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Rod Eddington, CE of British Airways
Rod Eddington, CE of British Airways

BBC BREAKFAST WITH FROST INTERVIEW:
ROD EDDINGTON CHIEF EXECUTIVE OF BRITISH AIRWAYS

OCTOBER 21ST, 2001

Please note "BBC Breakfast with Frost" must be credited if any part of this transcript is used

DAVID FROST:
Well one industry that's been terribly badly hit of course is the airline industry, the Chief Executive of British Airways, Rod Eddington, doesn't give many interviews, in fact this is his first live interview since he took the job a year ago. And therefore that means we've had two legendary cricketers within 10 minutes.

ROD EDDINGTON:
Thank you David.

DAVID FROST:
Good to have you with us. Basic first question Rod, how safe is it to fly today, is it as safe as it was before September the 11th?

ROD EDDINGTON:
It's safer than it ever was to fly, the additional security measures we put in place along with the other British airlines here in the UK ensure that, but of course it's something we can never take for granted and it does require eternal vigilance.

DAVID FROST:
What about this idea of sky marshals, do you like that idea, the EU are discussing that aren't they?

ROD EDDINGTON:
It's certainly something that should be on the agenda, the real question is whether or not for me they should be armed or not and if so with what. There are issues that need to be worked through very carefully with our security people, with the regulators here in the Airframe UK and our own crew community, pilots and cabin crew.

DAVID FROST:
And what about another thing, reinforced cabin doors or cockpit doors, are you going to fortify the, the pilots cabin?

ROD EDDINGTON:
Yes that's something we're working on at the moment with both Airbus and Boeing the UK manufacturers because of course they're their aircraft. I have no doubt we'll have reinforced cockpit doors.

DAVID FROST:
And plastic knives and forks?

ROD EDDINGTON:
Plastic knives and forks for the moment at least.

DAVID FROST:
This week I, I actually cut my finger on a plastic, plastic knife

ROD EDDINGTON:
I'm sorry to hear that.

DAVID FROST:
On a flight but, so they're dangerous in a different way. How much traffic did you lose in the first week after September the 11th?

ROD EDDINGTON:
The main challenge for us has been on the North Atlantic and our Middle Eastern routes, both very important route groups for us and traffic fell away more quickly than it did in the Gulf War ten years ago, something like a third of our passengers plus on those routes decided to stay at home.

DAVID FROST:
And someone said in that first week you lost about 48 million?

ROD EDDINGTON:
Yes because of course we had many aircraft which were forced to divert when the Americans closed their airspace on the 11th of September. Aircraft that had to divert into places like Halifax in Canada to, in order that they could get onto the ground quickly because they couldn't go on to North America, and those aircraft were stuck on the ground for four days, the crews and passengers, I think, coped with that brilliantly but we had aircraft literally scattered all over the world.

DAVID FROST:
What, what are you looking for from the government, you've been to Number 10 and so on, and the, the word was that you hadn't specifically asked for aid except for compensation possibly for those four days, what, what did you ask the government for, what do you want from the government, what would you like them to do?

ROD EDDINGTON:
Well what we don't from the government is a handout, what we want the government to do is to ensure that we can compete globally, North American carriers have been supported by their government, specifically we're looking to the British government to support us on issues like the additional costs of insurance and security, things that we'll need to do to tide us through this period. We want to make sure our government here in the UK provides a level playing field so that we can compete globally but we're not looking for the government to bail us out.

DAVID FROST:
But you're looking possibly to have a liberal response to any sort of merger or partnership ideas you come up with, the Sunday Business says you're starting talks again with KLM for instance?

ROD EDDINGTON:
Yes we want and believe that European aviation has to consolidate, that there are many carriers operating in Europe today, grown up over half a century of European aviation when each nation state in Europe wanted its own flag carrier. Our view was that European aviation has to consolidate just as North American aviation has consolidated and we want the British government to work with the people in Brussels to make sure that that happens in a sensible and logical way. We are talking to KLM, we're talking to other carriers with whom we have an excellent relationship in this exceptional times to see if there are ways in which we can work together most closely.

DAVID FROST:
The guy at KLM said this week that he thought that the end of this consolidation process would be that there would be three major carriers in Europe, British Airways, Air France and Lufthansa, do you think that's the way it'll probably go?

ROD EDDINGTON:
I think there's a good chance that that's what European aviation will look like, there may be more than three but it will be that sort of number rather than the 15 or so that exist today. That doesn't mean to say that there won't be airlines in other European nations but they won't be inter-continental airlines, they'll probably be short-haul carriers serving the local domestic and intra-European routes.

DAVID FROST:
So that intriguingly would mean that you and Virgin would get together in some way?

ROD EDDINGTON:
Not necessarily, as I said there may be more than, than three, but I think there'll be three major international carriers. Virgin of course have their own relationships with Singapore Airlines for instance, so for Virgin Atlantic there would always be a number of options including staying as they are.

DAVID FROST:
Now Sunday Business editorial actually raises the possibility that British Airways might not survive, you obviously are confident you can or is it touch and go?

ROD EDDINGTON:
No we'll survive but we're going to have to change the way we run our business, the things we do in order to survive, as all airlines will globally, no airline has been unscathed by this, we have to manage our business intelligently, we've got to do all we can as we've always done to look after our customers through this period. We're going to have to tighten our belts, we've begun that process already, there may well be more things we have to do.

DAVID FROST:
Well in fact people were saying you may well, you've had to say goodbye to 7,000 people, there may be more job cuts to come?

ROD EDDINGTON:
When we know what's going to happen in the market, when we're clear about what happens to demand over the next one, two, three, four, six months, I think we'll have a clearer view about what our business should look like. The great uncertainty for all of us at the moment is what is going to happen to demand, as I said a few moments ago it fell away very quickly after the 11th of September and we've seen no signs of recovery since then, how long will this go on? That's the question.

DAVID FROST:
So at the moment how much is traffic across the Trans-Atlantic route at the moment, how, what, what's the drop?

ROD EDDINGTON:
It's over 30 per cent and North American customers particularly are still very anxious about getting onboard aircraft, I can understand that but we're hopeful that we can put that behind us quickly. But no one really is sure when our North-American customers are going to have the confidence to fly again.

DAVID FROST:
What's the best thing to do in a situation like this then, Rod, is it to raise prices or cut prices?

ROD EDDINGTON:
I think you have to cut prices ultimately, you've got to try and stimulate the market, you've got to try and encourage people to get back onboard the aircraft. The first thing we've got to do though is to convince our customers that it's safe to fly again, that safety and security is our first priority. Once people are comfortable that that's true and they can fly safely I think that's the time to really push on the sales promotion front.

DAVID FROST:
But at the same time we hear great figures from EasyJet and so on, that their business is up this September apparently, now of course they don't fly across the Atlantic but why are they doing so well, you can't really compete with them though, can you?

ROD EDDINGTON:
Well they're short-haul, point-to-point operators both domestically within the UK and in Europe and those routes for us are pretty strong, they've taken a hit but a tiny hit in comparison to what's happened on the North Atlantic and the Middle East. The challenge for us is particularly our North American routes and our Middle Eastern routes and we have a huge amount of capacity committed to that route structure.

DAVID FROST:
Were you right to get rid of Go, your own cheap airline?

ROD EDDINGTON:
Go's a terrific business, well-run, but it doesn't sit naturally in the British Airways family, it's a no-frills carrier and a very good one, British Airways runs a full-service airline and we have to concentrate all our attention on that fact.

DAVID FROST:
Will you have to sell off part of your property portfolio and lease it back, including your headquarters possibly?

ROD EDDINGTON:
I hope not but it is one way in which we could raise cash if needs be, we don't need to own our own buildings, as I said a few moments ago it really depends on how long this goes on for, if it goes on long enough it may make sense for us to, to sell our properties and lease them back to raise cash.

DAVID FROST:
And will it make sense possibly to get out of Gatwick altogether, would you save a lot of money by doing that?

ROD EDDINGTON:
Gatwick's important to us, we don't want to run a hub-and-spoke operation at Gatwick but Gatwick is a critical market, there's a market for the Gatwick catchment area in its own right. Heathrow is our major London priority but Gatwick is important to us, I wouldn't want to get out of Gatwick.

DAVID FROST:
So you're staying at Gatwick?

ROD EDDINGTON:
Indeed.

DAVID FROST:
And you've got, this is a, this is a boost for the airline industry I guess, Concord's coming back and, and having a test flight tomorrow I gather?

ROD EDDINGTON:
Indeed, terrific news, our flagship back in the air, we're putting it back into commercial service in early November and we've had a lot of bookings already, a lot of our regular customers on Concord want to get back on Concord as quickly as possible, it's great news for everyone in British Airways and our customers.

DAVID FROST:
And in fact it's been welcomed by Mayor Juliani in New York I see, as another sign of life, life coming back to normal?

ROD EDDINGTON:
Indeed, it's, for the people who use it on the North Atlantic it's a time-machine, it saves them three or four hours on, on that important sector, changes the way they do business between London and New York and Mayor Juliani recognises that and he's been very supportive which is terrific.

DAVID FROST:
So what's your message to, to Tony Blair this morning Rod?

ROD EDDINGTON:
Allow us to compete, do what he can particularly with the people in Brussels to ensure that we have a level playing field and if markets can respond intelligently to our industry, we'll respond intelligently as businesses. He's, he's got to support us but he's always been supportive of British industry and I'm sure that won't change.

DAVID FROST:
And if other airlines, you haven't asked for handouts, but if everyone else gets them would you accept them or would you post them back?

ROD EDDINGTON:
We're in a very awkward position because we have to compete, North American carriers have already got something like $16 billion from their government in grants and loans, we need to compete globally so we will be watching very carefully what other governments do but to be frank we want governments to try and stay out of it if they can.

DAVID FROST:
And you'd like the government to give the go-ahead to a union with American Airlines for instance?

ROD EDDINGTON:
We would certainly like to get together with, with American Airlines, we would want to work much more closely with them, to do that we need anti-trust immunity otherwise they go to jail and we're hoping that the governments will be able to deliver that towards the end of this year.

DAVID FROST:
But September the 11th, obviously had tragic implications, implications for so many people but it's, it's changed your life presumably?

ROD EDDINGTON:
It has David because the terrorist weapon of choice were commercial aircraft, they used commercial aircraft as Cruise missiles and that's had a profound effect on everyone in the industry and it's changed it in, in ways which we're only just beginning to understand.

DAVID FROST:
And, and do have sort of crisis management meetings early in the morning, late at night, every day?

ROD EDDINGTON:
We meet regularly, for the first two weeks after the, the tragedies we met twice a day, first thing in the morning last thing in the afternoon. We meet less frequently now but there's an enormous amount of work going on across our business to make sure that we adjust it in intelligent ways and move forward.

DAVID FROST:
Rod, thank you very much.

ROD EDDINGTON:
Thank you David.

DAVID FROST:
Much appreciated, Rod Eddington there.

END

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