BA overhauls £5bn spend

13 February 2009

13 February 2009 | Jake Kanter

British Airways (BA) has launched a review of its £5 billion annual spend following the appointment of a new head of procurement.

Tim Richardson, previously general manager of procurement strategy and operations at the company, took over as acting buying chief earlier this month. Current CPO Paul Alexander (below right) will leave the airline in April to join BP.

Richardson's first move has been to help introduce an "external spend control group" to monitor all buying.

Purchasing, along with financial controllers in BA's divisions and the company's CFO, will observe spending through the airline's e-procurement system. The plan is to understand and challenge behaviour and transactions over the course of the year, regardless of agreed budgets. All purchases including consultancy, hospitality, training and recruitment, will be assessed. BA has a procurement spend of just over £5 billion a year including fuel, and it plans to work with its 250 biggest suppliers to identify areas where costs can be cut.

Richardson, who has been with BA for 13 years, said 2009 will be an "extremely challenging and difficult" year and procurement will play a significant role in making operations as efficient as possible.

BA reported nine-month operating profits fell 88 per cent to £89 million, compared with the same last nine months of 2007. Chief executive Willie Walsh said fuel costs had almost doubled, reaching more than £2.2 billion, and other costs rose by £335 million to £4.7 billion.Alexander will join BP as a director of procurement in June. He will manage a spend of up to £3.5 billion on HR and professional services and lead a team of 30 buyers.

BP is in negotiation with UK and US suppliers to reduce costs on contracts due for renewal. It wants to bring prices down in line with the lower cost of oil and other commodities such as steel.

SMfeb2009

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