British Airways Labor Dispute in Tailspin

With only one week to avert an unprecedented 20 days of strikes, British Airways (BAIRY) and its cabin staff trade union are locked in an acrimonious stand-off with little expectation that talks will restart before the first five-day walkout begins. The problem is that the original row over staffing plans is no longer the main quarrel: Now the focus is on the handling of the dispute itself, raising issues of principle that leave neither BA nor Unite room for manoeuvre.

At the centre of the clash are BA's plans to cut cabin crew numbers and change employment terms and conditions in a desperate attempt to cut costs and stem spiralling losses. But last week, cabin crews voted an overwhelming "no" to BA's revised plans, because chief executive Willie Walsh refused to reinstate travel perks withdrawn from staff who participated in the last wave of strikes in March. The company now faces four separate five-day walkouts, with just a few days in between – a move BA claims is evidence of the union's "callous disregard" of passengers.

Unite pressed BA to reopen discussions throughout the weekend. But both sides have talked themselves into a corner. At this stage there is no official hint that negotiations will restart before the first round of industrial action next week. In the meantime, BA is focusing on contingency planning, including calling again on the services of the 1,000 volunteer cabin crew it relied on in March. Details of clear plans are expected to be published later this week. So far it expects to run all flights from Gatwick and London City Airport, as well as a "substantial operation" at Heathrow.

With strikes scheduled for the Spring Bank Holiday, the half-term break and the start of the football World Cup in South Africa, the pressure on both sides will be intense. The trouble is that one side will have to back down, and both have too much to lose. Weeks of negotiation have seen substantial changes to Mr Walsh's original proposals on staffing. The carrier has agreed to reinstate 184 cabin crew members – far from the 500 required by Unite, but still a start. It has also tinkered with the pay deal, and addressed concerns about the allocation of work on key long-haul routes, in line with union requests. But progress has been swamped by the increasingly poisonous atmosphere of the dispute.

Crass moves on both sides have not helped calm tempers. Strained relations hit a new low shortly before the first walkout, when Unite went ahead with the announcement of stoppage dates, despite what BA saw as clear progress in deal talks. In response Mr Walsh withdrew the company's offer and refused to restore the same terms. As for BA, on the final day of last week's crucial ballot, the company sacked a senior union official, Duncan Holley, for gross misconduct. Given Unite's repeated loud accusations of bullying of its officials, the move was at best poorly timed.

In the run-up to the next series of strikes, the union is keen to stress that it is still working within the original mandate that was overwhelmingly agreed by BA crews just before Christmas. But it also acknowledges that it now considers the real stumbling block to be a "culture of bullying" in respect of the dispute, which the union says make it impossible for it to persuade its members to accept any compromise deal.

The biggest problem is the withdrawal of staff's travel perks. The issue is so inflammatory that the union cannot be seen to give way. But, although the perk is not worth much in financial terms, BA is boxed in too. "Willie Walsh cannot just back down," Gert Zonneveld, an analyst at Panmure Gordon, said. "He can give ground on the main dispute about cabin crew numbers, but having said he would take away travel perks for strikers, he cannot reinstate them when staff threaten to strike again. It would really weaken his hand going forward."

The other problem is the company's disciplinary action against 50 members of staff involved in the dispute, of whom six – including Mr Holley – have been sacked. Unite says the moves constitute "intimidation" and that some staff have faced investigation for as little as visiting a Facebook page with a link to a list of pilots who volunteered as crew during the March strike. Mr Holley has said that he was sacked for taking time off over Christmas to pursue trade union business.

But BA counters with accusations of intimidation in return. Insiders shrug off the Facebook accusation as a red herring, and allege harassment of non-striking staff. And even official spokesmen – although they refuse to be drawn on the details of individual cases – stress that the airline has a duty to pursue disciplinary measures in response to allegations of bullying in the workplace.

If the strikes go ahead, there is a financial implication for BA. The first set of stoppages cost the airline £45m, and a further 20 days could add another £130m to the bill. But the company has a £2bn cash pile, giving it enough liquidity to hold out. "Because of their cash balances there is no immediate disaster for BA financially, so long as the strikes don't go on for another six months and into the summer season," James Halstead, an independent aviation expert, said.

Of greater concern is the damage to BA's reputation. The airline's management hope that passengers' ire will focus on the striking crews themselves. The company has been hit hard by the financial crisis, slumping to a record £401m loss last year and facing another £150m black hole this year. It has no choice but to cut costs. The hope is that, in this context, the cabin crew's demands will look unreasonable.

But the company will not escape untarnished. The share price barely flickered in response to the latest strike dates, suggesting that the threat is already priced in and Mr Walsh retains the confidence of the City. But nearly a month of chaos will test even the strongest apologists for a firm stance, and Mr Walsh may yet be accused of unhelpful obduracy.

Then there is the worry that an organisation so beset by internal strife might struggle to recover even once an official deal is struck. "The biggest danger is that they do not have a way of restoring morale in the cabin crews," Mr Halstead said.

Ultimately, the dispute could have no winners at all.

Head to Head

Willie Walsh

BA's chief executive is renowned for a pugnacious approach to negotiations. Despite his background as a trade union negotiator, he was nicknamed "Slasher Walsh" after he took over at Aer Lingus.

In fact, Mr Walsh has already made considerable concessions in this dispute. BA has agreed to reinstate 184 crew positions on key flights. It has also changed the pay deal and put in extra safeguards to address concerns about allocations to work on key long-haul routes offering lucrative extra income.

Mr Walsh will not back down on the union's demand for travel perks withdrawn from striking staff to be reinstated. He also denies claims of a "culture of intimidation" in BA's disciplinary action against 50 staff involved in the industrial dispute.

Tony Woodley

Unite's joint general secretary has made considerable progress in forcing BA to acknowledge its restructuring plans went too far, too fast and needed to be revised.

He cannot overlook issues of principle in BA's response to the dispute. And in a strongly worded letter to members in the run-up to last week's ballot, Mr Woodley recommended that members reject the airline's peace deal because the company is branding strike participants as "permanent second-class citizens" by withdrawing travel perks.

Added to the multiple disciplinary actions – the majority of which are "barely worthy of a slap on the wrist" – BA's actions have created a situation where it is impossible to place any trust in the management, Mr Woodley says.