Teece

I see BA have since dropped this bit from the answer...

ask BA

The Saint

Yes, I noticed that. It was done yesterday evening.

Someone with some PR experience has started to get a grip.

BOH

Good grief man, heaven forbid this kind lf logical thinking would apply

Put simply, it is easier and far more short term beneficial to slash costs to improve margin. Implementing your latter strategy takes longer (as the market has to get used to the better service and word has to spread) and requires MORE money to be spent in the short term before any positive revenue results. The city don't like strategies like that

However, there is a point on the costs vs service curve where they just won't be able to slash costs any further without driving some quite high margin customers away. Maybe they are there now?

And never forget the impact of personal bonuses in the suits making these cost cuts. If they are on a huge bonus for achieving the holy grail 10% in say a 12-24 month period then this will have a big, big impact on whether it is costs to be cut, service to be improved or a combination. The shorter the timescale for triggering their bonus the more they will focus on costs.

On a slight tangent but related to bonuses, one of my clients operates in the rail sector and I'm reading the excellent book by Christian Wolmar on the disastrous UK rail privatisation. There is a chapter on the Hatfield crash of 2000 and how the dangerous condition of the rail had long been reported and the new replacement rail had already been delivered to site many months earlier. The problem was the old Railtrack regional bosses refused to sanction an emergency shutdown of the track at Hatfield to replace the dangerous rail because they would have to pay compensation to GNER for this act. And this would affect their KPI's on profitability which was a key factor in how their bonuses were paid . Instead they told the contractor to wait until the next already scheduled shutdown to replace the dangerous rail - and we all know what happened before this date could be reached. The evidence in the hearings was clear that personal bonuses had undoubtedly been influential in their judgement - astonishingly even when it came to a clear safety related decision.

The moral of this Hatfield story - Never, never underestimate the influence of large personal bonuses in upper management decision making

IAMORGAN

I think that BA has to grasp that they basically have two markets:

1. Premium PAX -eg Club Europe/Club World & First/ FF tickets
2. Economy/Low-cost & low expectation pax, who want the Ł60 return to somewhere like AMS, and don't care about getting anything to eat/drink.
BACON failed (in my opinion) because their branding was just not up to it -there was no seperate website, no accommodation for Premium pax (why didn't they effectively make it 2 tier: Club Europe (with free food/drink/40TP's, etc) and NEW eurotraveller with maybe a free soft drink -alcoholic drinks to purchase, along with snacks? With that they could have cut costs.

Another point is that if they charge higher fares, they will lose a number of their lower revenue pax, and if they lose to many of those, then that will be their new-found profitability. So many people I know think my company is mad to pay anything over Ł100 return for a European trip, and think that it really doesn't matter if you get food or drink onboard.

I'd like to see BA go more like JetBlue on their EU flights (without the food in economy even, but a seperate Club cabin -they then can hopefully succeed in getting as many pax as possible). Or am I being too presumptious, and is being all things to all people impossible (look at their Ethnic Liveries)?
I don't know what the answer is, but I do know that any way must be better than their current direction! They need to STOP CUTTING PREMIUM SERVICES whilst still charging premium prices!

They're becoming more like BMI every day.

Globaliser

Not sure I understand the point. The non-stops to BKK, HKG, JNB and SIN are going to happen anyway, whatever the rest arrangements for crew. The key is to make sure that there are enough crew to deliver the service and the safety, even at the end of the flight.

Globaliser

Well said.

I fear that we may have reached exactly this point in BA. The holy grail is in sight, so now we slash and cut everything in sight, abandoning all thought for the longer-term future of the company. Which worries me greatly.

john11111111111

I really don't think that Gypsies are to blame

bernardd

I'm sure BA has slashed some parts of the service, but my experience is it hasn't slashed as badly as AA etc. Will cutting more reduces costs faster than it cuts revenue? That's the billion dollar question.

Thanks to one and all for the explanation of the 10% margin. I'm not surprised that it seems so arbitrary, and it still seems like 50 million in crew savings isn't going to make a lot of difference in a business that can make or lose more than that in fuel price hedges. I guess it's a nice round number but at 0.25% of revenue I would have figured there were bigger fish to fry first.

JonNYC

Thanks, PUCCI-- you certainly needn't apologize for giving a detailed, thoughtful guess/ personal analysis! I appreciate it very much.

I guess the main question in my mind is if I can "sneak in" the trip -before- any actual possibility of a strike or if I'd be better off waiting. It is a discretionary trip, but I'd love to do it now if it's not nuts to do so.

Is it factual to say that at any given point-- assuming notice has not been given at that exact point in time-- that a strike is at least 7 days away? If they are meeting to discuss "later in the week" does that mean it's 7 days + the number of days left for meetings? Or more nuanced than that?

Here's a question that I'm sure is more answerable-- what is the generally accepted beginning/end of school half term? I'd like to factor that in but have no idea.

ian001

For most schools the half-term holiday is the week beginning Monday 12 February, so the half-term getaway will begin on the Friday 9 February. Some schools in the country will have a half-term holiday beginning Monday 19 February.

Bear in mind that any strike following this ballot would have to commence within 28 days of the announcement (15 January).

JonNYC

Ah, yes. That does create a bit of a pincer movement.. thanks for reminding me of that.

vsevolod4

Chalk me up as one of the few on the board that is on the side of management in this dispute.

A strike, even a well-intentioned strike, hurts BA both short-term and long-term and results in less money in the kitty to be distributed to everyone, including the crew.

Go cut off your nose. Go spite your face.

I will not capitulate to mass extortion. Management may, but I don't have to.

There are plenty of other airlines I can (and do) fly. I will shift my business elsewhere. I'm sick of the rude attendants. I'm sick of the high level of taxes and landing fees and "fuel surcharges" and other nonsense. I'm sick of the declining benefits of the EP program.

Many other airlines fly to the UK, and as for connections throughout Europe, I'll make do with LH, BD, AF, KL and others.

bernardd

AF? How did they get in there? That's not an airline, it's a social club for employees that happens to be conducted at 30,000 feet.

AJLondon

bealine

Let's hope this is not all bluff and bluster - let's hope both sides want and amicable settlement!


Extracted from BA Intranet:

BA and T&G meet this afternoon



British Airways is due to meet with the T&G trade union for talks this afternoon (Tuesday) aimed at averting a strike by its cabin crew branch BASSA.

Simon Talling-Smith, head of inflight service said: “The issues under discussion are extremely difficult for both sides but let me be absolutely clear that the airline – and inflight service specifically – is completely committed to creating and maintaining good industrial relations with the T&G.

“Let me be equally clear that no changes to the terms and conditions of our crew have been imposed and that we have no intention whatsoever to do so.”

A key part of discussions with the T&G today will focus on how both sides can take meaningful steps towards bolstering a relationship for the good of crew, customers and the company as a whole.

Simon added: “I must stress that I still do not believe a strike to be inevitable. Our aim remains the same – to achieve a breakthrough with the T&G and reach a negotiated settlement.

“Talking is the way to do that and I hope that discussions will see us begin to build a platform that will enable a way for the issues behind the ballot to be settled amicably and without the need for an unjustified strike.

“I will keep you updated on the situation as developments occur.”