BA aims for smooth landing

THE late summer was a stressful period for Rod Eddington of British Airways with the now infamous chaos at Heathrow in August.

But all those anticipating a cull among the group's senior operational staff, led by veteran Mike Street, will be bitterly disappointed.

An internal inquiry has found that it was a combination of optimism and misfortune which brought BA to a halt at Terminal One and left 1,300 angry passengers grounded - 400 of them without hotel rooms.

The immediate problem was that BA's new IT system proved less than durable when placed under pressure. It was not tracking aircraft kit as well as had been hoped, and left the fleet 'fragile' at the busiest time of the year.

Add to this bad weather, runway closures and a geriatric baggage system, run by the British Airports Authority, and chaos ensued.

If BA had seen the problems mounting up more clearly, passengers would have been notified before they left home and the damage to the company's reputation could have been limited. But the carrier found itself shorthanded.

In financial terms, there can be no doubt that the summer snafu is a blow to Eddington's recovery plans. So far, BA estimates the costs at £10m but they could rise to £30m by year end. It might have been worse but for the fact that in revenue terms, August turned out to be far better than a year earlier.

Obviously, costs will now rise as a result of the decision to add staff at terminals to ease the strain, but the belief is that this will not take too big a bite out of the overall cost reduction efforts.

Commercially, BA finds itself competing on its most profitable transatlantic routes with heavily subsidised American carriers which are either in or close to Chapter 11 bankruptcy.

Despite this, Eddington is confident that the airline can prosper. Debt has been reduced as a result of the Qantas share sale, which produced £400m, and the carrier would like to find a European partner. To do this it needs to strengthen its finances.

As for Eddington, he is not flying off into the sunset anytime soon. Having stopped the rot and flown through the turbulence of 9/11, the stock market retreat and SARS - not to mention strikes and disruption at UK airports - he is determined to nurse Britain's flag carrier back to full health.

That would be the best moment for him to declare his innings.

Varley's return

AMONG my experiences as a cub reporter was sitting through interminable and angry meetings of Barclays Bank shareholders in the late 1970s at which the chairman, the formidable Sir Anthony Tuke, would face baying crowds of apartheid protesters.

Eventually in 1986, as financial sanctions really started to bite, Barclays beat the retreat.

Now we know it was only a temporary respite. Barclays' newly-installed chief executive is seeking to plunge right back in by taking a majority stake in South Africa's ABSA Group at a potential cost of £1.8bn.

The bank already has moved its African corporate HQ back to Johannesburg and has been busy rebuilding its wholesale banking business there. Barclaycard has a major joint venture in the new South Africa.

In relation to Barclays' market value of £35bn, the deal may look disappointing to investors, who recently have run up the share price strongly.

Varley would presumably like to think this is due to his own robust management style. But there is a strong suspicion in the market that Barclays is a merger candidate.

Much of the speculation has focused on Bank of America, although there also has been mention of Deutsche Bank in recent times. The Abbey deal with Santander shows that the barriers to cross-border deals in Europe are not insurmountable. In the long history of Barclays, the forced separation from South Africa was a mere blink of the eye.

Energy error

BRITISH Energy has decided to deploy the nuclear option in its effort to vaporise the pesky American shareholders Polygon and Brandes who have stirred up a revolt among private shareholders, which was useful in airing the issues.

By delisting the shares now, before new rules require the consent of investors, BE is driving a coach and horses through shareholder democracy.

Irrespective of the rights and wrongs of the restructuring of BE, the changed arrangements in the energy market and the protests of bondholders, this does not set a good precedent.

Companies need to listen and respond to investors. The nonexecutives Clare Spottiswoode, Ian Harley and Robert Walmsley should have stamped their feet and let the revolt run its course.