Saturday, 30 May 2009

Honour and responsibility

So Mr Walsh is going to forgo £51,000 - the salary (without bonus) that he struggles by on each month - as propitiation for leading British Airways into the worst loss of its history.

Not a small part of the record loss must be laid at the fiasco of T5 and its aftermath. According to the CEO, the responsibility for that failure lay with him. The cost to him of that failure? He declined his bonus and demanded the heads of two junior directors. Well that’s alright then.

Failure in the real world impinges directly on those responsible, but not in British Airways. Perhaps football clubs (which shed managers after half a dozen lost matches) are a bit too real-world for a realistic comparison, but do you imagine that Sir Terry Leahy will still head up Tesco if it posts the equivalent of a £400m loss?

Of course the airline has its team of spin doctors, wordsmiths who’ll put a positive gloss on Armageddon if asked. They decreed that the £400m loss was primarily due to the totally unexpected rise in the cost of fuel and the loss of its premium class passengers to other airlines.

That’ll be the same fuel that Virgin, working in the same market as British Airways, had to buy. They’ll be the same premium class passengers who like to travel from airport terminals not shopping malls and on the same aircraft as their baggage.

That’ll be the Virgin that in the same year posted a £64 million profit.

But is it wise to blame the cost of fuel? The implication is that whilst Virgin’s economists bought wisely, BA’s economists bought forward when the fuel price was at its peak, in other words, it’s someone else’s fault.

Taking the blame is a matter of honour. When his Foreign office staff failed to warn Lord Carrington that Argentina might invade the Falklands, he resigned. Can we expect the resignation of anyone in BA? Who knows, but don’t bet on it being the CEO.

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