Nick Swift, BA’s chief financial officer

Faster Thinking

Meet the director

Nick Swift, the man behind BA’s huge investment programme, explains where the money is being spent – and why.

Why is aviation such a low-margin industry?
Historically, the aviation industry has been woeful at creating value. The reason is essentially the oversupply of aircraft. The trouble with our business is that it’s got low entry barriers and high exit barriers, which is the wrong way round to make money. It’s very easy to fully finance an aircraft and it’s very easy to start collecting money from passengers before they fly. You get into trouble down the line when you either have to repay the debt or give the money back if you can’t fly the passengers. So as the airline industry consolidates, hopefully we can be more sustainable at adding value.

What surprised you about BA when you joined?
The most pleasant surprise was the strength of the brand. It was pretty good when I joined three years ago, but has gone from strength to strength ever since.

Probably the biggest negative is the amount of catch-up we’ve got to do. Even 10 years on we’re still no bigger than we were back in 2003; it’s been a tough decade and we’re now spending a huge amount trying to catch up – about £5 million a day. It’s working well so far but it does mean we’ve got to push our earnings up to pay for everything we’re spending.

Where is the money going?
It’s across the piece – so it’s new aircraft (we’re taking roughly two every month at the moment, which is a huge amount of money);  IT networks: we’re replacing our core systems; lounges; product on some of the older aircrafts and new IFE, new seating.

Why are new planes important?
The new-generation aircraft are much more advanced: the air-conditioning systems, for example, do make you feel fresher. The 787s and the A380s are a lot quieter inside. Second, they save us about 15 per cent on fuel – we spend about £10 million a day, so over the next couple of years we should get about £150 million in fuel savings. And third, we can’t keep going with planes much beyond 25 years: if you do, you end up with very heavy maintenance bills and a lot of down time.

Is the high staff-retention rate an issue at all?
It’s great to work for a company where people want to stick around. I’ve worked in other places where they don’t and that’s a harder problem to deal with. The trick is to grow: and that’s part of the reinvestment programme we’re working on. So as well as replacing the aircraft we’re looking to grow 2-3 per cent a year. This year we’ve actually grown by about 6 per cent. That ensures you get lots of new ideas and fresh thinking.

Name one thing that would make your job easier
Probably the most volatile factor in our industry is the fuel price. Volatility means that you are making long-term investment decisions on a very short-term backdrop. It doesn’t particularly matter if the global fuel price is high – but if it’s stabilised, it does help you to plan. So that would be helpful.

What do you like to do when you’re on a long flight?
Typically, a bit of work – I think quite a few of us share the escape part of a long-haul flight. There isn’t email, you can’t be called, and that’s a really nice time to catch up and reflect on things, because many of us just don’t get enough thinking time. Sleep is good, and the odd film, too.

Would you welcome Wi-Fi on BA flights?
I would if that’s what our customers want. The opinion is a bit mixed at the moment. Many customers want some sort of connectivity so they can work on email; virtually no one wants phones ringing in the cabin all the time. The other issue is reliability – if you’re not careful, you turn the cabin crew into an IT helpdesk, which is the last thing that you want. So it’s a while away yet. Overland it’s not bad – some of the US carriers are using it – but over sea, it’s still pretty early days.

As CFO, how can you make the case for flying with a premium airline, especially on short-haul?
Short-haul is a competitive market, but we’ve got a pretty good network, a very good schedule and also we do give customers a lot of choice. If you want an all-inclusive food package, you can come with us. If you want to take a load of bags, you can come with us. If all you’ve got is hand luggage, come with us – we now have an option where we’ll charge you less for not carrying a bag. So we’ve got the network, the schedule, the choice – there’s no reason we shouldn’t succeed.

Why is the loyalty of premium customers so important?
We invest a huge amount in our Executive Club. The Avios frequent-flyer programme is a big part of that, but similarly the various cards we have to reward loyalty mean that you can get things like lounge access, which we know our customers value. We have a huge number of very loyal customers and we want to make sure we give them what they want.