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What did Alex Cruz say to the House of Commons Transport Committee yesterday?

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Yesterday Alex Cruz, Chairman and CEO of British Airways, appeared before the House of Commons Transport Select Committee to give evidence on ‘Coronavirus: Implications for Transport’.

This is the second time this year that British Airways has been grilled by MPs this year. In May, former IAG CEO Willie Walsh gave evidence in front of the same committee on behalf of British Airways.

Alex Cruz British Airways CEO

It’s not clear why Walsh put himself forward at that time, given that the majority of questions were regarding British Airways and not IAG as a whole. This time, Alex Cruz was on the line and to respond to 2.5 hours of the committee’s insightful but occasionally meandering questioning.

Much like in May, Alex Cruz had one particular message that he wanted to get across: that securing the future of British Airways would secure tens of thousands of British jobs.

The majority of his answers were framed in respect to one uncontestable fact. British Airways is currently operating at between 25% and 30% of 2019 capacity.

Last week, 187,000 passengers flew versus just under one million last year. Weekly changes to the travel corridors list, no testing solution at airports and APD were all ‘quite challenging’ for the airline. Cruz does not predict the ‘short term return of our passengers’ whilst these problems remain.

Alex Cruz Transport Select Committee

Fire and rehire off the table

Back in May, Willie Walsh steadfastly refused to respond to questions about the ongoing consultations with staff. Alex Cruz had a lot to say regarding potential redundancies at British Airways.

Whilst initial Section 188 paperwork indicated the potential for up to almost 13,000 staff redundancies, Cruz hopes it is closer to 10,000. 7,200 people have already left in July and August.

The good news is that initial proposal of ‘fire and rehire’ appears to have been avoided. Since the initial notification, progress has been made with the trade unions on changes to existing terms and conditions.

Cruz gave the impression that legacy and Mixed Fleet cabin crew will remain on separate contracts rather than becoming a unified fleet, although with far more similar terms and conditions than previously.

(One rumour is that legacy crew will NOT have a ‘stand down (with no pay)’ clause in their contracts – unlike Mixed Fleet – which means that Mixed Fleet will lose out if temporary working is required.)

This was welcomed by the committee. although ‘fire and rehire’ was likely only ever a worst-case scenario that BA used as a blunt instrument.

Alex Cruz said that the new agreements will have a maximum pay reduction of 15% for legacy crew when taking into account basic pay and allowances. This is significantly lower than the 70% pay cuts that Unite and GMB said would be the case for some staff in their very public BA Betrayal campaign.

The majority of these changes have either been agreed or are currently out to ballot.

Permanent changes to contracts

When questioned whether permanent changes to pay, terms and conditions were necessary versus temporary solutions, Cruz insisted that the only way to guarantee the survival of British Airways – and therefore British jobs – in the long term was to make permanent changes to staff working conditions.

This is on the basis that the Covid-19 pandemic is significantly more severe than both 9/11 and the 2008 financial crisis, from which business travel still hadn’t recovered by 2019.

Cruz argues that “all the data points to permanent changes” in the aviation industry and that temporary pay cuts would simply be kicking the can down the road.

Management have also taken haircuts, with 5% to 20% pay cuts depending on seniority. Cruz himself took a 33% pay cut and has not received a performance bonus for 2019, with likely ‘no bonuses for many years to come’.

Cruz DID manage to avoid answering the question of whether management would face permanent changes to their pay and conditions.

British Airways Gatwick Airport narrow

London Gatwick

No decision has been made about Gatwick yet, with British Airways taking a ‘wait and see’ approach to demand. At present a limited number of Caribbean flights are taking place, with short haul consolidated at Heathrow.

Heathrow Covid-19 testing

Travel corridors, testing and APD

Looking to the future, Cruz singled out three specific issues that are extremely disruptive to rebuilding the British Airways network. The lack of significant regional considerations was also a problem, although the Government did give regional guidance for seven Greek islands last week.

In particular, a regional approach to testing would be necessary to re-open travel with BA’s largest market, the United States. “We cannot wait for the last US state to reach the correct levels”.

As expected, Cruz called the last minute changes to travel corridors “incredibly disruptive” and called on the Government to implement a testing regime for arrivals in the UK.

He said that British Airways would be willing to help in any way it could to set up test trial between London and New York, the most profitable airline route in the world.

BA has been lobbying Government with other industry bodies to move towards a scheme involving two tests: once on arrival and once five days later.

Regarding APD, Cruz suggested it was not right that a domestic flight was taxed more highly than an international flight due to Air Passenger Duty being levied on both legs.

Slots

There was also some discussion regarding the rollover of the slot waiver into the winter season and whether this would simply encourage slot-sitting.

British Airways is currently using around 20% to 30% of its total slots, or 12.5% of total Heathrow slot capacity.

Cruz is hopeful for slot relief this winter and “possibly for the summer season next year” which is further in advance than most of the discussions I have seen on the issue.

Fundamentally, however, Cruz defended BA’s slots by arguing that if the Government were to strip the airline of some of its slots it would effectively be destroying British jobs.

Cruz cited the fact that 95% of slots re-allocated in the last 3.5 years have gone to foreign airlines, with 83% going to Chinese carriers. The implication was clear: protect British Airways and British jobs or risk surrendering UK routes to foreign carriers.

Refunds

Whilst the heat regarding refunds has begun to subside, the committee did briefly delve into the subject.

As of last week, British Airways has processed a total of 2.1 million refunds and 1.6 million Future Travel Vouchers.

When grilled why refunds could only be processed over the phone, Alex Cruz argued that “complex itineraries” meant they could not automate the process: “the only way we can do that is face to face or over the phone”.

To be perfectly honest, it would have been good to see the MPs grill Cruz a little harder on this topic rather than let him get away with this lazy and deceptive answer. The BA website had no difficulty in processing refunds before March 2020.

Conclusion

There was very little that was new here, despite 2.5 hours of discussion. It was a more conciliatory session than the one with Willie Walsh, which is more in keeping with Cruz’s own personality and approach.

Comments (54)

  • RussellH says:

    There was a big article in one of the Sunday Papers – Times or Observer – profiling Luis Gallego who has now succeeded Walsh as boss of IAG.
    Not insignificant speculation that Alex Cruz may be on the way out of BA – it was suggested that Gallego would like to see BA move upmarket again.
    Obviously I have no idea if the journalist in question actually knew what (s)he was talking about…

    • marcw says:

      I doubt Alex Cruz is on the way out.

      • Rob says:

        Depends what Luis is planning. In general, the people who are passed over for the top job (and technically Alex should have got Willie’s job as BA is the bigger airline) usually leave quickly rather than work for someone who they believe has leapfrogged them. Cruz also doesn’t have much of a background in premium.

        That said, we have seen the First Wing, Club Suite, Club Europe on domestics and the new Do&Co catering so it hasn’t all been a race to the bottom.

        • Opus says:

          I doubt he’s leaving though. Lest we forget Luis started at IAG in 2013. Alex and Luis used to work together at Clickair and then vueling. The reality is that. Alex has done more for BA than Willie Walsh and kieth Williams combined. New lounges new seat BOTH in club and first coming on line soon. Do&Co. It’s obvious Alex wants BA to be the best airline but with WW breathing down his neck he could only do so much. With WW gone now I think we will see even more positive changes to industrial relations and customer experience. And I could also see that from his interaction with the committee. Lest we forget after he came in and made super cuts that’s when the board finally approved an investment in BA. Now with short haul food offerings. It’s been free since the coronavirus started and just like a la carte in lounge is here to say. I suspect that is here to stay too

      • Nick says:

        I also doubt Alex will be leaving any time soon. The role is a poisoned chalice, no one else will want it, at least on the terms that would be available at the moment. He’s paid lower than many equivalent CEOs and takes significantly more aggro. Plus BA still (sensibly) has a ‘one in, all in’ policy for bonuses, so if the CEO gets one then everyone does… and that won’t be the case for a while so they can’t bump it up that way. Now really isn’t the time to get someone else up to speed. Don’t get me wrong, I dislike him as much as anyone, but he’s around for a good while longer.

    • ChrisC says:

      If Gallego wants to take BA back upmarket then that does not preclude Alex staying on.

      He’ll just do what he’s told. Might be difficult but he’s not stupid and can adapt.

      Not sure that whoever is boss of BA should just move to be boss of IAG as Rob suggests just because BA is bigger. IAG was supposed to be a merger not a takeover.

      It would make being in charge of IB a less interesting job if you preclude them from the possibility of the top job. Also being a good airline CE does not mean you’ll be a good CE of a holding company.

      Perhaps what should be the case Is that the IAG chair is a different nationality to the CE.

      • marcw says:

        I believe Alex Cruz has also a British passport. He has been living in the UK for decades.

      • Novice says:

        TBF, BA have always charged high prices despite having one of the worst biz/first class products in the market. So, if you all are right that they want to actually bring it into this century and actually improve everything then what prices will they charge for the flights? Are they planning on x2/x3 the price they already charge?

        And, Alex did bring in all the improvements so far so he should get the credit for that.

        Why don’t ppl like Alex Cruz here? I have nothing against him as I don’t like/dislike ppl who I don’t really know. He’s just doing his job and I think he hasn’t done bad, coming from the experience he came with.

        BA was a dated product for ages. You can fly on ME3 for a fraction of the cost they charge. Especially for solo travellers who have a lot of time on their hands, none would ever choose BA over ME3 or some of the Asian airlines. I have flown more on Lufthansa than BA by choice.

        I was flying regular BA when I was flying with parents who were adamant they wanted to get everywhere direct from UK.

        • marcw says:

          I honestly believe Cruz has done an excellent job – BA flies more passenger than ever, flies to more destinations than ever, they are updating and upgrading their product, new lounges, no premium services… you can’t do everything in one year, especially when BA had such an old premium long haul product.

          • Josh says:

            A lot would disagree with you about Cruz doing an “excellent job” …IT failure after IT failure…BoB on European flights…and the “cost cutting is in our DNA” approach.

          • Novice says:

            @Josh, but a lot of the things you mention seem to actually be the wider holding company’s fault probably. I don’t think Cruz is to blame alone for those things. Personally, I don’t have an issue with BoB on short flights as a lot of airlines do it and if someone really is starving in a few hrs flight, then they should fill up before boarding or pay up. I haven’t flown BA for shorthaul for a few yrs now because I tend to like to try out different airlines so just use the airlines of whichever country I’m going to eg. TAP for Portugal but having said that I’ve mostly been touring far flung countries for years now.

            I don’t know this so it is a genuine question; Do BA provide food to biz customers on shorthaul or are they expected to BoB?

          • memesweeper says:

            Free food and drink at the front on BA short haul

          • Novice says:

            I really don’t know what is everyone complaining about then. Surely, they can’t be expected to give food to Economy passengers on short-haul. Having said that, they could give water though I guess and tea/coffee.

          • Rob says:

            Er … BA did do this until about 5 years ago, and even 2 years ago it was drinks (inc alcohol) and crisps / biscuits.

            Is that realistic in today’s market? Given that I saw one-way flights from Gibraltar to Heathrow for £14 in Economy the other day, clearly not.

            A bigger problem is that BA’s buy on board is, nutritionally, dire. easyJet and Ryanair do at least have fresh / hot options.

          • Anthony Dunn says:

            If you fly in Club in short haul, then yes, you do receive something to eat and to drink. I cannot vouch for UK domestic but if you can get (pre-SARS CoV-2/Covid-19) a full meal in a 35-40′ flight between LCY and RTM, then longer sectors can certainly manage it. Catering had actually begun to improve after quite a dip a few years ago, following the appointment of Do&Co for more and more of the inflight catering. As I am entirely embargoed (owing to my wife’s treatment regime) from any flying right now, I cannot comment on the current state of affairs.

          • Opus says:

            I also find it interesting that when BA does something everybody likes (club suite, lounges, new food, new bedding) that has nothing to do with Alex Cruz. But ONCE it’s the other way it’s definitely Alex Cruz…

        • BlueThroughCrimp says:

          Good for you, but don’t include me in your “none”. I’m happy to avoid the ME3 thanks.

      • Lady London says:

        Taking BA upmarket would be a fool’s errand.

        Maybe, just maybe, on rich routes like NYC, Barbados/Caribbean, Nice etc., they could market a new ultra-premium service, and quietly drop First from all the rest.

        BA currently owns English-speaking lower-to-middle aspirational and it’s a superb defensive position. Why in h*** would BA want to compete with the likes of QR J.

  • Rajan says:

    Fire & rehire wasn’t used because all the staff have taken at least 21% permanent pay cuts with at least one further cut in 2023 ( something to look forward to ! ) Contracts left untouched but the T&C’s have been changed so have all work practices . Walsh/Cruz planned this a decade ago, walsh must have thought he won the lottery when covid struck a month before his retirement . Cruz is not a people person , completely out of his depth & should have never been put in charge of BA .

    • Doug M says:

      Do you have any evidence of this decade old plan? To be honest your entire post reads like random rant. Do you honestly believe that BA think Covid is a win because it allows them to restructure contracts?

      • Novice says:

        Covid 19 did seem like a win at first to some. But, take it from someone who lived a pre-covid life similar to post-covid, it’s not the blessing we all initially thought. Because, there’s no freedom of choice now. So, Walsh might have thought initially that it might be a blessing but the fact that BA is flying at such low capacity is never good for business so I think there is nobody running an airline in the world at the moment who thinks that this pandemic was a win.

      • Spursdebs says:

        Love your avatar Doug.

  • Novice says:

    @Rhys and @Rob thanks for taking down those comments…Much appreciated…

  • Chrisasaurus says:

    Find it very hard to to take Alex seriously without his hi-viz on…

  • memesweeper says:

    🙂

    WW looked terrible for his last appearance for parliamentary scrutiny… bad background, camera angle, headphones, everything looked shite

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