British Airways’ Heathrow flights grounded by dispute at Gate Gourmet
A bitter industrial dispute at British Airways’ catering supplier affected the airline itself in August 2005 as ground staff at Heathrow airport took unofficial strike action in support of dismissed catering workers.
A dispute over restructuring plans at Gate Gourmet, the catering supplier to British Airways (BA) at Heathrow airport, resulted in unofficial strike action in August 2005 and the dismissal of hundreds of workers involved. BA ground staff at Heathrow took 'sympathy' action, which was also not authorised by the trade union concerned - the Transport and General Workers’ Union (TGWU). This resulted in the cancellation of more than 700 flights at one of the busiest times of the year.
Gate Gourmet is one of the world’s largest providers of in-flight meals, operating in 29 countries with a total workforce of 22,000. It has been owned since 2002 by the US venture capital firm Texas Pacific (TPG). The company has not made a profit since 2000 due to falling revenues in the face of increased cost competition in the airline sector and rising oil prices, which have squeezed catering services and budgets. The UK firm lost GBP 22 million in 2004 and is due to make a bigger loss in 2005.
Crisis talks had been underway for months with the TGWU about restructuring plans that included staffing reductions, changes to overtime payments and the flexible deployment of staff to boost productivity. Rates of pay and the final-salary pension scheme were to be unaffected, but the package was rejected by the workforce. On 5 August 2005, the company offered mediation, and this was scheduled for 12 August. However the dispute came to a head on 10 August when the company took on 130 seasonal staff who are employed on lower rates of pay. Workers interpreted this as a threat to their jobs since the company was considering redundancies. One shift refused to return to work while their representatives sought talks with management. A similar sit-in six weeks earlier had ended when managers persuaded staff to return to work, but on this occasion the company regarded this as unofficial strike action and dismissed 350 workers at its Heathrow South unit, with a reported 670 workers eventually sacked in total.
Implications for BA
The next day, around 1,000 baggage handlers and loading staff at Heathrow refused to work to express their support for the sacked Gate Gourmet workers. Both groups belong to the same union, and were colleagues until the meals business was outsourced by BA in 1997. Many of the BA workers also have strong community links with the Gate Gourmet workforce, most of whom are Asian British. The walkout by BA staff led to the cancellation of hundreds of flights and stranded 100,000 passengers. The disruption was estimated to have cost the company up to GBP 40 million, with further damage to its reputation. This was the third consecutive summer that BA passengers have experienced severe disruptions due to industrial action (UK0308103F), and Sir Rod Eddington, BA’s chief executive, condemned the unofficial action as 'outrageous' and 'a body blow that defies belief'. The company also announced that, as a 'responsible employer', it would set up a confidential 'fact-finding' telephone line in response to claims that some staff had been 'intimidated, bullied or harassed' into participating in the unlawful, ie unballoted industrial action. The TGWU said that it resented the suggestion and warned that any 'victimisation' of its members would lead to lawful industrial action.
Meanwhile, BA was compelled to intervene directly in the Gate Gourmet dispute, not least because it remains dependent on the company to source the heavy volume of meals it requires at its Heathrow hub. With the management of Gate Gourmet threatening to take the company into administration, and further solidarity action from its own staff a possibility, BA agreed to renegotiate its contract on the proviso that Gate Gourmet settled its own labour dispute. Discussions were already underway before the strikes as Gate Gourmet argued that its troubles largely followed BA exercising a contractual clause on the sale of the company to TPG to renegotiate much more favourable terms. BA offered an extension of two years to its current contract, taking it to 2010, with some improvement in terms to help cover the estimated GBP 7 million cost of a redundancy programme agreed between Gate Gourmet and the TGWU as part of a search for a solution to the dispute.
Towards a deal?
On 25 August, after four days of negotiations conducted with the involvement of the Trades Union Congress (TUC), a partial deal was reached which included a request for volunteers for an enhanced redundancy package. This would include a payment of two weeks' pay for each completed year of service, more than double the statutory minimum. The invitation was extended to both the sacked workers (some of whom had already been reinstated as they had been absent form work for other reasons), and the 1,400 still working for the company. A reported 675 applications were sought. However a major sticking point was that senior management said that it would not reinstate any of the 200 workers it labelled as 'militants' or 'troublemakers'.
In the event around 700 staff applied for redundancy, 300 from those dismissed and 400 from current staff. Talks between the company and the union were scheduled to resume on 12 September, including detailed analysis of applications and who might be permitted to leave. At the same time, Gate Gourmet was told by senior creditors that it had until 19 September to meet their demands for the company to pay off or restructure its loans; otherwise it might have its assets seized, possibly triggering bankruptcy. With pressure mounting from the major stakeholders - the union, creditors, BA and no doubt the parent company - it was hoped, though no means certain, that negotiations would reach an acceptable compromise over reinstatement of the so-called strike ringleaders.
The Gate Gourmet dispute has been one of the most acrimonious in the recent history of British industrial relations. The company accused sections of its workforce and their union of intransigence in the face of necessary cost-cutting and flexibility measures. Management claimed that shop stewards wanted to hold the company to ransom, for example using commercial penalties attached to late deliveries as a lever to defend outmoded and inefficient 'custom and practice' rules. They also said that militants organised the walk-out on a false pretext, as it was normal practice for temporary workers to be employed in the busy summer period. The union in turn accused the company of provoking the strike in order to dismiss workers without compensation, including union activists.
Whether or not the company is guilty of what Tony Woodley, the general secretary of the TGWU, called 'crude union-busting techniques', the episode does suggest that confrontational 'macho management' is alive and well in the UK. First, this reflects a more aggressive commercial environment; in this case, BA was able to squeeze a supplier that was largely dependent upon it in order to help meet its own longstanding cost-cutting programme (UK0004168F). Mr Woodley referred to 'bogus' outsourcing as a 'legal nicety' to permit cost-cutting and productivity measures at the expense of working conditions. BA is now one of the world’s most profitable airlines, with first quarter pre-tax profits of GBP 124 million, though the logic of outsourcing where the commercial relationship is mutually dependent was also brought into question by the dispute.
Second, a hard-line management style is also facilitated by UK labour law. Obligations to consult systematically are limited, and significant restrictions are placed on industrial action. Employers are permitted (after 12 weeks of industrial action) to dismiss strikers for breach of contract even when the statutory requirements of balloting and notice periods are met (though they are not allowed to selectively dismiss or re-engage), and there is no protection against dismissal for workers taking unofficial industrial action. Solidarity or 'secondary' action is prohibited even when companies have strong connections to one another. An emergency motion put by the TGWU to the TUC’s annual conference in September 2005 said that the Gate Gourmet case exposes defects in UK law repeatedly condemned under international laws, but the government is apparently unwilling to consider major reform of the UK’s labour law framework. Events like those seen in the Gate Gourmet dispute remain highly untypical of the UK industrial relations scene. What is significant in the case of the Gate Gourmet dispute is that the workers concerned, and their co-workers in BA, possess a significant and high-profile degree of disruptive capacity that they are willing to deploy even in the face of the law. (J Arrowsmith, IRRU)