British Airways is asking employees to volunteer for a month of unpaid leave—or even unpaid work—to help save the beleaguered company
British Airways (BAY.L) is giving staff the option of working without pay for up to a month in order to "play their part" in what chief executive Willie Walsh describes as a "fight for survival".
The beleaguered company says employees can opt for between one and four weeks' unpaid work, with the salary deduction spread across between three and six months' pay packets. Operational staff will continue to receive shift allowances, so staff will not necessarily be receiving no money at all for the period, BA said. There is also the option of up to a month's unpaid leave.
More than 1,000 of BA's 40,000 employees have already signed up to an offer of a month's unpaid leave or a switch to a part-time contract, which was launched after last month's announcement of record £401m losses. The latest offer is more flexible to appeal to more workers, says BA.
Mr Walsh – who, along with finance director Keith Williams, is forgoing his pay for July – called on all staff yesterday to get involved in the cost-cutting measures. "Our survival depends on everyone contributing to changes that permanently remove cost from every part of the business, and I would urge you to play your part," he wrote in the staff newspaper. "These are the toughest trading conditions we have ever seen and there simply are no green shoots in our industry... This is not a temporary problem. This is our greatest ever challenge."
The offer of unpaid work, and the strident rhetoric, comes against a background of long-running talks with three different trade unions – Unite, the GMB and Balpa. BA has set a deadline of the end of June to agree its cost-cutting plans, which include reducing cabin crew staff by 2,000 but also affect ground staff, engineers and pilots.
The expectation is that cuts can be achieved through voluntary redundancies, part-time contracts and natural churn, although Mr Walsh has refused to rule out compulsory redundancies.
Some 2,500 jobs have already gone, since August, 480 of them managers taking voluntary redundancy. The only way to find the kind of money the airline needs is to address staffing issues, such as crewing ratios. BA typically flies between two and three more cabin crew on long-haul flights than its rival Virgin Atlantic, and one or two more on short-haul flights compared with easyJet (EZJ.L) or Ryanair (RYA.L).
There is no reason to do so apart from history, said Andrew Fitchie, an analyst at Collins Stewart. "The crewing ratios out of synch with other airlines purely because BA used to be state-owned and there are entrenched unions," Mr Fitchie said. "There is no reason for it, certainly no safety reason, just entrenched terms and conditions the trade unions created over years that left BA unable to compete."
There is no question that BA needs to do something. From record profits of £922m in 2007/8, BA dropped to a £401m loss in the year to March, battered by high oil prices, tumbling sterling and collapsing passengers numbers, particularly in business and first-class. Premium seat sales were down by 15 per cent in March and April, non-premium by less than 1 per cent. It has cancelled its dividend and is in talks with its 250 major suppliers with a view to bringing down their combined £4.5bn annual bill.
Although the potential savings from the latest staffing scheme cannot compare with those from major headcount reductions, every little helps. "When you are on course to lose £400m-£600m, you will do anything," Mr Fitchie said. "BA is in desperate need of an economic recovery, meanwhile the cash pile is slowly but surely burning away."