Tags: EU | Britain | Earns | British | Airways

BA Posts Another Record Loss as Strikes Loom

Friday, 21 May 2010 01:09 PM

British Airways PLC toughened its hardball stance against striking workers on Friday as it posted a record annual loss for the second consecutive year, increasing the likelihood of travel chaos for millions of customers over the summer.

With the lengthy walkouts due to begin on Monday sure to anger customers still reeling from the Icelandic volcanic ash cloud that closed European air space for several days, Chief Executive Willie Walsh accused workers of being out of touch with the harsh reality of the industry.

The prolonged battle, which has switched gears from an industrial dispute to a highly emotive struggle for power with hapless passengers as hostages, is steadily cutting deeper into the finances of the airline. Not to mention the British flag carrier's reputation.

Analysts say that BA has enough cash to withstand several more walkouts and Walsh, a former pilot and union leader who has long had a reputation as uncompromising and aggressive, is counting on most of the blame being directed at the striking cabin crew.

But the longer the dispute drags on, the less uncertain the outcome becomes.

"It's one thing for BA to stand and hold its ground, and the union may believe it has a strong case for its actions, but without the customer you haven't got a business to be worrying about," said Bob Atkinson, of travel website travelsupermarket.com. "They must get things back to normal to end the uncertainty over booking and reinstate confidence in the brand, which has been severely tarnished."

BA was hard hit by the global economic downturn because of its heavy reliance on the sale of premium fares, particularly on the trans-Atlantic route. Already losing customers to low-cost airlines and coping with rising oil prices and looming tax increases, the strikes increase the chances of sending customers to its competitors as it battles to put in place a cost-savings program.

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 percent to 7.99 billion pounds from 8.99 billion pounds.

Richard Hunter, Head of UK Equities at Hargreaves Lansdown Stockbrokers, said the loss was slightly less than investors had feared, comparing favorably with a 691 million euro ($867.61 million) net loss posted by Air France/KLM on Thursday. He also noted that the company's cost cutting program almost equalized the overall loss of revenue.

"The company's ongoing issues are numerous, however, and a root and branch structural change is clearly necessary," Hunter added.

Walsh said that's just what he's trying to do with his proposed changes, including fewer staff on longhaul flights, that are being disputed by the Unite union, which represents some 90 percent of BA's 12,000 cabin crew staff.

"Returning the business to profitability requires permanent change across the company and it's disappointing that our cabin crew union fails to recognize that," said Walsh, a former pilot and union leader who was nicknamed "Slasher" by Irish unions for the sweeping job cuts he made as CEO at Irish carrier Aer Lingus.

The customary hardline stance adopted by Walsh, who as a union representative once claimed that "a reasonable man gets nowhere in negotiations," helped him engineer a huge turnaround at Aer Lingus when it was left vulnerable in the wake of the New York terror attacks on Sept. 11, 2001.

But the latest BA walkout is as much about principle and the survival of union power as it is about pay and conditions.

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 — if no deal is reached with BA over the weekend.

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 percent 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 percent of its longhaul program and 50 percent of its shorthaul service from that hub. It plans to operate a full schedule at Gatwick and London City.

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.

Walsh was more positive about the airline's performance this year, forecasting 6 percent revenue growth and break even at the profit before tax level, as cost savings continue and market conditions improve.

The airline is also expecting to benefit from the completion of a merger with Spain's Iberia SA and a three-way transAtlantic deal with American Airlines. Those alliances would streamline costs for the company and improve offerings for customers.

Atkinson said that BA was also likely to restore some good will by announcing a fare sale once the strike situation has been sorted.

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British Airways PLC toughened its hardball stance against striking workers on Friday as it posted a record annual loss for the second consecutive year, increasing the likelihood of travel chaos for millions of customers over the summer.With the lengthy walkouts due to begin...
Friday, 21 May 2010 01:09 PM
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