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Thursday, October 22, 2020

Alex Cruz Stands Down As British Airways CEO

In an unexpected announcement on Octobr 12th Alex Cruz, who became Chairman and Chief Executive of British Airways in 2016, is stepping down to be replaced by Sean Doyle, currently CEO of Aer Lingus, who previously spent 20 years at BA.

I have known Alex Cruz since he was CEO at Click Air, a low cost subsidiary of Iberia, which merged with Vueling, another low cost airline, where he subsequently also became CEO.

At that time, I came to know an energetic boss who led a dynamic, growing and profitable airline, held in high regard by his young team.

Move from Vueling to British Airways

Moving to British Airways, Cruz had a clear remit to bring his skills in low cost management to further improve the airline’s own efficiency as it faced not only growing low cost short haul competition, but emerging threats from long haul low cost airlines, such as Norwegian.

Some suggest that cost cutting was his only objective, but this neither matches reality nor recognises the achievements which he has delivered whilst at the airline.

Challenges

There have certainly been difficulties over the past four years. Several IT failures hit the airline and a data breach compromised customer information. To blame Cruz for these is simply lazy. In part legacy systems, which arguably should have been upgraded or replaced years earlier, failed by chance on his watch. A data breach, whilst far from acceptable, is not unique to BA nor to other airlines or indeed other industries. Alex Cruz is highly tech savvy and interested in technology, if anything he was upping BA’s game in this arena and moving it more fully into the digital arena.

Tackling low cost competition

UK media lambasted his decision to take off complimentary catering on short haul flights and to introduce a buy on board product for food and drink. The reality is that what catering remained prior to this move, had already become very limited, as BA had to respond to low cost carriers taking the lion’s share of short haul traffic with lower fares. Cruz recognised the need to fight like with like, low prices supported by a reduced cost base. Surprise surprise traffic went up and short haul routes, traditionally loss makers, became profitable. But this was not simply a “dumbing down” exercise as is sometimes claimed. For those willing to pay, BA improved its European business class and added it to domestic services, something it had not done for decades.

Making up for lost time on long haul business class

On long haul, critics argue BA’s product had become inferior to that of many competitors, especially the Gulf carriers. In my view the airline had its eye off the ball for several years here, having failed to invest and it fell to Cruz to make up for lost time. 

He made the case for the product specification including new seats, lounges and much superior catering, but putting right something of this magnitude has a long gestation. The fruits of these efforts, along with a significant cycle of new aircraft deliveries, would have become increasingly evident in the years ahead and maybe still will, had the Covid-19 crisis not intervened.

Bitter union battles

With the airline virtually grounded and haemorrhaging millions of pounds a day, the crisis dictated further action to cut costs, resulting in fierce battles with unions. An initial lack of recognition of the long term seriousness of the crisis by some unions led to a high profile campaign against the airline rather than getting quickly to the table to negotiate a way forward.  This led to further criticism of Cruz which he was only able to rebut and to explain the magnitude of the challenge, in an appearance before UK MP’s at the Commons Select Committee on Transport in September.

I believe it will only become apparent at some future point exactly how significant Alex Cruz’s time at British Airways was in protecting both the airline’s future and the livelihoods of a large number of its staff in what are tumultuous times for the whole industry.

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