Faced with massive financial losses, in July 2009 British Airways sought major cuts in its personnel costs. It has reached a cost-reduction agreement with pilots but negotiations with trade unions representing other staff have so far failed to produce a similar deal. The company has also asked employees to work without pay for a period, take unpaid leave or switch to part-time work.
British Airways (BA) lost GBP 401 million (€466.9 million as at 16 July 2009) in the 2008–2009 financial year, as the global recession hit the aviation industry. In response, the company is seeking both temporary and structural reductions in its labour costs, arguing that this is necessary for its survival. BA’s cost-cutting initiatives focus on:
- appeals to individual employees to accept temporary reductions in their earnings;
- attempts to negotiate pay cuts and changes in employment conditions with trade unions;
- reductions in its 40,000-strong workforce, in addition to the 2,500 recent job losses at the company.
Staff asked to work unpaid
In June 2009, BA management asked employees to volunteer for a range of cost-cutting working arrangements with the aim of helping the company to weather the current crisis. These were:
- working without basic pay for up to four weeks spread over a period of up to six months, while still receiving allowances such as shift premia;
- taking up to one year of unpaid leave;
- switching from full-time to part-time work for up to a year.
BA’s Chief Executive Officer, Willie Walsh, announced that he would set an example by forgoing his monthly salary of GBP 61,000 (€71,000) for July.
Trade unions opposed the initiative, describing the idea of asking staff to ‘work for nothing’ as unrealistic, especially for low-paid employees.
At the end of June, it was reported that 800 staff had volunteered to work without basic pay for up to four weeks, 4,000 employees had agreed to take unpaid leave and 1,400 employees were prepared to work part time on a temporary basis. BA estimated the one-off cost savings at around GBP 10 million (€11.65 million) in 2009 and described employees’ response as ‘fantastic’.
The Unite trade union pointed out that less than 2% of the BA workforce had agreed to work unpaid and claimed that employees had been pressured to participate by managers.
Pilots agree pay cut
In mid June, negotiations between BA and the British Airline Pilots’ Association (BALPA) led to a draft cost-reduction agreement that was approved overwhelmingly in a ballot of the trade union’s members in July.
Under the deal, pilots will have their basic pay cut indefinitely by 2.61% from October 2009, and their flying time allowances will be cut by 20%. They have also accepted an increase in annual duty hours, shorter turnaround times on short-haul flights and reductions in crew arrangements on some long-haul routes. There will also be 78 redundancies. The changes will generate annual savings of GBP 26 million (€30.285 million). In return, pilots will receive BA shares worth GBP 13 million (€15.145 million) in 2011 if certain company targets are achieved.
BALPA’s General Secretary, Jim McAuslan, commented:
This is an unaccustomed position for a union to be in but we have pressure-tested the company’s trading position and cost base and are satisfied that this step is necessary to help BA recover its position as one of the world’s most successful airlines.
No deal yet for other staff
Negotiations on changes to pay and conditions with Unite and the GMB general trade union – the trade unions representing cabin, check-in, baggage-handling and ground staff – were due to be completed by the end of June. However, they failed to reach a conclusion by this date and in mid July the parties called in the Advisory, Conciliation and Arbitration Service (Acas) to facilitate the talks.
In the negotiations, BA has reportedly been seeking:
- a two-year pay freeze;
- 3,700 job losses, including 2,000 voluntary redundancies among the airline’s 14,000 flight attendants;
- permanent and far-reaching amendments to employment conditions, such as cuts in allowances and leave entitlements, particularly for cabin crew;
- reduced pay and employment conditions for new recruits;
- changes to working practices, such as the abolition of some ‘family-friendly’ flexible working hour arrangements.
The trade unions reject the management proposals and have offered their own package of cost savings, which they say has received support from BA employees. This includes a two-year 2.61% pay cut for cabin crew, mirroring that agreed by pilots, an immediate general pay freeze, voluntary reductions in working time and changes to working patterns.
At present, the two sides seem far apart. Unite’s national officer for civil aviation, Steve Turner, commented:
Despite our best efforts, our proposals have been conclusively rejected by BA. We cannot understand why the company would dismiss such significant savings and productivity measures. Our fear is it can only be because BA’s management is opportunistically using the recession to force through changes which are more far-reaching
Mark Carley, SPIRE Associates/IRRU, University of Warwick