Close co-operation between British Airways and its key suppliers will be vital in helping the airline to weather the economic storm, according to its chief executive, Willie Walsh.
Speaking at a Chartered Institute of Purchasing and Supply conference in London, he said the airline needed to find “new opportunities for cost reduction and cost efficiency” and that it had been “talking to key suppliers for some time now” about this.
“We are all going to have to take some pretty tough action,” he told the audience of 120 purchasing professionals. “It’s inevitable that we will look at how to cut back our spend.”
Walsh (pictured above) said he had no problem with using aggressive tactics where appropriate, but stressed that he was not looking for short-term price cuts to shore up BA’s finances at suppliers’ expense.
“Many of our suppliers are strategic suppliers,” he noted. “We need to look, in a new way, at how we work together.
“We recognise with key strategic suppliers that we are working together long term… We have to look to support one another now.”
Walsh said he believed good supplier relations were ones where “you can be tough with one another but shake hands at the end of the day. You need to be fair.”
Asked about his reputation for cost cutting – something that in his previous role as CEO of the Irish airline Aer Lingus earned him the nickname “Slasher Walsh” – he was unapologetic.
“I think you should be genuinely proud to talk about cutting costs,” he said. Eliminating waste, improving efficiency and finding ways to do business more effectively using technology was not something people should be “embarrassed” about. “I’m not.”
But he emphasised that it wasn’t just about price. “Price is very important, but you’ve got to look at what service you get for that price… We do look at the value of the relationship over time.”
Walsh painted a stark picture of the crisis facing his company and industry. A combination of high oil prices, financial turmoil and weak consumer confidence meant BA was having to contend with “the worst trading position for an airline that we’ve ever seen”.
BA’s fuel bill would be £3 billion in 2008 – a third higher than last year, he said. As a proportion of the airline’s cost base, it had risen from 10 per cent in 2000 to 35 per cent now.
Walsh said BA was working with engine makers and other suppliers on alternative fuels, including biofuels, but predicted slow progress. “I don’t think there will be an alternative to kerosene for many years to come.”
