British Airways CEO Willie Walsh is aiming to cut 5% of the company's staff to stem huge losses. Can he avoid a potentially crippling strike?
British Airways' (BAY.L) chief executive Willie Walsh refused to rule out compulsory redundancies yesterday, as the airline continues crisis talks with trade unions over plans to cut pay and jobs.
Mr. Walsh has set a deadline of the end of June to agree plans to cut 2,000 of the company's 40,000 staff in an attempt to drag the recession-hit airline back into profit. Four days of discussions with trade unions Unite, GMB and Balpa representing cabin crews, pilots and engineers started this week in an attempt to avoid a strike.
Recession has left the airline industry "fighting for survival", according to Mr. Walsh. "There needs to be urgency around the discussions we are having," he said at the annual meeting of the International Air Transport Association (Iata) in Kuala Lumpur yesterday. "I have talked about this industry being in a fight for survival and BA, as part of the industry, is in a fight for survival. There will not be an economic recovery that will be quick enough or strong enough to address the challenges. Our people understand that we have to take action."
Mr. Walsh says he is confident that the negotiations will not end in a strike. But ground handling workers represented by Unite have already rejected a pay cut. And despite the expectation of huge pent-up demand for voluntary redundacy among cabin staff, Mr. Walsh still refuses to rule out compulsory lay-offs. "I would not rule that out," he said.
"We will take whatever steps are necessary to see the business through this crisis. We are working together and, I would say, generally constructively so far. But we have significant challenges that must be addressed." The airline has been in talks with the unions representing its 13,000 cabin crew since January. Similar arguments with cabin staff in 2007 only reached a settlement the day before a scheduled one-day walk-out, costing BA millions of pounds.
The aviation sector has been devastated by the combination of last year's soaring oil prices followed by collapsing passenger numbers as economies across the world fell into recession. Iata is forecasting global airlines will lose a total of $9bn this year as revenues plunge by 15 per cent to $80bn below last year's level. BA has been hit hard, particularly by the drop in high-margin first and business-class travel across the Atlantic. Last month, the company announced it had slipped £401m into the red in 2008, the worst losses since it was privatised in 1987.
Recession savings: Air fares fall
Cash-strapped consumers will see bargain air fares this summer as beleaguered airlines cut prices to try to fill their planes. Worldwide, average ticket costs are expected to fall 7 per cent over 2009, the International Air Transport Association (Iata) forecast this week. British travellers are already seeing the benefits of the downturn, helped by the extra competition on US routes from last year's Open Skies market liberalisation treaty. Fares to the States dropped 30 per cent in the first three months of the year, and first and business-class tickets came down by a quarter, and further cuts are expected.