British Airways owner IAG suffered a significant shareholder revolt on Tuesday over plans to pay outgoing chief executive Willie Walsh and other executives large bonuses even as it struggles through the worst crisis in its history.
A fifth of voting shareholders voted against the company’s pay report, which includes a bonus of £883,000 for Mr Walsh for his work in 2019, as part of a total package worth just under £3.2m.
Influential shareholder advisory group ISS had urged investors to vote against the packages at the group’s annual meeting, arguing there was “ample evidence” the industry was about to face turbulence when they were announced. IAG executives have since taken pay cuts as part of a cost-cutting drive.
IAG said it was “disappointed” that just over 20 per cent of shareholders voted against the pay award.
“The board will continue to engage with shareholders to fully understand their concerns,” it said.
Mr Walsh told shareholders on his final day as chief executive: “Aviation has been decimated by the impact of the pandemic, resulting in substantial losses for the global industry. It is the worst crisis we have ever faced.”
Mr Walsh handed over to Luis Gallego on Tuesday, a company insider who ran Spanish flag carrier Iberia for almost seven years.
The Spaniard will have to chart a course through an uncertain winter as Covid-19 cases rise and the company downsizes itself to reflect the impact of the pandemic. IAG is also in the process of renegotiating its €1bn deal to buy Air Europa, which it expects to go through in the next six months.
“My goal is to ensure that IAG adapts to the ‘new normal’ in aviation,” Mr Gallego said.
Investors overwhelmingly backed IAG’s €2.75bn rights issue, helping it to shore up its balance sheet as the outlook for the industry remains uncertain.
IAG said the capital raise will enhance its “resilience, balance sheet and liquidity position”.
Mark Simpson, an aviation analyst at Goodbody, said the new shareholder funding still left IAG “stretched”, while rating agency Moody’s downgraded the airline’s debt just hours before Mr Walsh’s swansong as it warned of liquidity concerns if there was no meaningful passenger recovery.
Mr Walsh told shareholders not to expect a rapid increase in flights over the coming months, and called on governments to introduce Covid-19 testing regimes and to expand travel corridors, including between Europe and the US.
“Our airlines’ experience over the summer suggests that there is a pent-up demand for people who want to return to the skies subject to government restrictions,” he said.
The former pilot, who earned the nickname “slasher Walsh” for his tough stance in two decades of labour negotiations, closed his career at IAG under fire from several sides.
Unions and politicians attacked a decision to impose savage job cuts on British Airways this year, with some MPs calling for the airline to be stripped of its valuable UK airport slots.
But Mr Walsh has won respect from within the industry for his modernisation drive at IAG, which became one of Europe’s most profitable airline groups following the 2011 merger of British Airways and Iberia.
Michael O’Leary, chief executive of Ryanair, told the Financial Times that Mr Walsh had been “head and shoulders the best airline CEO in the world over the past 10 years”.
“I know I speak for all his competitors when I say ‘thank God he is retiring’ — now please don’t come back. He will be impossible to replace,” he said.
“He was never afraid to take on the challenge of doing the right thing even if it wasn’t going to be popular,” said Robert Boyle, an aviation consultant who was director of strategy at IAG under Mr Walsh for eight years.
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