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The statement, which was made shortly before 9.30 this morning, is written in slightly cryptic terms, as is the way with these things. It is described as a resignation, but clearly that only tells half (or less) of the story. Lord Marshall, the Chairman and previous chief executive, will step back into the breach until a new CEO can be found (that might not be too easy).
It looks as if the departure is the result of behind the scenes pressure by institutional shareholders. Presumably the two largest shareholders, Franklin Resources with 17.5% and Mercury Asset Management with 10.5%, were involved. The other side of the story seems to be that, after returning from 2 weeks holiday, Ayling decided that he had had enough. This doesn't really wash, since it is unlikely that, in these circumstances, he would have left so abruptly. However, with all the flak he has had to deal with over the last four years, you'd have to sympathise with him if this was the case.
I feel as though Ayling has been rather hard done by. He is quoted as saying:
In sporting parlance, the hard yards have been done and British Airways is well positioned to continue to be the leading international airline in an increasingly competitive industry.
Although he seems to be interested in different sports than me, I think these words sum things up quite nicely. The industry has been getting very much more competitive and Ayling has actually done pretty well to keep British Airways in a leading position. The environment through which he has had to navigate the company has certainly done him no favours. It's a dirty job, but someone had to do it.
Bob Ayling, a solicitor by training, worked as a lawyer at the DTI, before joining BA as Legal Director in 1985. In February 1993 his appointment as Group Managing Director was announced and on 1 January 1996, with the share price at 466p, he became Chief Executive. Everything was going smoothly at first, with the world economy expanding nicely and the oil price staying under control. In September 1997, just before the Asian crisis, the shares peaked at about 760p. Things have never been the same since.
First of all, intense price competition set in on many of BA's key routes and, more recently, an extortionate oil price has put even more pressure on margins. The annual pre-tax profits bear this out. In the year to March 1996 they were £585m. In 1997 they peaked at £640m before slipping to £561m in 1998 and finally collapsing to £206m last year. This year, the group is forecast to fall into loss. The shares closed yesterday at 293p and, following a sharp spike to 335p on the announcement, they have now fallen back to 308p.
The share price fall during Ayling's time in office was therefore about 37%. In contrast AMR (NYSE: AMR), the holding company for American Airlines, has increased 46% over the period, Delta Airlines (NYSE: DAL) has increased 24% and Lufthansa has increased 122% (although only 52% in sterling terms). BA, through its greater reliance on the premium end of the market, has had more to contend with than most. Ayling has tried to come up with tricks, like building a global airline, to maintain some sort of pricing power. Unfortunately, the competition authorities don't like pricing power and, in sporting parlance, have never played ball with him. Eventually he had to give in and start up the low-cost operator Go. Now it seems he has been forced to give up altogether.
Poor old Bob Ayling has probably not managed British Airways particularly well but, in the circumstances, I don't think anyone else could have done much better. I just wish he hadn't taken the Union Jack off the planes.
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Related Links
• British Airways Website - Investor Relations