WILLIE Walsh versus Sir Richard Branson is already shaping up to be one of the most protracted corporate spats of all time.
Yesterday it emerged that Virgin boss Branson has written to US President Barack Obama warning of the threat to competition if British Airways is allowed to develop ties with American Airlines.
It has been nearly a year since Branson began tradi
ng insults with Walsh, chief executive of BA, over Heathrow's lucrative landing slots and already their verbal sparring has surpassed Sir Stuart Rose's high street tiff with rival retailer Sir Philip Green and Tiny Rowland's public fallout with Mohamed Al Fayed.
Branson and Walsh have not been on speaking terms since they fell out three years ago when Branson's Virgin Atlantic airline blew the whistle on BA's fixing of fuel surcharges. While Virgin escaped fines, Walsh was handed a £125 million bill. The current fall-out dates back to last August when Walsh outflanked Virgin announcing he was working on an alliance with American Airlines and Spanish carrier Iberia to share revenue and co-ordinate schedules on transatlantic flights.
If the proposed venture gains regulatory approval from the US department of transportation and the European Union, the trio would co-operate on capacity, schedules and ticketing, while sharing revenues and profits. The airlines say passengers would be able to "travel more easily" on a combined network serving 443 destinations in 106 countries.
Branson claims that, thanks to the scarcity or expense of slots at Heathrow, any agreement between the trio would entrench their dominant position. The alliance would control more than 60 per cent of flights to Boston, Chicago and New York's JFK airport from Heathrow, Europe's busiest airport and a location where there are not enough slots to allow significant new competition.
It would certainly leave Virgin Atlantic exposed. If the tie-up wins approval, Virgin will be the only airline flying from Heathrow to the US that is not in one of the big three alliances. Branson is tackling the issue in the way he knows best, with a £3m publicity blitz.
Yesterday he delivered another blow. In a letter to Obama, he lambasted British Airways' business plan and urged the US administration not to let BA and American Airlines effectively merge.
"BA and AA are opportunistically suggesting your administration should suspend rigorous competition analysis due to the current economic downturn," he wrote. "You should reject this self-serving sympathy ploy. Every carrier faces financial challenges and should be adjusting their business plans and costs without a free meal ticket from government."
Walsh has already accused Branson of sounding like a "broken record" in his continued opposition to the tie-up and yesterday a spokesman for the group reiterated that there was "nothing new" in what Branson had said.
Virgin says it expects a decision from the US department of transportation as early as October. Until then expect the war of words to increase in ferocity.
Next month Branson will take his campaign to US Congress when he appears before the House of Representatives judiciary sub-committee on competition policy. He is expected to reiterate his view that granting anti-trust immunity will allow the creation of a "monster monopoly", giving British Airways and American Airlines an unassailable position on flights between Heathrow and the US.
For Walsh the deal is a necessity. Struggling with the "worst trading environment ever", having to agree pay cuts and possible redundancies across the airline's 40,000 staff, and dealing with a pre-tax loss of £148m in the three months to the end of June, the national flag-carrier has never been in such a tailspin.
Walsh is worried that the carrier is going through a structural change in the market. His concern is that British Airways' first and business class travel, where two thirds of its profits come from, may not return to "previous volumes", leaving his business model in tatters.
Given that, Walsh has to tackle BA's £9.2bn cost base which derives from its life before privatisation in 1987, when the airline was like an arm of the civil service.
Reducing the wage bill is key to BA's survival. Data from the Civil Aviation Authority shows the airline is paying its cabin crew and pilots up to twice as much as rival airlines, which analysts put down to the carrier attracting high-calibre personnel who look to BA as a viable lifetime career. But the contrast with other airlines is marked. The average salary for BA's 14,000 cabin crew, including bonuses and allowances, is £29,900, compared with £14,400 at Virgin Atlantic and £20,200 at EasyJet. BA pilots earn an average of £107,600, compared with £89,500 at Virgin and £71,400 at easyJet.
Analysts are predicting at least 3,000 compulsory redundancies.
To make matters worse, Walsh's public utterances about a fight for survival have been crudely jumped on by Branson, who has accused Walsh of "talking his airline into an early grave", while cheekily urging the government not to bail out BA, which Branson claimed "could go bust".
In terms of the alliance, BA has been here before. It tried a similar venture in 1997 and 2001 but both were deemed too damaging to business by cartel watchdogs. Walsh will be hoping it is third time lucky.
