Originally Posted by Financial Times

Threat of strike could hit BA revenues
By Kevin Done,Aerospace Correspondent

Published: January 15 2007 22:46 | Last updated: January 15 2007 22:46

The overwhelming vote by British Airways cabin crew in favour of taking strike action over a long series of grievances has added a new element to the dangerous brew of labour issues confronting the airline.

The airline has a history of fractious dealings with Bassa, the BA cabin-crew branch of the Transport and General Workers’ Union.

The T&G insisted on Monday that it still wanted negotiations and said it had not yet moved to set any strike dates.

Even the mention of the threat of strikes could hit the airline’s revenues, however, as travellers wary of BA’s record in recent years of labour troubles at Heathrow airport – many of them unofficial industrial actions – choose to book away from the airline.

In a service industry the descent into strike action by some of BA’s key frontline staff could also have a long-lasting impact on customer relations and in particular on dealings with the airline’s most lucrative business passengers.

BA was hit by highly damaging unofficial strikes in the summers of 2003 and 2005, but the last official industrial action was also taken by cabin crew, who went on strike for three days in 1997 over a series of issues similar to those being raised in the current dispute.

The strike had a lasting impact on morale at the airline, and Robert Ayling, chief executive at the time, was eventually ousted in a boardroom coup in early 2000 amid growing unhappiness at his handling of labour relations.

The negotiations with cabin crew, which have been going on for several months, are part of BA’s efforts to cut costs by £450m during the two years to March 2008.

A large part of the planned cost savings are related to reducing employee costs, including hundreds of job cuts, as the group rationalises its operations.

The grievances of cabin crew are focused on four main issues: the management of sickness absence, differing pay scales for similar work, a reduction in the number of senior cabin personnel on BA’s 747 jumbo jets, its biggest long-haul aircraft, and reductions in pensions benefits.

BA has made great progress in reducing absenteeism since it introduced a new absence-management policy, first for most staff and then several months later in October 2005 for cabin crew, but the arrangement has proved highly unpopular among cabin staff in spite of a one-off payment of £1,000 agreed for its introduction.

Before October 2005, sickness absence for cabin crew was running at 22 days a year per employee – management has claimed in the past that absence often coincided with the Wimbledon tennis championships or similar events – but has since been cut to 12 days a year.

Overall at BA, sickness absence has been cut from 17 days in 2003 to about 10 days last year, a big reduction but still well above the average among UK employees of seven days.

The union argues that the management of sickness absence has put crews under pressure to turn up to work even when unwell, because they are afraid of facing disciplinary action or dismissal.

BA says that in the past 15 months since the policy was introduced only three of its 14,000 cabin crew have left the company because of high levels of absence.

In a harsh international competitive environment with rivals cutting costs – in the US most of the leading carriers have made huge reductions in costs through Chapter 11 restructuring in the bankruptcy courts with protection from their creditors – BA refuses to change the policy but says it is willing to examine how it is managed.

It is refusing to negotiate a merger of two cabin crew pay scales to give up concessions it won in 1997. The move would cost £50m a year and cannot be contemplated, it says, when it is still having to seek other cost savings.

In the present inflamed atmosphere, BA is making little progress, however, in its effort to reduce the number of senior members in a 15-strong Boeing 747 cabin crew from five to four, a move that could save £4m a year.

It maintains that BA and Japan Airlines are the only two left of more than 40 747 operators with such manning levels.

The dispute with the cabin crew comes at a highly sensitive moment for BA, as it seeks to finalise crucial pensions reforms after 16 months of negotiations. Its four main unions have split over whether to recommend the group’s final offer.