AIRLINES, like all firms, have a duty to shareholders to cut costs, if it makes them more competitive and more profitable in the long term. British Airways has been zealous in this regard. Over the past few years, the airline, under the stewardship of Willie Walsh and Alex Cruz, has cut staff, outsourced IT, and removed complimentary goodies from passengers.
They have their reasons. Not so long ago, some questioned whether British Airways could survive the combination of low-cost carriers devouring its short-haul route and upscale Middle Eastern rivals dominating the long-haul connecting market. Both of those challenges remain real (indeed a third previously unforeseen threat has arisen in the form of low-cost long-haul competitors such as Norwegian Air). Still, no one now questions British Airways’ immediate future. Partly as a result of cost-cutting, and a bit of luck in the form of low oil prices, the airline’s finances are rosy. In 2016, IAG, the carrier’s parent firm, reported a profit of €2.36bn…Continue reading
from Business and finance http://www.economist.com/blogs/gulliver/2017/06/share-spoils?fsrc=rss