IAG’s boss Willie Walsh to retire on sour note amid criticism on leaving bonus, job cuts despite gov
Antonio Vazquez, chairman of nine years, is also scheduled to retire in early January as revealed last month to ensure a smooth transition between chief executives.
Walsh first announced his departure in January, just months before the pandemic dragged the airline industry in its worst crisis yet, setting the retirement date for June 30.
Plans were later changed amid the crisis and Walsh is officially leaving on Tuesday, at the delayed annual general meeting.
The virtual event is not expected to be a walk in the park as some shareholders are outraged by the GBP883,000 leaving bonus Walsh is expecting to take home.
Advisory group Institutional Shareholder Services has been vocal against it, urging shareholders to reject the remuneration plan, although Tuesday’s vote is not binding.
They are not the only ones: unions and government officials have expressed outrage several times concerning the group’s methods to protect its balance sheet.
The company finished 2019 with EUR7.5bn of net debt and EUR4bn of cash and cash equivalents, proposing a final dividend of EUR0.17 which was later scrapped in the light of travel restrictions.
The year’s EUR2.3bn profit before tax turned into a EUR4.2bn loss in the first half of 2020.
In the UK, its British Airways arm furloughed staff and accessed GBP300mln through the COVID-19 Corporate Financing Facility by the Bank of England.
Despite the support from the government, the flag carrier set out to cut 12,000 jobs, including over 6,000 voluntary redundancies, while thousands of workers were asked to sign new contracts with worse conditions.
The pilots’ union negotiated for 270 compulsory redundancies down from an initial 1,255, while the number of pilots shrunk to a ‘holding pool’ of the equivalent of 300 pilots employed on reduced pay and ready to return to flying as demand picks up.
Walsh, who started off as a pilot at Aer Lingus and moved up the corporate ladder, was nicknamed ‘Slasher’ after axing 2,500 jobs at the Irish carrier to ensure its survival.
After becoming chief executive at Aer Lingus, he took the same role at British Airways in 2005 to oversee its merger with Spain’s Iberia in 2011 and he has been at the helm ever since.
Successor Gallego is now left with a company reportedly burning through GBP20mln a day, prompting the EUR2.75bn pre-emptive subscription rights issue to be approved by shareholders on Tuesday.
When it was announced in July, IAG said the money would put it in the strongest position possible ahead of a recovery, though it was not estimated to come before 2023.
Qatar Airways, the company’s largest shareholder with a 25.1% stake, is backing the fundraise and will subscribe for the issue on a pro-rata basis.
Gallego steps in just before the summer bounce turns into a still winter, when traffic is estimated to dwindle depending on lockdowns and travel restrictions.
Another challenge will be achieving the net-zero carbon flying target by 2050 as IAG committed last October.
With many experts forecasting a green recovery post-pandemic, Gallego may have to figure out how to paint IAG the right colour.
Shares were trading 3% lower at 202.8p on Tuesday afternoon.