Aussie rules prove profitable for revitalised British Airways

Mr Rod Eddington is the first to acknowledge that most of the strategy for recovery at British Airways (BA) has little to do …

Mr Rod Eddington is the first to acknowledge that most of the strategy for recovery at British Airways (BA) has little to do with him. When the struggling airline's chief executive arrived from Australia a year ago, a path had already been set by Mr Robert Ayling, his predecessor.

But the lanky and accessible Mr Eddington can claim the credit both for implementing much of the strategy and for improving frayed relations with staff.

Under Mr Ayling, a cooler and more detached figure, service standards had dropped and BA had slipped into loss. The BA board, under siege from the City, sought an alternative approach to management. Last week, Mr Eddington revealed a quadrupling in operating profits to £380 million sterling (€630 million). The underlying pre-tax profit improvement - a turnaround of £480 million - was the best the airline has ever achieved in a year. It has been a gruelling time for Mr Eddington but it has not all been work. He has found time to play cricket with Sir Richard Branson, founder of BA's formerly bitter rival, Virgin Airways.

Mr Eddington played cricket for the University of Oxford while studying there as a Rhodes scholar in the mid1970s. He went on to lecture in nuclear engineering before starting a career in business. In spite of the history of vexed relations between Virgin and BA, Mr Eddington turned out for the Virgin team at a friendly cricket match played on a pitch at Sir Richard's country home.

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"He batted and bowled and saved the Virgin team. It's a nice twist," says Sir Richard, whose regard for Mr Eddington extends beyond sport. "He gets out and talks to the staff, which the previous management failed to do. He is a hard competitor but he is not someone who indulges in underhand behaviour."

Mr Eddington's pedigree in the airline industry has stood him in good stead since he arrived at BA and has earned the respect of senior colleagues. He previously ran Hong Kongbased Cathay Pacific and Ansett Australia, the latter for Mr Rupert Murdoch. He is still on the board of News Corporation.

If anything, Mr Eddington has accelerated some of the moves initiated by Mr Ayling to improve the profitability of British Airways. Several have involved concentrating on more lucrative full-fare economy and business-class passengers and eliminating deeply discounted fares. As part of that effort, the airline has been introducing flat-bed seats in long-haul business class.

Mr Eddington has made some changes to the strategy he inherited. He has set in train the sale of Go, BA's low-cost European airline. He has also dropped the airline's costly attempt to develop Gatwick as a second airport hub. Instead, BA will use Gatwick mainly for short-haul direct flights.

But perhaps his most striking contribution so far has been to ease the problematic relations between BA's staff and its senior management under Mr Ayling. Although the changes he is making are at least as radical as those that provoked unrest under Mr Ayling, industrial relations have remained peaceful.

Jobs are going and businesses are being merged - but with little public fuss. "The changes that are taking place at Gatwick would not have been possible without industrial disruption under the former regime," says Mr Chris Avery, aviation analyst at JP Morgan. "Labour can resist an awful lot of change at airlines."

Just as importantly, Mr Eddington has engaged his senior managers. "Rod is very collegiate. On big issues he gets all his senior staff involved. We all have an input. Bob was more keen to have bilateral relationships with his senior managers rather than a broader discussion. The directors are acting more solidly, more cohesively," says one senior executive at BA.

Colleagues say Mr Eddington has also brought "rigour and discipline" to decision-making and is determined to avoid any sense of drift and uncertainty. Last year's merger talks with KLM, the Dutch airline, are a case in point. Mr Eddington says consolidation in the European airline industry is inevitable. He wants to be in the lead and KLM is probably the best fit for BA. But when he realised it was unlikely to happen, he ended talks to concentrate on operational change.

He has started to tackle the extreme fragmentation of BA's European short-haul operation, still the main source of losses, and has ended BA's flirtation with the low-cost sector. The disposal of Go should be completed next week with its takeover by 3i, the UK private equity group.

"There has been a lot of change without a great deal of fuss. He gets on and makes things happen," says a colleague.

In public, Mr Eddington has revealed a romantic streak. "Forty years ago as a barefoot Australian kid standing in the outback to the east of Perth I used to watch the aircraft vapour trails in the sky," he told an audience last month. "Aviation represented freedom, far horizons and all the opportunity in the world."

Back on earth, however, the challenges are mounting. His first round of wage negotiations with the still-powerful BA unions begins in the autumn. The present rash of pilot strikes at German rival Lufthansa does not bode well. He must take a lead in the approaching battle over new airport capacity in south-east England to secure a future for his overcrowded Heathrow hub.

Mr Eddington must also find a way to secure antitrust immunity for BA's alliance with American Airlines across the Atlantic. "He has made a very good start," says Mr Chris Tarry, airline analyst at Commerzbank. "But the honeymoon period is over. There is a new momentum - but the key is building on that."