The benefits of privatising BA seem to have worn off — so why not do it again?

It is exactly 20 years next week since British Airways was privatised. Arguably, it was the most successful of all the Thatcher-era privatisations. Under the redoubtable Lord King and his marketing-wizard sidekick Colin (now also Lord) Marshall, a demoralised, loss-making state enterprise had been turned by five years of vigorous, not to say brutal, leadership into ‘the world’s favourite airline’. The share offer in February 1987 was 32 times oversubscribed, and almost 10 per cent of it was set aside for the airline’s staff, many of whom became proud owners of a stake in a business which seemed to have been miraculously transformed.

But that was then, and this is now. Despite two decades of shareholder ownership — and the relatively brutal style of chief executive Willie Walsh, who previously turned Aer Lingus’s fortunes around by sacking 2,000 staff — BA today seems to have slipped backwards to become the nearest thing we have to an ailing ‘state enterprise’. Like the privatised water companies, it is vilified by many of its customers. Like British Telecom in an earlier phase, it is hobbled by its lingering status as a national carrier. Like Royal Mail, it is buffeted by competition from more entrepreneurial rivals in profitable areas of its business. Worst of all, its employee relations have deteriorated into trench warfare with trade unions that see BA as one of the few remaining soft targets for high-profile disruptive action. A pay deal cobbled together after 120 hours of angry negotiation averted a strike this week — and another that would have hit half-term travel — but thousands of irritated passengers had already re-booked on other airlines only to find their original BA flights re-offered at reduced fares. Significantly, a key issue in the dispute was the astonishingly high rate of sickness absences among cabin crew, at one point averaging 22 days a year — a sure sign of demoralisation, and almost twice the ‘sickie’ rate of depressed parts of the public sector, such as the Prison Service.

So what can be done to pull BA out of the debilitated, self-destructive state to which it has reverted? The radical solution might be another privatisation — but in 21st-century form, combining ownership by private-equity investors with a management and employee buy-out that gives a new generation of staff the opportunity to stop being disgruntled cannon-fodder for headline-seeking union leaders and become genuine stakeholders in the business: that way, the airline might recapture the evaporated spirit of 1987.

Big brother to watch

The headline-seeking union leader to watch is Tony Woodley of the Transport and General Workers, the former Vauxhall shop steward whose big agenda is to promote a merger of the T&G with Amicus, Britain’s largest private-sector union — and no doubt he sees himself as its potential boss.