing that we now have the money to spend” on improvements.
But the challenges BA faces, 100 years after predecessor airline Aircraft Transport & Travel first launched scheduled services, are great.
Its ageing fleet, which has prompted criticism from some customers, will require expensive replacement over several years. The average age of BA’s 747 jumbo jets is 22 years and they will not be fully retired until 2024.
The threat of a third runway at Heathrow, expected in the late 2020s, will dilute its dominance at London’s international hub and reduce its advantage over rivals.
And laurels such as being one of only two airlines with supersonic Concorde planes, which could fly from London to New York in less than four hours, half the time of conventional jets, have long since been lost. BA ended its Concorde flights in 2003.
Mr Kershaw thinks the carrier is an analogue for the state of Britain. The sense that the nation has lost its way as the clock ticks down to its EU departure has parallels with feelings towards the flag carrier, he said.
“A huge part of Margaret Thatcher’s philosophy [when she was prime minister in the 1980s] was to make people feel great about being British. And feeling great about BA was intrinsically linked with that.
“At the moment, there’s probably a confluence between people not feeling great about Britain the way they did and not feeling the same way about BA. Let’s hope both soar again.”
How ‘dirty tricks’ campaign undermined BA
BA’s “dirty tricks” campaign against Richard Branson’s Virgin Atlantic in 1991-92 was a big setback for the national flag carrier.
The airline faced competition from Sir Richard’s airline after it won valuable slots at Heathrow, BA’s main base, and challenged it in business class travel.
People working for BA accessed Virgin’s computers and rang up its passengers pretending to be Virgin, persuading them to switch airlines.
BA even had people going through the bins at Heaven, a nightclub Virgin owned, looking for drug paraphernalia, according to Sir Richard’s account in his book.
He sued BA and chairman John King, forcing the airline to settle in January 1993.
In the largest uncontested libel settlement at that time, the company paid out £610,000 to Sir Richard and Virgin, as well as costs of £3m, acknowledging the campaign and apologising.
Today the matter still rankles with some of those involved.
David Burnside, BA’s former public affairs chief, said the company made “a tactical mistake of caving in on a defamation case which gave Richard Branson a Christmas present he didn’t deserve . . . There is no doubt it damaged the reputation of British Airways. Branson was a very capable publicist and really milked it for all he could.”
Outside court in 1993, Sir Richard said: “We survived British Airways, but only just.”