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British Airways Has Upper Hand in Crew Dispute, 1997 Strike Leader Says

British Airways Plc’s 12,000 cabin crew will struggle to win a dispute over staffing and pay even after two strikes that cost the carrier 45 million pounds ($69 million), according to the man who led their last walkout.

A slump in air travel following the global recession has created tougher negotiating conditions, said George Ryde, who was the senior aviation official at the U.K.’s Transport & General Workers union during the three-day stoppage in 1997.

“We’re in a different environment now,” Ryde said from New Zealand, where he emigrated in 2001. “This industry is cyclical and the troughs are getting deeper and the peaks are becoming lower, so the pressure is on for everybody.”

The Unite union that represents cabin crew is currently locked in talks with its members. British Airways is waiting to hear whether the labor group will recommend management’s proposal to members or call a further walkout.

Martin Broughton, the airline’s chairman, said April 16 he was confident negotiations would end “soon.” Unite spokeswoman Pauline Doyle declined to comment. Neither side has disclosed any details of the new offer.

The dispute started when Chief Executive Officer Willie Walsh, seeking to reduce flight-attendant costs by 63 million pounds, cut the number of crew on long-haul flights in November without consulting unions. That was after he secured voluntary departures and part-time working that eliminated 1,500 jobs.

Volcano Losses

British Airways is slashing costs amid sagging demand on long-haul routes and competition from discount carriers within Europe. The London-based company says it’s likely to report a 600 million-pound pretax loss for the fiscal year ended March 31, compared with a then-record profit of 640 million pounds posted months before the July 1997 walkout.

The airline said yesterday that it is also losing as much as 20 million pounds of revenue a day due to disruption caused by clouds of ash from the volcanic eruption in Iceland.

Ryde’s comments echo those of Walsh, who says the recession has changed the airline industry forever, with some business travelers unlikely to ever return to premium cabins. That environment requires a step change in the company’s cost base, Walsh says.

“This is an airline that has a history of being bloated and never able to get costs under control,” said Howard Wheeldon, a senior strategist at BGC Partners LP in London, who has covered BA since it was first listed on the stock market in February 1987. “Much was done, but it was never finished.”

Ayling vs. Walsh

In 1997, then-CEO Bob Ayling achieved 42 million pounds of savings in areas such as expenses and working practices, while ceding control over where the cuts were made to the T&G, according to Andrew Murray, a spokesman for the union at the time and now director of communications at Unite, its successor.

“Ayling made a situation that had been festering beneath the surface worse,” Wheeldon said. “He was just dismissive of cabin crew, as if he felt he was above them. Walsh realizes that they’re important and I think he does respect them.”

Walsh was a pilot and labor activist at Aer Lingus Group Plc after joining the Irish airline in 1979. By 2000 he had become CEO and cut 2,100 jobs, more than one-third of the workforce, to avoid bankruptcy and return the Dublin-based carrier to profit.

A spokesman for Ayling said that the executive, currently vice-chairman of vacuum-cleaner company Dyson Appliances Ltd., doesn’t want to comment on the 1997 strike.

Unite’s Murray said a landslide election victory for Tony Blair’s Labour party in May 1997 also helped provide a favorable backdrop for industrial action by ending 18 years of Conservative Party rule during which union influence was eroded.

Then and Now

“It was a very benign environment for us to go on strike,” Murray said in an interview. “The company did misjudge the mood, categorically BA lost the public relations battle in 1997, there’s no question about that. Now it’s been a bit more even-handed.”

British Airways also faced a less competitive market in 1997, said Tony Cocklin, who was working at the time in the office of then-Chairman Colin Marshall, having joined via the purchase of domestic rival British Caledonian in 1988.

Ryanair Holdings Plc, Europe’s biggest low-cost airline, carried 3.7 million passengers in 1997, less than 6 percent of the 65 million it transported last year. EasyJet Plc, the region’s No. 2 and a direct competitor to British Airways on dozens of routes from the U.K., has increased the total from 1.14 million to 46 million over same period.

British Airways carried 38.4 million people in 1997, including subsidiaries in Germany and France that it has since disposed of, versus 32.3 million in 2009.

Long-Haul Rivals

In the inter-continental market, Walsh faces competition from Air France-KLM Group, Europe’s biggest airline, which was created through a Franco-Dutch merger in 2004, and an enlarged Deutsche Lufthansa AG, together with carriers such as Emirates and Etihad whose growth has matched that of low-cost carriers.

British Airways is also aiming to pare costs as it prepares for a merger with Iberia Lineas Aereas de Espana SA of Spain that will help close the gap to European rivals, together with a deeper alliance with AMR Corp.’s American Airlines.

“The competition is definitely much more intense now and the effect of the economic situation has been much more severe,” said Cocklin, who is now an associate at Nyras Aviation Consultants in London. “It’s a much tougher time, which is why the airline is going for much tougher measures.”

Ryde, who is now national secretary of the Aviation & Marine Engineers Association in Wellington, representing engineers and ground staff at Air New Zealand, said British Airways should resist the temptation to impose a settlement.

“My experience with British Airways or any other airline is that you still end up having to sit down and talk around the table,” he said. “Unless there is a conclusion that employees can buy into there is just going to be more heartache for BA.”

To contact the reporter responsible for this story: Steve Rothwell in London at srothwell@bloomberg.net.

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