Tuesday, May 4, 2010

Clearing the air: What went on behind the scene

S Kalyana Ramanathan / London May 05, 2010

The April 15 decision by air traffic regulators to declare the European air space a no-fly zone had all the elements of a Hollywood blockbuster — the action, the emotions, the expectations and a happy ending.

However, the audience from across the world, who were glued to their television sets catching up with every bit of action that unravelled on screen over the six days, missed out on what went on behind the screen.

When the south Icelandic volcano erupted, spewing ash into the air in a massive plume sending thick, dark brown ash cloud several kilometres across northern Europe, navigation regulators had few options beyond flight bans.

Experts say ash from the volcano could have choked the engines and result in mid-air crisis — in numbers that could feed Nat Geo’s famous Air Crash Investigation series for one whole year.

However, little did the authorities relaise how the decision would snowball into a global crisis that the industry is yet to recuperate from — a loss that would cost them $1.7bn.

While the unified voice of IATA, the airline industry body, expressed their displeasure about the “$200 million loss of revenue a day”, voices from within the union made far bolder statements —in a tone and fashion few elsewhere would dare.

Three voices stood out in the din and noise that followed the crisis that of British Airways’ CEO Willie Walsh, KLM chief Peter Frans Hartman and IATA Director General and CEO, Giovanni Bisignani.

Six days into the crisis, when the British government apparently gave a nod to German carrier Lufthansa to fly over the isle provided it was above 20,000 feet,

Walsh was infuriated with the decision. He swung into action and ordered 26 of his fleet — stranded with thousands of passenger inside UK and across the world — to come home.

According to unconfirmed reports, BA and UK’s navigation service provider NATS had a mid-air debate on whether to allow the aircrafts to land. Subsequently, Walsh’s preemptive action forced NATS and other authorities to give in and allow BA to land its fleet. This, many consider was the breaking point for the week-long crisis, effectively pulling not just BA but other carriers back into business.

While many started asking if corporate greed pervaded on Tuesday night, the question today might seem a little late in the day. It would be helpful to remember that Walsh is not all suit-and-tie, ordering potentially risky decisions from the comfort of his office. A week prior to the incident, he took a test flight of a BA aircraft through the plumes. Though he — a licensed pilot who took to flying when he was 17 — did not pilot the flight, he was on board the plane.

The 48 year old Irish CEO of BA, has been at the helm of the company since 2005. His official resume reads, “Prior to joining British Airways, Willie was CEO at Aer Lingus, a position he was appointed to in the aftermath of 9/11. Faced with bankruptcy and heavy losses, Willie radically restructured the airline and this culminated in it posting a £73 million profit in 2004, making Aer Lingus the most profitable state-owned airline in the western world.”

In his early years, while his office was a plane’s cockpit, he headed the pilot’s union — a role that would come handy when he was dealing with BA’s union that was threatening to go on industrial action.

While Walsh was taking the test flights during the peak of the crisis, his counterpart in KLM, Peter Frans Hartman was doing the exact same over Dutch airspace. Hartman’s point, like Walsh was to send the message out loud and clear — what is safe for me is safe for my passengers as well.

Hartman, 61, has been with KLM since 1973 where he started with the engineering and maintenance department. He became the president and CEO of KLM in April 2007.

While the airline CEOs pressurised European governments through their calculated and daring actions, IATA’s Giovanni Bisignani was true to his role as an industry lobbyist. He called the excessive caution from aviation authorities and European governments as unscientific and ad hoc.

“The European system results in blanket closures of airspace. I challenge governments to agree on ways to flexibly re-open airspace.” Twenty four hours later, airports across Europe did open up.

The 64 year old IATA’s Italian chief has had a long and flourishing career across industries including banking (Citibank where he started his career). This Harvard Business School product had also been the CEO and managing director of Alitalia. His resounding voice, while has a calming effect on his members, it did act as a wake-up call for governments when he demanded compensation for the losses suffered by airline companies in Europe.

He was quick to point out the reaction of the US government when its airspace was shut following the 9/11 attack. “The scale of the crisis (because of the volcanic ash) eclipsed 9/11 when US airspace was closed for three days,” Bisignani argued.

While some may call this brinkmanship driven by greed, there are voices in the industry which disagree.

John Strickland, director with the London based aviation consulting company JLS Consulting said both BA and KLM have had in the past flown through volcanic ashes and know what exactly was going on. He further said, Bisignani’s style of “shouting politely” is the best way to make government’s hear the woes of the aviation industry.

Laurie Price, director of aviation strategy at consultants Mott MacDonald agreed. “Rising fuel price is pushing costs up. Yields are down. Labour unrest in some parts and surface competition that are heavily subsidised. The aviation industry on the other hand contributes £3 billion a year to the exchequer (in the UK) and pays for is own infrastructure.”

Other experts said that privately-owned navigation agencies were being extra cautious because they were not sure if they could handle the insurance claims should there be any mid-air catastrophe. “For this, the aviation industry was bleeding.”

While this may be a point for future debate, for now it explains in part, why the cowboy CEOs in Europe straddled their horses and cocked their guns last week and took on the establishments like men on a holy mission.

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