Ex-British Airways CEO Alex Cruz Proud He Turned It Into a Low-Cost Carrier

On this week’s Airlines Confidential, Scott McCartney had former American Airlines CIO Maya Leibman back as his co-host and ex-British Airways boss Alex Cruz as their guest. Cruz talked about bringing the low cost model from his time running Vueling over to British Airways. And I think he’s actually proud of that?

Cruz believes in premium when it costs nothing to offer (where you can get someone else to pay for it, in exchange for exposure to your customers):

When I started Click Air and eventually we moved into Vueling, we realized that there were many instances we just couldn’t compete well with Ryanair. I mean, we were about just a little bit under twice their cost base. And we had a pretty low cost base, but Ryanair’s was wildly low cost base. So we made it a mission to not just look for ways to lower cost base, but to try to premiumize with only one condition. And that condition is that it wouldn’t raise costs.

So if you have flown a Vueling in those early years, you would have had some interesting experiences like morning newspapers on some business routes. We had hot towels for a while, free food for the first row. We put up some special soft head rests. We were the first ones to put on board Wi-Fi in Europe at the beginning of all the locus carriers, all kinds of things.

But of course, the main premise was they couldn’t cost us money. So we did it via partnerships that paid for all the services from media groups to Pepsi. We innovated a great deal. I do have to say some of those partnerships ended and we removed the service because for us, cost came first.

So he moved over to become CEO of British Airways and brought with him the same mindset. And he thought it was crazy that they were offering a better, bundled product on European flights.

Now, BA was complete opposite. It was all about unlocking what customers wanted to pay for. And we did find out that we were competing on price on many routes with locus carriers from Ryanair, probably a little bit less, but really very much with EasyJet, which was head on. and then with a bunch of others.

In those competitive, really competitive pricing environments, we were still offering two pieces of onboard baggage, one checked-in bag, sandwich and chips, nearly unlimited alcoholic drinks, and of course, miles, upgrades, access to lunches for more expensive fares. It just didn’t make sense.

So their solution was unbundling and basic economy (like ‘hand baggage only’ fares). Cruz became CEO of BA in 2016, and these fares actually started on intra-Europe routes before that (but not transatlantic until 2018). Emphasis mine:

All the data that we had, not just from my own experience, but over and over again from many data sources, was that the majority of leisure customers, their biggest consideration was price. So we followed a little bit of the basic fare logic, mastered by the legacy airlines in the US. We did create a very basic fare.

We changed the onboard model to buy on board, and later on we added free water and a snack. But in reality, we still kept many of the amenities, like two pieces of baggage on board, and of course, all the premium features, of course.

He offers that he didn’t come in relating to the premium long haul business that British Airways had.

I guess the other big difference is also, for me, from Vueling to BA was the long-haul product. There was so much of it. And the long haul dynamics operationally and commercially were totally different.

Premium, super premium, very large numbers of very high tier frequent flyers, launches, deep commercial partnerships with other airlines, alliances, et cetera. It was really a new world to me from a responsibility perspective. I mean, there’s nothing new, but managing it very closely was a steep learning curve for me, for sure.

It was a very strange interview in many ways. Cruz complained about the lack of subsidies to British Airways from the U.K. government during the pandemic, notwithstanding that the grant of the largest portfolio of slots at London Heathrow airport (the right to operate in the lucrative market, to the exclusion of others) is a huge subsidy with tremendous market value and while BA got less than the billions handed to Lufthansa and Air France the broader claim about no pandemic subsidies really isn’t true.

• Bank of England Covid Corporate Financing Facility): BA issued £300m of commercial paper under the state-backed program in April 2020.

• Coronavirus Job Retention Scheme: government wage subsidy to furlough staff (up to 80% of wages, capped per employee).

• UK Export Finance guaranteed loans: £2.0bn guaranteed five-year facility, plus an additional £1.0bn UKEF Export Development Guarantee facility that was committed and undrawn. These were government-subsidized loans, not direct injections of taxpayer cash.

He also claimed that BA IT issues totally took them by surprise in 2017, they learned a lot from them, and “BA hasn’t had any self-managed outages since then.” And I don’t think he knows what he’s talking about here?

• May 27–29, 2017: This is the outage Cruz acknowledges. Power was cut and then an “uncontrolled return of power” at a BA data center caused a surge that took down BA’s IT worldwide, stranding 75,000 passengers over a holiday weekend.

• July 18, 2018: I guess this is where he can blame Amadeus problems that caused BA to cancel short-haul flights.

• Aug 7–8, 2019: BA check-in and operations meltdown in London with 500 flights cancelled and delayed on the 7th and over 100 the next day, I think maybe he wants to blame airports for this one?

• Feb 25–27, 2022: The British AIrways website and app went down, airport operations affected, and flights were cancelled as disruptions lasted several days. I don’t know what third party he’d point the finger to here.

• Jan 17, 2025: BA website and app again failed, check-in was blocked for many customers. Again, this one was on BA unless he’d argue it was BA’s own IT services that had been outsourced to third party vendors in India that failed, but that’s still BA’s IT management decisions.

Ultimately former British Airways chief Alex Cruz seems proud of bringing the low-cost mindset from Vueling to BA — unbundling meals, baggage, and perks while calling it innovation. You might wonder why he’s confessing to destroying the storied brand. I think he’s bragging.