Business Insight Zone

If only the reality had matched the beautiful dream of this 3D rendering.

In April we talked about the spanking-new Terminal 5 at Heathrow Airport, the opening of which turned into a debacle for British Airways. In a spirit of fairness — and to see if BA learned anything from the snafu — I thought I’d return to the issue to see how the airline has handled things since then.

The short verdict: much better.

Terminal 5 was a massive undertaking, costing billions of pounds and taking 20 years from conception to completion. Overruns in the construction schedule cut short the amount of time that BA had to train its baggage handlers and gate agents in the new terminal, which only made things worse when the terminal’s fancy automated baggage-handling systems went through early hiccups.

Terminal 5 irons out the kinks

To its credit, BA took responsibility for the problems, and — despite Heathrow’s generally lousy record for delays — passengers have now been reporting relief and surprise that their Terminal 5 experiences have gone smoothly. The terminal has also withstood the addition of 30 long-haul flights, including key routes from New York JFK and Lagos, Nigeria, as BA phases in traffic previously handled through Terminal 4.

After the initial Terminal 5 foul-up, BA wisely slowed down the phase-in of new flights, so that it is now happening by stages across the summer, instead of all at once. Its prudence seems to be working: a few weeks ago, the airline issued a report claiming that 80 percent of Terminal 5 passengers waited less than five minutes at check-in.

A weak market, but strong long-term appeal

Like the rest of its industry, BA has faced sluggish demand tied to a softer global economy and fares driven higher by fuel prices. Yet current market conditions, like the Terminal 5 problems, shouldn’t mask BA’s larger success over the past few years. As this insightful story from Dan Reed at USA Today explains, BA has turned its fortunes around since the beginning of this decade:

Makeover puts British Airways on top

BA has done better by aiming resolutely at high-end air travelers, who often turn to BA as their carrier of choice on trans-Atlantic routes, even in preference to their normal frequent-flier carriers. To better mine this lucrative customer base, BA has now begun flights for its OpenSkies sub-brand. OpenSkies flights, which currently serve only Paris and JFK but will expand to other European cities soon, are dominated by BA’s popular first class and business class sections, with only a few coach seats.

Last month there was a minor stir when BA revealed that its chief executive, Willie Walsh, would — horror of horrors! — receive a raise in the company’s new fiscal year.

BA boss Willie Walsh gets huge pay rise

Or maybe the Telegraph’s headline writers are just dyspeptic: a £35,000 raise on a £700,000 salary comes to . . . let’s see . . . ah, five percent. Yes, £35,000 is a significant chunk of money (it’s equal to $69,000 and change as I write this), but the fact that it’s a mere five percent increase makes me wonder at the numeracy of the Telegraph’s staff.

No bonuses for Terminal 5 snafu

To his credit, Walsh turned down his annual bonus after the Terminal 5 brouhaha, as the same Telegraph story makes clear:

Last month, Mr Walsh announced it would be “inappropriate” to claim his £700,000 bonus for the last financial year after the fiasco over the opening of Terminal 5 at Heathrow in March.

Fact is, BA has been doing very well under Walsh (and his predecessor, Rod Eddington), and he’s being paid what seems like a modest sum by the standards of modern CEOs. And while I’m sure Walsh would have preferred to avoid all the trouble that accompanied the opening of Terminal 5, he also seems confident — for good reason — about where BA is headed.

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Previously on this topic:

• The Happy Path . . . to Perdition.
• British Airways gets trapped on the baggage carousel.

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(Picture by terminal5insider.)