British Airways is facing a serious confrontation with its two main unions in the wake of plans to slash US$1.5 billion from its cost base in three years. The UK carrier has also come under fire from employees and the financial community over the apparently unfocused nature of its proposals, but UK approval for its link-up with American Airlines looked imminent.
BA line managers have been asked to try and make 10 per cent across-the-board savings, while the carrier is looking to shed 5,000 workers from the core airline through a mix of outsourcing, redundancies or retraining. The carrier says, however, that it is looking to take on the same number of staff by 2000 with a bigger focus on 'customer-based skills.' But BA's two main unions, the TGWU and MSF, are resisting attempts by the carrier to change the terms of its current staff redeployment scheme which almost guarantees salary parity in the new position.
British Airways' pilots union has also fired its first shot by suggesting it would seek equity participation or performance bonuses in return for the $70 million in concessions management is seeking, says Balpa's general secretary Chris Darke. 'Management will argue that they offer job security [in return for concessions] but that is frankly dated, that's 1960s speak,' he adds. But the airline rejects any suggestion of bargaining with the unions. 'It's not about trading one thing with another. We're looking at new ways of working,' says BA. The carrier argues that US style concessions for equity exchanges have no place in the current climate. 'When Esops were introduced in the US it was to save those carriers from bankruptcy. That is clearly not the case at BA.' The other main unions say 'equity is not a bargaining point'.
Union leaders concede that BA employees have been sheltered from the strictest elements of changes in the UK employment market over the past 10 years. But the airline's cost-saving measures in recent years have been viewed by employees as 'death by a thousand cuts' and the scale of the current plans has taken unions by surprise. 'The announcement came out of the blue,' admits one senior union negotiator. 'BA seems to be trying to hit every group of workers at once this time and really does seem to be spoiling for a fight.'
Analysts, who have already expressed concern about the profits record of BA and Lufthansa this year, say BA's tactics in its cost-cutting drive have left them unsatisfied. 'We are whistling in the dark,' says one London analyst. 'The financial community does not feel quite as well served as it used to be. They provide lots of data but very little substance.' Another analyst cites a new investor relations team, following the appointment of Chris Wilford as its head in June, as the reason for the lack of information.
BA appears to have sewn some bitter seeds among financiers. One leading BA trader believes maximising shareholder value is no longer the airline's primary aim. 'Under Sir Colin Marshall shareholder value was the objective that was maximised whereas everything else was optimised,' he says. 'I think management has woken up to the fact that share price no longer matters. With a capitalisation of $8.6 billion who's going to take them over?' he asks.
Meanwhile, progress on the US-UK bilateral remained stalled at presstime ahead of the UK government's decision on the BA-American alliance, with both sides preparing for UK trade secretary Iain Lang to approve the deal.
Lang received the Office of Fair Trading's report on October 2, which was not expected to recommend a referral to the Monopolies and Mergers Commission but require the airlines to give up slots at London/Heathrow. The focus would then shift to the US. But Washington insiders say there will be not ruling until bilateral talks restart.
A fresh round of US-UK talks remained unscheduled ahead of the OFT decision and one Washington source believes negotiators will not return to the table until 'the UK moves to a position which is at least 90 per cent of the US definition of open skies'.
'BA and American have lost a lot of ground,' says one rival US airline executive. 'I don't think the European Commission's slot trading proposal helps them much. The longer they're left hanging out there the worse it gets for them.'
Source: Airline Business
