On a swing through Europe last week, I had the good fortune to attend a discussion with British Airways CEO Willie Walsh during the Chartered Institute of Purchasing and Supply (CIPS) forum at the new Sofitel in the airline’s new Terminal 5 at London Heathrow.

In between pot shots at rival Virgin Airlines CEO Sir Richard Branson, the always-controversial Walsh shared his thoughts on leadership in tough times. Earlier in the day, the FTSE dropped 391 points and the British government was on the verge of following the U.S.’s lead in bailing out some of its most prestigious banks. And, like other airlines, BA is facing a triple whammy of soaring jet fuel prices, weaker consumer and business confidence, and the credit crunch.

So, it wasn’t surprising that Walsh’s comments quickly turned to the critical importance of spend management. His insights, while not groundbreaking for some procurement executives, provide a sound flight plan for using spend management to navigate the current economic storm:

• Don’t be afraid to cut costs : “There are people who are embarrassed to cut costs. That’s just ridiculous. And bad business sense. You should be proud about reducing costs. It’s not necessarily about the cheapest price. It’s about reducing waste and being more efficient. It’s about getting the best value and innovation from your supply base. At BA, we challenge ourselves to ensure we are getting value for every cent we spend.”
• Strategic suppliers require strategic relationships : “It’s important in tough times to remember your strategic suppliers. It is in our interest to ensure we’re all capable of survival. With our strategic suppliers, we want long-term relationships and new opportunities for cost reduction and cost efficiencies.”
• Not all suppliers are strategic : “Some relationships aren’t long term. Some suppliers provided us with services that are no longer relevant. We are constantly evaluating our [purchase requirements] and shifting our suppliers accordingly.”
• Hedging just got riskier : “We have traditionally hedged our fuel buy to remove an element of risk from the business. But [with the credit crisis] hedging is a much more risky activity than it used to be. We now need to manage the counter-party risk to hedging.”
• It’s time for sustainability : “[Despite the economy,] we are focused on balancing the environmental impact of aviation with the economic benefits of aviation. [Others] need to work for this balance.”
• Don’t outsource your problems : “Outsourcing is only a relevant option for something that is already the most effective it can be within your organization and [the outsourcer] can deliver a new level of efficiency that you can’t accomplish. If you outsource a problem, you only create a greater challenge.”

The fact that the head of one of the UK’s largest companies recognizes that spend management is a key lever to the economic turnaround, speaks volumes for the discipline. And our future. I only hope other CEOs are listening.