British Airways Posts Another Record Loss as Strikes Loom

USA Today

 

LONDON — British Airways posted a record net loss for the second consecutive year on Friday — giving Chief Executive Willie Walsh a platform to accuse striking cabin crews of being out of touch with reality.

The full year net loss of 425 million pounds ($611 million), compared with a 358 million pound loss the previous year, was the largest since the former national airline was privatized in 1987. Revenue dropped 11% to 7.99 billion pounds from 8.99 billion pounds.

The earnings report was slightly better than analysts had feared and BA was more upbeat about the current financial year, but Walsh said it underscored his argument that staff need to accept changes to pay and working conditions for the airline — and their jobs — to survive.

The union representing cabin crews, which are due to walk off the job on Monday for a series of strikes totaling 15 days, accused Walsh of "macho" posturing and urged him to back down from a hardline stance that has revoked staff travel perks and taken disciplinary action against striking workers.

Walsh has repeatedly warned the Unite union that the changes at the center of their dispute with the airline, including fewer staff on long haul flights, are necessary to cope with reduced demand for air travel in the wake of the global financial crisis.

"Returning the business to profitability requires permanent change across the company and it's disappointing that our cabin crew union fails to recognize that," he said. "The dispute ... should be put behind us as quickly as possible for everybody that works at BA."

Unite joint general secretary Derek Simpson said that union leaders were willing to negotiate with BA over the weekend to avoid the strike beginning on Monday.

"We don't want this dispute," Simpson said. "This has to be resolved by negotiated settlement."

However, there has been little sign that BA and Unite, which represents around 90% of the carrier's 12,000 cabin crew staff, will be able to reach a deal in the monthslong dispute.

Negotiations have become increasingly difficult since Unite forged ahead with a financially damaging walkout in March and BA retaliated by revoking the travel perks and taking disciplinary action some 50 workers.

Unite was further incensed when BA turned to the courts earlier this week, just hours before a planned series of strikes totaling 20 days was due to begin on Tuesday, winning a ruling that the walkouts were unlawful because of a technical error in the union's ballot of members.

That decision by the High Court was overturned by the Court of Appeal on Thursday and Unite announced plans to carry on with the rest of the planned strike dates — May 24-28, May 30-June 3 and June 5-9.

Friday's earnings report included the seven-day cabin crew walkout in March, but not the recent closure of European air space because of the Icelandic volcanic ash cloud.

CEO Walsh was more positive about the airline's performance this year, saying it was making progress on a cost savings program that has included cutting jobs and restructuring the company.

"Our cost base has improved and we are seeing signs of market conditions improving," he told reporters on a conference call. "The combination of the two of those leads us to forecast break even at the PBT (profit before tax) level."

Walsh added that the carrier was targeting 6% revenue growth this year.

Shares in the airline were down 0.6% at 185.3 pence in morning trade in London after rising initially — the stock has dropped around 11% in the past three months, compared with an 8% fall in the FTSE 100 index.

"The loss was slightly less than investors had feared, and the cost cutting program has almost equalised the overall loss of revenue." said Richard Hunter, Head of UK Equities at Hargreaves Lansdown Stockbrokers. "The company's ongoing issues are numerous, however, and a root and branch structural change is clearly necessary."

Bob Atkinson, travel expert at travelsupermarket.com, said BA was performing well compared with a euro691 million net loss posted by Air France/KLM on Thursday.

"From the customer's point of view, we are highly likely to see a fares bonanza in the summer months and through to the autumn," Atkinson said, noting that Air France/KLM announced they would sell cheaper seats over the summer.

"BA will no doubt react once strike action is over," he said.

Walsh said Friday he expected a large number of cabin crew staff to ignore the strike call — as several did during the March walkout.

The airline, which has been running a reduced service this week, said it plans to fly around 70% of passengers booked to travel over the targeted period, which includes British school summer vacation period, a long weekend and the run-up to the football World Cup in South Africa.

As with the March strike, London's Heathrow Airport will again bear the brunt of the cancelations with the airline planning to operate around 60% of its longhaul program and 50% of its shorthaul service from that hub. It plans to operate a full schedule at Gatwick and London City.

American, British Airways Accord Accepted by U.S.

Business Week

AMR Corp.’s American Airlines and British Airways Plc won tentative U.S. government permission to deepen their trans-Atlantic alliance as they counter competition created by the 2008 lifting of flight restrictions between the U.S. and Europe.

American Airlines, the second-largest U.S. carrier, and British Airways, Europe’s third-biggest, may jointly price, market and schedule international flights in their Oneworld alliance without fear of antitrust prosecution, the U.S. Transportation Department said today.

As a condition of approval, American and British Airways must yield four pairs of takeoff and landing slots at London’s Heathrow Airport, Europe’s busiest, to rivals that would provide new U.S. service, the Transportation Department said. That’s a fourth of the 16 pairs of slots the department asked the carriers to give up in 2002, when an earlier request for antitrust immunity fell through.

The decision “beggars belief,” said Richard Branson, president of Virgin Atlantic Airways Ltd., a British Airways competitor that had campaigned against the agreement, in an e- mailed statement. “Four slots pairs is a complete joke, and those responsible for this decision should hang their heads in shame.”

The decision may become final after a 60-day comment period, the Transportation Department said.

‘Valuable Benefits’

“The potential benefits outweigh the potential harm,” Susan Kurland, the department’s assistant secretary for aviation and international affairs, wrote in the decision. “Oneworld could provide the traveling and shipping public with a wide range of valuable benefits, including lower fares.”

Carriers restricted by law from cross-border mergers seek such grants of antitrust immunity to act more like single entities. Iberia Lineas Aereas de Espana SA, Finnair Oyj and Royal Jordanian Airlines are also part of the agreement, which is still being evaluated by the European Union.

American and British Airways also won tentative approval for a separate joint venture with Iberia, according to the Transportation Department order.

Airlines use each others’ routes to expand networks and compete with other large alliances. Oneworld is the third- largest global airline alliance behind Star and SkyTeam.

Airlines Respond

“We are pleased that DOT has agreed that it is in the best interest of the traveling public” for the carriers to have immunity, Will Ris, an American senior vice president, said in a statement. The “order is a key step in the process towards allowing Oneworld alliance members to cooperate more effectively,” British Airways said in a statement.

American Airlines, based in Fort Worth, Texas, and British Airways of London won the immunity after two previous requests in 1997 and 2001 failed. A hurdle to past approval was removed with “Open Skies,” a treaty that ended a four-carrier monopoly on flights between the U.S. and Heathrow.

British Airways, Virgin Atlantic, American Airlines and UAL Corp.’s United Airlines had been the only carriers that could compete on flights between the U.S. and Heathrow, which are popular with business travelers willing to pay high fares. Since 2008, all carriers can pursue the routes.

Justice Department

The U.S. Justice Department advised the transportation agency in December that the American Airlines-British Airways alliance should gain antitrust immunity only if some takeoff and landing slots are surrendered or routes exempted from the partnership.

The European Union said in a statement Feb. 1 that it was evaluating proposed antitrust remedies by the carriers aiming to alleviate concerns that the alliance would hurt competition.

The Transportation Department in July approved antitrust immunity for Continental Airlines Inc. to coordinate flights abroad with United and eight other carriers as part of the Star Alliance, the world’s largest airline group.

Northwest Airlines Corp. and Delta Air Lines Inc., before they merged in 2008, also received antitrust immunity to collaborate with Air France-KLM, Italy’s Alitalia SpA and Ceske Aerolinie AS in SkyTeam, the second-largest alliance.

An American-British Airways alliance with antitrust immunity would be “comparable and more competitive with the product and service offerings of Star Alliance and SkyTeam,” Kurland of the Transportation Department said.

The European Commission said Oct. 2 it sent complaints to American Airlines, British Airways and Iberia concerning their agreement on coordinating operations and marketing. The Brussels-based commission said the deal may break EU rules on “restrictive business practices.”

7,000 British Airways Staff Volunteer For Pay Reductions
Story from the Mirror UK

Almost 7,000 British Airways staff have applied for voluntary pay cuts, including 800 who said they will work unpaid for up to a month, the airline announced today.

Of the 40,000-strong workforce, 6,940 employees had volunteered for unpaid leave, part-time working or unpaid work by June 24, which the company said will save up to £10 million.

Chief executive Willie Walsh, who has already announced that he will work unpaid for the month of July, said: "This is a fantastic first response. I want to thank everyone who has volunteered to help us pull through this difficult period.

"This response clearly shows the significant difference individuals can make."

Options offered to staff included volunteering for between one and four weeks' unpaid leave or unpaid work, with the pay deduction spread over three or six months.