British Airways Union Urges Shareholders to Seek Pay Compromise From Walsh
British Airways Plc CEO Willie Walsh. Photographer: Michele Tantussi/Bloomberg
The tail fins of British Airways aircraft are seen at Terminal 5 of Heathrow airport in London. Photographer: Simon Dawson/Bloomberg
British Airways Plc’s cabin-crew union appealed to investors at their annual meeting to press for a compromise in an 18-month dispute over pay and staffing levels. Chief Executive Officer Willie Walsh told the gathering that there’ll be “no fudging” in his drive to cut costs.
The Unite union distributed a letter to shareholders entering today’s meeting at the Queen Elizabeth II Conference Centre in London seeking “an end to management by conflict,” and a banner outside said: “Give peace a chance.”
The 12,000 flight attendants at Europe’s third-largest airline are in the second week of voting on Walsh’s latest contract offer. While Unite says new proposals on pay may prove acceptable, it also wants the CEO to give ground on the withdrawal of travel perks and suspension of striking workers.
“The difficult thing for Unite is that a minority of their members are not going to get their travel concessions fully reinstated, so the union has a difficult job to find a way of placating them,” said Geoff van Klaveren, a Deutsche Bank AG analyst in London with a “hold” rating in the carrier.
Strikes by cabin crew have grounded flights at London-based British Airways for 22 days this year at a cost of 154 million pounds ($234 million), Unite estimates. The walkouts have hampered the company’s ability to benefit from a rebound in demand for global air travel, though Walsh says all inter- continental services will operate in any fresh stoppage.
Weaker Position
“If BA is able to operate almost all their long-haul flights during the dispute, that makes the union’s bargaining position weaker than it was a year ago,” van Klaveren said.
Unite is staying neutral in the current pay ballot, which ends on July 20, saying it can’t back Walsh’s offer because he won’t negotiate on the perks or disciplinary matters.
Should the CEO’s proposals be rejected, the dispute and associated “instability” will continue into the autumn, hurting earnings further, the union said in the letter to investors.
Even if the deal is accepted, an improvement in morale “above all” requires the restoration of travel concessions, which would come at no cost to the company, Unite said, adding that employees will also be angry about the “heavy-handed” use of suspensions and “fearful” for their future at the company.
Basis for Deal
Walsh told investors that British Airways is in dispute with the BASSA branch of Unite, which represents cabin crew, rather than with the majority of workers, and that he’s hopeful the latest proposal will be seen as a way of ending the dispute.
“We are absolutely determined to make what changes are necessary to ensure that British Airways is competitive in the future,” he said. “There is no fudging of this issue. Our costs must be brought into line with those of our competitors.”
Cabin-crew costs at Dubai-based long-haul carrier Emirates are probably less than half those at British Airways, he said.
Chairman Martin Broughton said Walsh’s strategy has his full support and that the company has the backing of its biggest shareholders and clients, with whom it is in “constant touch.”
British Airways rose 1.1 percent at 207 pence in London today. The stock has gained 11 percent this year, valuing the company at 2.39 billion pounds.
Walsh is trying to cut costs after the global recession pushed it to a record 425 million-pound loss in the fiscal year through March. The carrier also faces increasing competition on its long-haul routes from Middle-Eastern carriers such as Emirates and Qatar Airways Ltd.
Crew Cuts
Walsh cut plane staffing levels in November and estimates that the airline can save 160 million pounds annually within 10 years. Of that total, about 60 million pounds will come from the reduction in crew complements and the rest from establishing a parallel fleet using new attendants on less-generous contracts.
Passenger traffic at British Airways fell 11 percent in May after flights were lost to strike action, just as industry-wide demand jumped almost 12 percent, based on International Air Transport Association figures. Traffic at the company fell a further 11.5 percent in June as the walkouts continued.
Extended stoppages could cost 1.4 billion pounds in lost sales as people switch to discount carriers such as EasyJet Plc, researchers at Manchester Business School estimate.
Broughton today reiterated that British Airways aims to break even at the level of pretax earnings. The company is also targeting a 6 percent increase in revenue, he said.
Business Flights
While the trading environment is still “harsh,” corporate bookings are continuing to pick up, especially on the most lucrative North Atlantic routes, the chairman said.
Regulators in the U.S. and European Union should deliver final rulings on the deepening of the U.K. carrier’s alliance with AMR Corp.’s American Airlines in the near future, with all signs suggesting antitrust immunity will be granted, he said.
British Airways is also confident that a plan to reduce its pension deficit will be approved by Iberia Lineas Aereas de Espana SA in September, paving the way for a merger between the carriers before the end of this year. Should the deal go ahead, the new company’s annual meeting will take place in Madrid.
Air France-KLM Group, Europe’s biggest airline and one of British Airways’ biggest rivals in the long-haul market, said today it has entered a code-sharing agreement with Flybe, the U.K.’s biggest domestic carrier.
According to the deal, Air France will be able to sell its own tickets on 45 new services between Britain and France via Flybe flights, as well as 17 new routes within the U.K. Flybe will gain access to five additional services to France, seven new domestic French routes and 11 international destinations.
To contact the reporter on this story: Steven Rothwell in London at srothwell@bloomberg.net
Rate These Stories
Rate this Page