Walsh set to continue cost reduction at British Airways

Willie Walsh, who is to become the new British Airways (BA) chief executive, has promised to continue the work of his predecessor…

Willie Walsh, who is to become the new British Airways (BA) chief executive, has promised to continue the work of his predecessor, Rod Eddington, particularly in relation to cost control.

Mr Walsh said he did not expect a radical departure from the path chosen for the airline by Mr Eddington. He said cost reduction would continue to be a key issue for the airline, particularly in the current environment of high jet fuel prices and falling yields.

However he strongly denied any suggestion that his move to BA could result in Aer Lingus being taken over by the British carrier.

"There is a long relationship between the two airlines, seen in recent years in the One World Alliance. But the relationship between the two companies predates me, so there is no connection between my appointment and the relationship between the two companies," he said.

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Mr Walsh (43) will officially take charge in September. The details of his remuneration package have not been disclosed by BA, although Mr Eddington had a basic annual salary of €806,000.

Mr Eddington, an Australian, and Mr Walsh, a former pilot, both experienced serious difficulties at their airlines in the wake of September 11th. In Mr Eddington's case, a large number of BA planes were grounded in Canada after the attacks. The resulting climate of fear dealt a severe blow to first-class traffic across the Atlantic.

Mr Walsh, who took over shortly after the terrorist attacks, managed to cut the airline's costs by 30 per cent. The airline's staff numbers were also cut by one-third. In the past few years, Mr Eddington has reduced his airline's staff numbers by 13,000.

It is understood that BA chairman Martin Broughton is a big admirer of the way Mr Walsh managed to reverse crippling losses at Aer Lingus and believes he can continue the work of Mr Eddington.

His statement yesterday gave a sense of this: "Willie has an outstanding reputation in the airline industry around the world for the way in which he transformed the fortunes of Aer Lingus from a high-cost underperforming carrier into a successful and profitable entity."

Aviation analysts believe Mr Walsh will be given clear instructions by the BA board to keep a tight reign on costs. With jet fuel prices showing no sign of abating, the other obvious cost area to be examined is staff.

However, the industrial relations climate at BA is far from harmonious. Last year a wildcat strike took place leaving thousands of passengers stranded and BA management seriously embarrassed.

However, Mr Walsh's job has been made slightly easier because senior BA managers such as John Rishton, the chief financial officer, have already set the airline's stall out and said that costs will have to come down.

Another major decision Mr Walsh will have to make is whether to re-structure BA's short-haul operations.

These have been under pressure in recent years, particularly services not operating out of Heathrow, the company's base. Many of these routes use inefficient aircraft and some analysts suggest Mr Walsh might seek to reduce these routes in favour of boosting long-haul traffic.