Confidence in BA boss finally expired

The departure of the British Airways' chief executive, Mr Bob Ayling, was a long time in coming, but falling profits and poor staff morale lost him the confidence of his board.

Last week, Mr Ayling stepped into one of the capsules of the London Eye millennium wheel with Lord Marshall and Lord King, his two predecessors as chief executive of British Airways.

The three posed smiling for the cameras as the wheel, a spectacular structure that Mr Ayling had championed, soared above the capital. Few outside the capsule knew that Lord Marshall, now BA's chairman, had, a few days earlier, called Mr Ayling into his Berkeley Square office and told him his days with the airline were over.

That discussion brought to a close one of the most controversial business careers of the 1990s. In his four years as BA chief executive, Mr Ayling had earned the dislike of many of his staff, provoked a strike by BA's cabin crew and caused a national furore by replacing the Union flag on BA's tailfins with ethnic designs from around the world.

He had also put in place one of the most daring strategies the airline industry had seen. He declared last year that BA was tired of carrying back-packing economy passengers whose fares did not even cover the cost of flying them. In future, BA would pay more attention to business travellers. Under Mr Ayling's leadership, BA began to install business-class seats that reclined to become beds.

Mr Ayling also became a controversial figure outside BA. He was close to the Labour government. He threw a joint 50th birthday party with Jack Straw, the home secretary, four years ago. He also turned down an offer from Tony Blair to head his policy unit.

Although the BA-sponsored London Eye Ferris wheel on the south bank of the Thames is widely seen as a success, it was embarrassingly unusable at London's New Year's Eve celebrations.

Most controversially, Mr Ayling also chairs the New Millennium Experience Company, which was responsible for building and running London's Millennium Dome.

After opening night celebrations were marred by organisational chaos and initial attendance figures proved disappointing, Mr Ayling sacked Ms Jennie Page, the Dome's chief executive. He replaced her with Mr Pierre-Yves Gerbeau, a little-known operations manager from Euro Disney. Ms Page had completed the Dome's construction on time and to budget, and many saw her as a scapegoat.

These events and others ensured that Mr Ayling stayed in the headlines throughout his four-year tenure as chief executive. Mostly, the headlines reflected controversy over his judgment. Partly as a result, there were regular reports that he was about to be fired. These rumours reached such a pitch in 1997 during the cabin crew strike that the BA board was forced to issue a statement expressing confidence in him.

Less than two weeks ago, BA again denied a report in the Ob- server newspaper that headhunters had been asked to look for a replacement for Mr Ayling. Lord Marshall yesterday insisted the story was untrue; BA had still not engaged headhunters to look for a replacement, he said. But whatever the truth of the story, it is acknowledged that BA's board has been discussing getting rid of Mr Ayling for several weeks.

Lord Marshall says the initiative came from BA's non-executive directors. He will not discuss which ones, but company insiders point to Sir Michael Angus, BA's deputy chairman and former chairman of Unilever, supported by Lord Renwick, former British ambassador to South Africa, and Baroness O'Cathain, former managing director of London's Barbican Centre.

While Mr Ayling was on holiday in South Africa, the non-executive directors decided he should go. After Mr Ayling's return to London last week and his meeting with Lord Marshall, the two agreed the announcement would be made after last Thursday's official opening of the wheel and the BA board's monthly meeting yesterday. After the board approved Mr Ayling's statement that he was resigning, he went to ground.

In its explanation for his departure, BA's directors said they still supported his strategy of moving the airline up-market. They had little choice; they had formally approved everything Mr Ayling did during his four-year tenure. But they also said what many inside the airline have long felt - that a new chief executive was needed to repair relations with staff, as the first step towards improving customer service.

What remains unclear is why the board has acted now. Lord Marshall says there was no precipitating event. Some BA staff speculate that an advertising campaign publicising the business-class beds before they were widely available had angered many passengers. One BA manager says that, after years of public and employee criticism of Mr Ayling, "the board just lost their nerve".

Were the directors right to decide he had to go? And was the criticism of Mr Ayling justified? There is much to be said in his favour. He attacked BA's costs with vigour, finding savings of more than £1 billion. If his handling of the cabin crew strike was abrasive, he did not flinch from confronting BA's powerful unions, a task that some argue Lord Marshall ducked.

But the list of Mr Ayling's failures is longer. He inherited the world's most profitable airline. The year before he became chief executive, BA made pre-tax profits of £585 million sterling. This year, it is expected to make a loss before exceptionals of more than £200 million. When he took over in January 1996, BA's shares stood at 466p. The day before his departure was announced, they were 293p.

His tailfin designs were an interesting idea, based on an appreciation that the majority of BA's passengers were no longer British. The designs won plaudits from many of those passengers, but BA's British business-class customers, who provide the bulk of the airline's profits, loathed them. Last year, Mr Ayling was forced into a humiliating retreat, announcing he would restore the Union Flag to half the fleet.

Another lapse was his failure to conclude an alliance with American Airlines to take on the Star Alliance, the worldwide grouping headed by United Airlines of the US and Lufthansa of Germany. The planned alliance with American was blocked by regulators in Brussels and Washington and Mr Ayling was forced to set up a looser grouping, Oneworld, instead, a grouping of which Aer Lingus is now a member.

Perhaps his biggest fault was that he did not groom a successor. His critics argue that this was because he did not want anyone to be seen as a possible replacement.

But it was Mr Ayling's occasionally distant, sometimes prickly personality that probably did most to cause his departure. Few of his staff warmed to him, or to his vision for the airline. His is a complex personality. His father's business, a chain of shops, failed when Mr Ayling was 15 and he was forced to leave school to go to work as a solicitor's clerk.

He qualified as a City solicitor before joining the civil service. It was while he was working as legal under-secretary at the Department of Trade that he caught the eye of BA. He joined the airline in 1985, two years before it was privatised, and served in a variety of jobs before becoming chief executive.

Mr Ayling is capable of great personal warmth and generosity. He has lived unpretentiously in a modest south London house for decades. He is devoted to his family and has always had a rich life outside the airline industry. Yet the moment a group gathers, he becomes stiff and pedantic. He thinks through every situation logically and does not seem to understand those who come to a different conclusion. Some of his problems in dealing with Mr Karel Van Miert, the former European Union competition commissioner who blocked the BA-American alliance, were rooted in Mr Ayling's legalistic approach.

Mr Ayling had examined the law and decided Brussels had no jurisdiction over the alliance. If Mr Van Miert thought otherwise, he was simply wrong. Mr Ayling failed to appreciate that Mr Van Miert was more than a regulator. He was a highly effective political operator. Whatever the legal niceties, he decided the BA-American alliance was a threat to consumers. Brussels insiders told Mr Ayling he should flatter Mr Van Miert but this was not in his nature.

Mr Ayling's greatest legacy will not be BA, but the effect he has had on London's architecture. The wheel is already an established part of the city's skyline. The contents of the Dome might not be to everyone's taste, but it is an undeniably impressive structure. And Waterside, BA's new headquarters near Heathrow airport, is a magnificent, lightflooded building.

What will he do now? His friends believe he will rest while he considers his future. The past few years have taken a toll on his family. Whatever his faults, he has a strong drive towards public service. The public has not heard the last of him.