Interview – Nick Tait

As part of the new move to a dynamic new management style, regional offices of the airline have been converted into individual profit centres. T his means that the buck stops in Sydney for services to Australia and New Zealand. John Spiers spoke to Nick Tait, General Manager of UK-Australia/New Zealand, about the changes.

JS: Well, you are back at your desk today from holidays. All things considered, are you sure this is where you really want to be, or would you rather be somewhere else?

NT: No, I think this has to be the place to be. I feel fairly optimistic for the immediate future.

JS: There have been some major changes in the style of management at British Airways. Can you tell me briefly why the changes were made and what difference is there in the style of management?

NT: Talking in fairly broad generalities, the previous style has operationally oriented The organisation we introduced last July is very much marketing orientated. The rationale is a very sensible one. We are a serviceindustryandunlessyouareintouch with your market, you’re not going to succeed. We have responsive to what our customers say, and if possible anticipate what they want before they say it.

JS: Part of this reorganisation has meant that you among others head your nonprofit centre and the buck stops with you instead of with London for operations over a fairly wide region. What does this allow you to do that you couldn’t have done under the old management system?

NT: A fairly difficult question to answer because there’s a question of how the roles themselves have changed on the one hand and then in a more personal sense how that actually affects me. We did have a route structure before and general managers in charge of them but there were fewer of them. As far as this area was concerned, services from the UK to the South Pacific were one part of the Greater Orient Division which. included everything east of Suez right through to the Pacific, Tahiti, Japan and so on. It was a very large division.

Now that division has been broken into three profit centres with the general managers much more responsible for the business wherever it may come from than was the case in the past. In the past, BA managers tended to be responsible for the countries that actually fell within their division rather than for all sales areas that could generate revenue for their route. Now we are just as as interested in what is going on in the UK selling to Australia as we are selling outbound to the UK. That’s quite a shift in the way the job is perceived.

The second part of it, the more personal side, is that historically all general managers and senior management of the company have always been in London. The philosophy that we’re trying- and it looks to be quite successful – is to locate the general managers away from London at the oppositeendoftheirroutestructure. This is not always possible. It makes no sense in Europe to have somebody living in Spain who is responsible for Italy. There are only three general managers living overseas and they are inprettyimportantareas-the Far East , based in Hong Kong, Australia/New Zealand, basedin Sydney, and the Americas where the general manager lives in New York. Hopefully, this creates a balance between the needs of meeting head office requirements and having all one’s staff in the head office, but also, on the other hand, being much closer to the market place and having a better appreciation of what the passengers using your services are actually going to want.

JS: One of the stated aims is to be more responsive to what the customer wants. I was also interested in another phrase which popped up, that the changes ‘made possible the departure of 70 senior executives. ‘ What changes are you making? There have been a number of changes to business class and other initiatives – your free flight into Europe from London and things like Sydney Auckland and back in a day – you’re the only airline that can offer that.

NT: Each department centre bids for capacity from the flight operations department and we have to develop business plans that are going to produce internally competitive returns. My bid for resources must succeed against counter bids from other market centres, and because we’re broken up into smaller profit centres, it is easier to focus on revenue opportunities than it might have been in the past. There has to be a degree of internal debate on plans that Australia would see as being suitable to Australia and the impact those might have on the Far East profit centre. This sort of thing has to be resolved, but it enables each profit centre to look parochially and in great detail at what its opportunities are and how people can exploit those opportunities. That has to be worked through conflicting requirements of other market centres, then built into an overall plan which hopefully will produce a better result for everybody. That certainly has been the experience of the current rescheduling we have just been through.

JS: So you now have the authority within your region to vary the amount of capacity available, obviously within the limits of the air services agreement.

NT: Yes. The market centre is in the end responsible for the way it does business as a kind of mini business within the greater operation of the company. That includes pricing as well as capacity decisions.

JS: Do you see any relative direction for your capacity as a result of this- hopefully upwards naturally, but would there be circumstances in which you might reduce capacity?

NT: We’ve been through a period where we reduced capacity to Australia and New Zealand in two ways – one by cutting frequency and by reducing our Asianterminating flights. Putting some of those calls onto Australian services has reduced capacity by putting on more intermediate traffic. One way of increasing capacity here of course is to re-introduce terminating services into Asia which would free up available capacity into Australia and New Zealand. I see this as the first stage – a gradual increase of capacity rather than frequency. We will increase this coming year from April.

JS: What sort of changes will be perceptible to the traveller evaluating your services against those offered by other airlines, wJ,at sort of things will be obvious in the marketplace?

NT: First of all I think we have be much more punctual airline. The aircraft are a lot cleaner, there’s much more effort being put into the appearance of the aircraft, so that’s a good starting point, and of course, if you are on time, this gets a better crew attitude. Through the reduction in staff numbers and the voluntary severance scheme, a very large number of crew who were perhaps bored with the job or less satisfied with the job left. In total, some 23,000 staff have left British Airways in the last few years. All staff have had the opportunity to leave on generous financial terms and it is fair to say that the 36,000 now on the payroll are there because they are committed to the success of British Airways. Those attitudes are already corriing through on the aircraft, and on comments we are getting back from passengers. We are listening,_! think, much more closely than we have done in the past, to what our customers tell us they want and the introduction of Super Club is a good example. The businessmarkethassaidthat it wouId prefer to pay more to get ahigher standard ofcomfortandseNiceasaclassbelow First Class. Similarly in First Class, we are just putting in new seats-we have a considerable programme of making the inflight catering more interesting and more exciting, not only in First Class but starting in First Class with the Great Chefs of the World programme – we’ve got various Australian restaurants involved in that. In fact, we’ve just won all the major awards at the HotelOlympiacatering exhibition in the airline category and that’s against all the major European and Asian airlines. Overall, we are re-emphasising the product passengers look for in an airline – the journey from A to B – and improving the comfort of that journey.

JS: What are your major problems in Australia?

NT: In scheduling terms, our problem is in providing the right sort of service to Sydney and Melbourne. In Australia, we have five international gateways and we also serve Auckland on flights that come through here. On nine frequencies a week, it isn’t very easy to provide a better service to Perth, Adelaide, Brisbaneandalessgoodservice to Melbourne and Sydney. What we need to work on is how can improve our service to Sydney and Melbourne, and at the same time maintain a good service to the other cities. Orie way of improving matters of course is dropping some of the intermediate calls. But even then you’vegot to strike a balance between fast end-to-end services with what is a very major market requirement for stopovers.

JS: I read recently some figures that over the past three years, British Airways has dropped 62 sectors, 25 stations and three maintenance bases. Has this affected your operations to and from Australia and what other cities are you likely to drop?

NT: I think, in the sense of impact on Australia, the very positive impact has been significant internally, particularly the centralisation of Reservations in Sydney. We have reduced our Australian staff by about 25 per cent to 148 through natural wastage. In terms of closing stations or for that matter opening new routes, I think very much decisions ·individual market centres. If a to be unprofitable and with little prospect of getting it profitable, then it must be considered tobe dropped, but I’m not aware of any that are in that category now. . I think with the lower cost, the introduction Of more efficient aircraft such as the 757s and 737s, some of the marginal routes are probably looking much better than they were on the bottom line, and as the western economies pick up, then hopefully is translated into an improvement in passenger demand. The North Atlantic is certainly very buoyant and looks set for an exceptional year. It is unfair to say that all British airlines are awaiting the CAA review of British civil aviation policy and I don’t think we are likely to know much about that before the middle of the year. So in a way, that review may influence future opportunities and areas ¼hat we could exploit. In the short term, there are things going ahead. Concorde is being extended to Miami as you know. The 757s gradually spread further afield. The 737s are coming in to replace some of the aider Tridents and by the end of next year will replace all of them. We will start flights to our 14th USA gateway Baltimore on May 14. Some of the Western Canada, suspended as a part of the cost-cutting, are under review, insomecasesfor summer operations rather than year-round services. And particularly with the economic buoyancy in North America, there are some opportunities that we might not have seen in the last two years.

JS: The recent over-booking problems in Singapore have highlighted a peak-period capacity shortage. I know the Australian Government has an aversion to charters, however you choose to describe them, but is there not potential for charters to Australia on a seasonal basis?

NT: We see no benefit in charters at all.

There could be some peak period short ages and infact I guess it’s the reciprocal a lot cutting your capacity when the demand falls away. As you know, a year or so ago Qantas cut back a couple of services to the UK in the latter part of the northern winter. The difficulty on a route like this is that the booking and particularly planning lead times are quite long and if you are talking about a multi-sector operation from Europe to Australia, it isn’t that straightforward to mount additional frequencies, particularly at short notice. It is not easy to look into a reservations system, say two weeks ahead, and identify that you need extra services. One advantage of the old Apex fares, which have been scrapped here, wasthattheydid enabled airlines to better judge what kind of capacity was required because people booked much further ahead. Over the last couple of years when demand has been down as well as the abandoning of Apex, people have been booking much later – they’re still planning a long time ahead – but the airlines are finding that aircraft are filling up at very short notice. There’s a lot of capacity on this route as you know and as I’ve read the papers over the last week, there’s obviously been a problem in Singapore where people have been turning up and there have not been seats, but I don’t recall that happening in the last two or three years. If this illustrates a pickup in demand, then more capacity will be provided. Qantas has 18 services between Singapore and Australia a week and yet they’ve had the same problem and that’s with an enormous amount of capacity. You really can’t plan for a very pointed peak. It’s very expensive if you do, it’s going to put up air fares because you are going to have then to carry a lot of those extra costs during the slack times.

JS: To get back to the more general ideas of new British Airways, how style of management?

NT: I think it is a new idea. I’m not aware of any airline that has tried locating its head office management away from its head office in the way that we’re currently doing. All my immediate head office staff, for example, are in London and I’m the only one who is actually here. Everybody else here in Sydney is part of the Australian area as opposed to my market centre and that clearly requires some sharpening up of communications.

JS: What kind of improvements have you made?

NT : We have installed facsimile equipment and hopefully we will bring online the BA computer management information system. This will enable me to monitor how the business is doing far more rapidly and accurately than I can at the moment. Currently I have to rely on paper whereas I will be able to key in to the London computer from my desk here. Instead of having to phone my people in London and say ‘Well, what are we doing about this, that and the other, what’s the latest information?’ I’II be able to look at it during the day here and because of the time difference, we will actually operate almost 24 hours between my two offices.

JS: One recent BA initiative is a staff bonus scheme. I understand that once the operating surplus passes a trigger level – £150million-thestaffreceivea week’s pay and another week’s pay for every additional £50 million surplus. Will this scheme be applied in Australia?

NT: The company’s intention is to apply the bonus worldwide, subject of course to prevailing local conditions making this possible. Our financial results so far this year indicate that a bonus should be paid.

JS: There was a time when British Airways, as a private corporation, would have been insolvent. As I understand it, the British Government has guaranteed loans to British Airways; without these, it would not have had the ability to get the funds to carry on. What point do you hope to reach to make British Airways attractive to private ownership in terms of equity and financial return?

NT: The Government stood as guarantor for the the loans but the loans were all raised on the commercial market. We’ve never actually had Government handouts which is a popular view that is put around. I think the results of the last 18 months have enabled us to reduce the debt quite significantly already, so if you like we are trading our way out of what was a very unhealthy situation of maybe two years ago.