British Airways CEO Alex Cruz says he is preparing the airline for disruptive innovation, no matter where or how that originates. Graham Newton reports
Is British Airways where you want it to be?
I’m happy with the airline’s performance in comparison with some of its peers in the market.
But I’m not happy that we’re still a long way from realizing our full potential. The aim is to transform the airline into the best in the world.
We have the tools, we have the people. But we’re not yet where we need to be. To get there we have to continue enhancing our internal processes and effectiveness.
We want to be smarter together, leaner together, and faster together. There is a lot of value that remains locked within BA. We need a platform that will allow the airline to address the many issues facing it.
What is the strategy to give British Airways that platform?
Our strategy is built on four pillars; customer, operations, efficiency, and people. All underpinned by digital and technology.
For example, there are a number of network themes brewing, all of which are very relevant.
To begin with, we acknowledge that there are now successful long-haul, low-cost carrier (LCC) operations. That means we must continue leveraging our strength in the US market to compete across the North Atlantic while we continue to become more efficient.
We will continue to extend the BA product and brand to more regional airports
Distinct summer and winter schedules is another theme. A process which started last year, we introduced new leisure destinations from Heathrow successfully.
So, this year we will increase frequencies and destinations in the summer.
In addition, we have some flexibility with the Embraers at London City that will allow us to better utilize the UK’s regional airports, including Bristol, Birmingham, and Manchester. It’s not a huge volume and we’re not going to base aircraft at those airports yet.
But we will continue with this strategy, extending the BA product and brand to a few more regional airports.
How important is fleet development to competing successfully?
British Airways is a large airline with a large fleet. That means fleet renewal is a constant process. This year is quite unusual in that we have only one Boeing 787-900 arriving.
But we also have Airbus A350-1000s, Boeing 787-10s and A320neos on order. We’re really eager for these aircraft to arrive although that won’t start to happen until 2018.
They’re vital for reducing operating costs and improving environmental performance. It’s likely that some of our 747-400s will make way for the new aircraft.
Although two-thirds of our 747-400 fleet have been refurbished and they look like new to our customers, the fact is that many of them will reach the end of their service life over the coming years.
You have an entrepreneurial background. Can you drive through the change required at a traditional, legacy airline quickly enough?
I spent 10 years at American Airlines before Clickair and Vueling so I have been exposed to a big airline. It’s true, though, that BA must drive through innovation and improve the time to market for new products. But that is a challenge for all the 45,000 people working at the airline.
We have to be effective and continue to roll out new products because we must compete against premium carriers as well as against LCCs.
In the modern market, the ideas of three or four years ago are no longer valid
But BA is not short of innovators. The airline brought the flatbed in business class to the market, for example.
That spirit has not been lost but, clearly, it needs to surface quicker and more often. Because, in the modern market, the ideas of three or four years ago are no longer valid.
We have to facilitate our innovative spirit by evaluating ideas quicker.
Give an answer, even if the answer is no. Manage expectations, but don’t sit on ideas. The company is always listening.
What technologies do you see as important going forward?
There is tremendous interest in New Distribution Capability. We’re already seeing benefits and we’re keen to explore where that capability can take us.
Then there are technologies that are enabling us to improve such areas as on-time performance and engineering. We are testing an electric pushback vehicle at Heathrow and designing new handling procedures around this technology with our local teams that will revolutionize the narrowbody turnaround time.
But new technology is really about the customer experience and that experience has to start before you even know you want to travel.
A new BA app has been developed that will be fully rolled out by the end of the year
As a channel, mobile is taking more of our time and investment, even in the inspirational area.
A new BA app has been developed that will be fully rolled out by the end of the year. It will contain functions not seen in an airline app before.
We’re also developing a lot of technology around our Avios program. The number of partnerships and ways for customers to accumulate and spend miles is increasing all the time.
Then there’s a lot of obvious technology, such as self-service boarding and self-service lounge access.
At Terminal 5 at Heathrow, for domestic flights you can now go from your car to your aircraft seat using fully automated processes. And again, we will roll out this ability in the months and years ahead.
Technology is the basis of the pillars of our business plan.
Is partnership the only way forward for an airline?
All forms of partnership—be it a codeshare, a joint venture, an alliance, an equity stake or a full merger—will always play a part in our industry’s future. It is up to each airline to evaluate the value behind the degree of partnership being explored.
BA has all types of partnerships. We have an equity stake in Comair in South Africa, we are part of oneworld, and we are owned by the International Airlines Group (IAG).
All these types of partnerships are valid and relevant, and we will continue to see them being implemented across the industry.
Of course, consolidation in Europe has not happened at the same level that it has happened in North America as regulations are different, but I suspect the industry will continue to look at all options available. IAG provides the perfect platform for growth in this respect.
Where would you like to see British Airways in 5–10 years’ time?
BA will be a smarter, leaner, faster airline. I would want us to be seen as the most transformed airline and the best fit for the market.
We will have responded to customer needs and be the best prepared for any disruption. Those disruptions might be big or they might be small.
They might even come from within BA and/or IAG. The airline has been a disruptor in the past. It has been the first to take many products to the market, particularly among the legacy carriers.
We will still fly, there will be seats, and you will get many services on long-haul. But what will be important is the ability to respond to the ideas that are being developed by entrepreneurs in garages today.
Is there enough fresh CEO talent to help you drive through innovative, even disruptive, changes at the industry level?
I did my thesis on the application of digital technologies for small and medium companies back in 1990.
I often feel that “digital” is in my DNA. I have a cartoon on my desk where I am explaining to three robots that they “just don’t get digital.”
But remember, I started with American Airlines so I had an injection of legacy too.
I understand the challenges and I’m privileged to have the opportunity to take BA to the next level. It is about knowing what is mission critical and then moving beyond that.
Our industry is being challenged out of its comfort zone by many younger new entrants. And not just airlines!
The fact is, by its nature, we don’t know what disruption is coming or when. But I do know that the innovation being seen in consumer technology today will affect big-brand companies.
Airline experience is still important for a CEO. It’s good to know about pilots, cabin crew, and operations; the intricacies of our industry ticket distribution; and the complexity of airspace issues as well as many other aspects of aviation.
But I’m sure there are many CEOs out there who could be effective, especially once they combine their understanding of other business elements with industry knowledge. It is about being relevant, particularly in the digital space.
Our industry is being challenged out of its comfort zone by many younger new entrants. And not just airlines! Acknowledging this reality together will help us understand how to be better prepared and respond faster.