Willie Walsh, chief executive of British Airways’ parent IAG, will be grilled by top investors this week over the handling of a 48-hour pilot strike that is set to wipe more than £80m off the profits of the UK’s largest airline.
British Airways on Tuesday will be forced to ground another 800 flights as a damaging walkout by its pilots enters the second day, with chief executive Alex Cruz admitting for the first time that the unprecedented strike action would “punish” its brand.
Shares in IAG dropped 3 per cent on Monday morning as BA cancelled almost all its 1,700 flights over the two days, hitting 195,000 customers. One top-10 shareholder admitted “you do get concerned” about the situation.
IAG management has meetings with top shareholders in the coming days as part of a prearranged investor roadshow, according to people briefed on the plans.
One fund manager, who did not wish to be named but confirmed he would attend one of the meetings, said he had already been “engaging both face to face and in writing with the chairman about a number of concerns at IAG from labour relations through to customer satisfaction [and] brand perception issues”. IAG declined to comment.
No new talks with the union have been scheduled to resolve the next walkout, planned for September 27, with BA and the British Airline Pilots’ Association still battling over the terms of a pay deal.
The airline has offered pilots a pay increase of 11.5 per cent over three years but the union wants a bigger share of company profits.
One BA first officer, who did not want to be named, said pilots believed BA’s pay was “out of kilter” compared with other big European airlines such as Air France-KLM and Lufthansa.
In a statement on Monday, BA said it remained “ready and willing to return to talks” with the union, which also said it was ready to start negotiations. A failure to resolve the dispute could lead to more strikes throughout the year.
Lawyers for BA said in a court hearing in July that strikes would cost about £40m a day, while analysts at RBC on Monday said the estimated daily cost could be £50m.
With only five BA flights planned on Monday, Heathrow’s Terminal 5 was almost deserted. In other terminals, passengers who had rebooked journeys with other airlines said they faced unexpected stopovers and shortened trips. The few passengers who turned up for flights were quickly offered seats in the BA lounge for staff to offer alternatives.
Mr Cruz refused to comment when asked by the BBC whether his job was at risk. The strike comes after a damaging cyber attack on BA last year and IT problems this summer that hit hundreds of flights.
“It’s going to punish customers, it’s going to punish our brand, it’s going to punish the rest of our colleagues,” Mr Cruz said. “It will also punish the pilots that want to come to work everyday to make it the best airline in the world.”
The strike action will also affect BA’s service on Wednesday, with dozens of flights cancelled as the airline restarts its London routes.
“Investors should be concerned about what’s going on at the company,” said Tom Powdrill, head of stakeholder relations at shareholder adviser Pirc. “Whenever you get to the point where workers go on strike something has gone wrong.”
He did not think the strike would cause investors to put pressure on the chief executive but added: “By definition a strike is a management failure.”
Although all passengers have been offered refunds by BA, many had been left out of pocket by incurring additional expenses while others said they missed important meetings.
Dr Heather Sugden, a lecturer at Newcastle University travelling with 16 students on a marine biology field trip, has had to rebook direct flights originally scheduled with BA to Cancún.
She said the new journey, via Miami, cost £250 extra per person and included a stopover than meant students must obtain and pay for ESTA visas. The party have cancelled cultural visits booked as part of their trip owing to the extended travel time.
“We spent the best part of two days trying to figure out how to fix the situation,” Dr Sugden said. “At one point we thought we’d have to cancel the whole trip.”
IAG’s shares finished the day down 1.7 per cent at 422.7p.
Additional reporting by Tanya Powley