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Willie Walsh Wasn't Everybody's Favorite Pilot

Chris Bryant

(Bloomberg Opinion) -- A perennial risk in the airline industry is that executives splash money on shiny new planes but fail to make an adequate return. Willie Walsh, the chief executive officer of International Consolidated Airlines Group, has tried to do things differently by — shock! — insisting that the British, Irish and Spanish airlines he oversees make decent money. (Created in 2011, IAG now comprises British Airways, Spain’s Iberia, Ireland’s Aer Lingus and the no-frills Vueling and Level units).

Nonetheless, the announcement on Thursday of his retirement won’t be mourned by all. His outspokenness and focus on the bottom line didn’t always endear him to customers, employees or suppliers. The moniker “Slasher Walsh” has stuck with him since his days running Aer Lingus, when he cut thousands of jobs and sold the company art collection.

Today some British Airways customers lament that the “world’s favorite airline” isn’t as polished as it was — a series of IT glitches haven’t helped. Aircraft maker Airbus SE, engine supplier Rolls-Royce Holdings Plc and Heathrow airport have all received a tongue-lashing from Walsh lately.

Investors are a different story. They admired his disciplined approach to capital allocation and his persistence in trying to consolidate the fragmented European industry under the IAG umbrella. This holding company structure has become fashionable — Rynair Holdings Plc and Germany’s Deutsche Lufthansa AG are copying it, and no wonder.

If done well, knitting together national carriers like this should bring the cost-saving advantages of scale without compromising brand identities (or provoking political opposition to mergers). Walsh has been a keen acquirer but he also knew when to back off; he showed fortitude last year by acquiring a small stake in Norwegian Air Shuttle ASA in anticipation of a possible bid, and then walking away when his expectations weren’t met.

IAG’s operating margins have steadily expanded, allowing the company to increase shareholder returns. Dividends and buybacks have totaled 4.1 billion euros ($4.6 billion) since 2015. Since 2011 the shares have returned 190% with dividends reinvested, about 13% a year. That’s not shabby considering the desperately low valuations investors ascribe to airlines. IAG trades on less than 7 times estimated earnings.

Walsh’s departure feels like the end of an era, and he’s not the only long-timer nearing the departure gate. Tim Clark is stepping down from Emirates and Michael O’Leary is giving up directly overseeing Ryanair to focus on its new holding structure.  

IAG’s in decent shape but perhaps this is a good moment to be leaving the cockpit. The new decade will probably be hard for airlines. While Walsh has committed to achieving net zero emissions, environmental taxes may yet curtail his company’s growth ambitions or require expensive investments in even more fuel-efficient jets. His replacement, Luis Gallego of Iberia, will have to be equally disciplined.

To contact the author of this story: Chris Bryant at cbryant32@bloomberg.net

To contact the editor responsible for this story: James Boxell at jboxell@bloomberg.net

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Chris Bryant is a Bloomberg Opinion columnist covering industrial companies. He previously worked for the Financial Times.

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