British Airways Profile News Information Routes
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BA Strike Latest more
Background To BA Cabin Crew Dispute
Increased BA Pension Fund Defecit Could Threaten Merger With Iberia
BA & Iberia Courtship Goes To The Altar
Willie Walsh From Pilot To CEO
BA History
British Airways origins go back to 1974 when under the title of the British Airways Group two major airlines BEA & BOAC along with two regional airlines were merged and nationalised by the British Government. In 1987 the company was privatised and it accquired British Caledonian the following year and Dan Air In 1992.
In the 1990's it was possible to fly on British Airways planes direct from cities like Birmingham and Edinburgh to most European capital cities. In recent years British Airways, largely because of competition from low cost carriers, British Airways have withdrawn these services except from London City, London Gatwick and London Heathrow. Passengers can still book flights through BA from some other UK cities but the services are actually provided by other carriers.
From its formation British Airways was because of the number of long haul destinations it served was one of the worlds leading international airlines. Its primary purpose was to offer exclusive travel to the well heeled and business class customers.
Background To BA Financial Crisis & Union Strike Ballot
British Airways the United Kingdom's national flag carrier and the country's leading non profitable airline. It like other national flag carriers internationally who are loosing money is often described as a 'legacy' airline. Many of these airlines, British Airlines included, have seen passenger traffic fall away over the last decade as passengers opt to travel with low cost carriers who, on short haul routes at least, offer flights often at a fraction of their price.
Since the summer of 2008, the economic downturn has seen British Airways passenger traffic collaspe on lomg haul routes - particularly as business customers have reduced the number of journeys they take. Many of those passengers who have remained faithful to British Airways have though reduced their spend by travelling in a lower class fare. Those that have deserted the airline for other legacy carriers or more competively priced airlines like Virgin Atlantic may not return to the fold until BA reduces it fares.
BA's present ill's are often cited by its CEO Willie Walsh as a consequence of the present economic climate but that is only part of the story. This airline has rested on it's laurels for several years and been almost oblivious to the changes in air travel and competition from low cost carriers. These failures are not only gross mis-management but also responsible for company's inability to withstand the consequences of the recession.
In the financial year ending March 2009 British Airways lost £401m and in the first six months of the current financial year (ending 30th September 2009) it lost £292m. Before the Christmas Strike was announced some analyst forecast that the in tthe financial year ending March 2009 it's losses would be in the region of £750m. If the strike action goes head these losses could rise close to £1bn.
As a result it has spent the best part of 2009 resorting to the firefighting measures which have alienated areas if its workforce- without who's support it's demise is inevitable. This year some staff have worked unpaid - most have taken pay cuts or accepted pay freezes, others have reduced their hours whilst some having taken voluntary redundancy. New staff have been recruited on lower salaries.
Staffing levels on long-haul flights out of Heathrow were from November 16th reduced. BA on the other hand argue that that crew contracts remain the same and stresses that staff based at Gatwick have been operating with reduced crew levels for several years, with the appoval of Unite.
Mr Walsh, who announced that he would not draw a salary in July to promote these policies, still recieved a 10% annual pay rise which wffectively gave him an extra month and a half's salary more than negating his July sacrifice - a postscript that did not impress BA staff .
As the severity of the company financial situation increased in the Autumn of 2009 BA Management began a series of cost cutting excercise ranging from withdrawing some in-flight meals or reducing the value of these meals to reducing staffing levels on long haul flights and changing the employment terms for new staff. The measures relating to cabin crew staff were implemented with out the agreement of their union Unite on November 16th.
The union applied to the High Court on contractual grounds for an injunction which would forced BA to withdraw the new measures. At the hearing the High Court refused to hear the case until Febuary 1st and BA refused to withdraw the new measures applicable to Cabin result. The High Court rejected the Union's application for the injunction which it sdeemed as reasonable give the company's financial position.
81% BA Cabin Crew Vote For New Strike
81% BA Cabin Crew, who are in dispute with BA Management over new pay and conditions introduced io November 16th last year, have confirmed that their members have once again voted for 'strike' action. The new ballot was held after a previous atrike scheduled for 12 days over Christmas was declared illegal by the High Court as the ballot for the action included the votes of cabin crew who had already accepted voluntary redundancy from BA.This means that 10,000 of BA's 12.000 cabin could go on strike when the strike dates are announced. The second strike is scvheduled for four days starting Saturday 27th March..
BA & Iberia Courtship Goes To The Altar
To Honour & Convey I Do Thee Wed
The UK's national flag carrier British Airways on off efforts to share the same runway and hangers with the Spanish national flag carrier Iberia have become determined in the last week as both companies have finally succomb to the temptations of an enduring romance as their finances under go a mid-life crisis.
British Airways who have sought the companionship of several other national carriers in the past first courted Iberia in 1999 when they purchased in 9% stake in the airline. Initially the relationship was hinged on code sharing excercises with enabled passengers to by seats for each company from either airline. After the 'open skies' agreement came into operation in 2007 BA realsed that Iberia's well heeled routes to South America which it had not been able to compete increased the practical merits of tie-up. The following year British Airways attempted to ibrease it stake in Iberia to nearly 40% but the advances were rejected by the senior members Iberian's family.
However the decline in long-haul air travel over the last year has left both companies on the shelf as their passengers particular those in premium and business class flirt with low cost carriers. Both companies have incurred serious losses in the first sixth month of the current financial year with Iberia's losses being 65.4m euros (£145.7m) and BA's £292m. The losses are expected by some anayllsts to possibly triple by the end of the winter.
Logistically both airlines are facing an uphill to struggle as poor industrial relations threaten the companies attempts to have facelifts. BA Cabin Crew are currently voting in a ballot which could result in cabin crew going on strike from December 21st over staffing levels and Iberian staff are intermitently taking strike action in a pay dispute.
At present BA fly to 148 destinations and Iberia 117. BA have 40,00 staff and Iberia 22,000. Respectively they fly 33m and 28m passengers in 245 BA aircraft and 117 Iberian. Terms of the proposed merger are thought to give British Airways a 55% stake in Iberia and Iberia a 45% stake in BA. The merger wil have to be approved by regulators at the European Commission but this would be a formality following their clearance of Air France's merger in 2004 with KLM the Dutch airline. However the main stumbling block could be the need for BA to plug the present gap in its pension fund. If this is not possible the agreement would allow Iberia to withdraw from the merger.
Respose to the announcement Viigin Atlantic sasid "The BA/Iberia merger will increase BA's dominance at Heathrow with 44% of take-off and landing slots this winter. It is impossible for any other airline to replicate their scale. Regulators in Europe and the US need to be alert to BA's growing dominance through proposals such as its monster monopoly with American Airlines, proposals which will not be in the consumer interest."
However rivals Ryanair welcomed the news with spokesperson Stephen McNamara vommenting "Since consolidation of Europe's high fares airlines has never led to lower fares, this merger will be great for Ryanair's growth and we look forward to welcoming many more millions of BA's and Iberia's passengers as they switch to Ryanair's low fares flights"
Editorial Comment: The bad news about this is that BA's CEO believes ''that this merger would be good for passengers and staff alike''. Though the merger potentially would save the companies around £300 m in admininstarion cost and theoretically make the opearations more viable it would treat only the symptom of the ir present problems - which are routed in their high fares and surcharges. It is also difficult to envisage how the new company would be motivated to reduce fares at hub airports like London Heathrow where BA's dominance will increase further.
BA Pension Fund Shortfall Could Threaten Iberian Merger Terms
The British Airways financial crisis became even more apparent on Dec 14th with the news that both of it's two final salary pension schemes are underfunde. The Airways Pension Scheme, has a deficit of around £1bn and the New Airways Pension Scheme has a defecit of £2.7bn. The combined deficit of circa £3.7bn has risen from a shortfall of £2.1bn in 2006.
Both of these schemes have been closed to new members but existing memembers continue to accrue benefits from them.
The shortfalls do not bode well for BA who could be forced to increase the annual payments into the pension fund by the regulator who can theoretically bankrupt the company if he is unable to resolve the issue to his satisfaction. However this issue does not have to be resolved until the end of June 2009.
More difficult is the merger agreement that BA agrred with Iberia in Novemberin which Iberia reserved the right to withdraw from the merger if it was not satisfied with BA's future provisions to honour the obigations of its pension fund.
Some analysts believe that Iberia has been able to negotiate a 45% stake in the proposed company only beause of the known shortfalls in the pension funds when the agreeent was drawn up.
However as these figures are worse than expected and some commentators believe that rather than pull out of the deal Iberia may seek to re-negotiate their percentage share it to as high as 50% in the new company .
Courting Trouble
BA has at times found itself in hot water in its efforts to retain these types of passengers - the most notable being the legal battle instigated by Richard Branson's Virgin Airline which resulted in British Airways apologising to Virgin "unreservedly" for a “dirty tricks” campaign it had mounted against Virgin. The legal action resulted in BA paying damages and legal costs. In recent years the company has accused of fixing cargo prices with its competitors.