Dinos Kyrou - Lobbying in the European Commission: The Case of Air Transport

DINOS KYROU

First published 2000 by Ashgate Publishing

Reissued 2018 by Routledge

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Copyright Dinos Kyrou 2000

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ISBN 13: 978-1-138-33932-3 (hbk)

ISBN 13: 978-0-429-44112-7 (ebk)

Bob Ayling resigned from his position as Chief Executive of British Airways on 10th March 2000. The press argued that there were at least two reasons for his decision; the 1997 cabin crew strikes, and the possible imminent announcement of a financial loss for the airline. Bob Ayling jumped before he was pushed, it was widely claimed. If true, the pushers would have been the institutional share-holders who control a large chunk of BA (as well as many other large firms listed on the London Stock Exchange), and the non-executive directors who were clearly getting nervous about the bad press that both Ayling and BA were getting. However, let us not forget that only a few days later these same institutional share-holders were valuing Lastminute.com, an internet firm with the turnover of a petrol station and losses of over 1.5 million Euro (US$1.6m) a month, at over 1 billion Euro. Indeed, it was in the long-term interests of such share-holders and directors that Ayling seemed to have been acting. The recent losses were typical of most airlines; the 1998 collapse of the south-east Asian economies led to massive over capacity and a slashing of economy fares (Virgin Atlantic, a rival to BA, claimed that it had made a profit during this time. However, as Virgin does not publish its accounts, establishing the validity of this claim is somewhat difficult). Further, oil prices had more than doubled in 1999 (a flight from Heathrow to Manchester, only 200 miles, uses over 16 000 Euro of fuel). Ayling decided that the future profitability of BA lay, not in attracting low-yield economy passengers, but in selling to the right kind of passengers, i.e. the high yield, business passengers, or the full fare economy passengers; much better to do this, and to improve profitability, than to go for growth in absolute passenger numbers. Ironically, this strategy is praised by those in the financial centre of London and by those who follow air transport economics; yet it was these very people who were about to give Ayling the push. Indeed, he has set the ground work for the future profitability of his former airline, but has paid for its past under-performance, despite the fact that, other than maybe softening his stance to the all important air transport unions, there is little more he could have done. Little, other than one important matter which could not have been more badly handled. This issue was the failure of BA to form a trans-Atlantic air transport alliance with the US carrier American Airlines.