Bangkok--Dec 6--eTurboNews
British Airways has announced a new plan to cut costs. The airline is taking the axe to its senior and middle management, with a reduction of more than one third of posts over two years.
Some top executives are in the firing line and will be out as early as March 2006. They earn an average of EURO86,000 a year and the bombshell leaves many families facing a miserable Christmas and New Year as they wait to see who is selected for the cut.
BA's chief executive, Willie Walsh, was unrepentant and said the move was the start of a renewed effort to deliver a sustainable ten percent operating margin. "We must lower our costs so that we can fund future investment in our business," he said.
"I am confident that these measures, however difficult, will help to build a robust British Airways and one that will benefit from sustained profitability. This action will enable us to carry out the investment we need to make in our business in the coming years in order to deliver a more competitive and efficient airline."
The proposed management job losses are aimed at saving the airline ?50 million, as part of a drive towards completing a EURO300 million cost reduction program announced in January 2004. This predates Willy Walsh's assumption of the top job in British Airways earlier this year, but confirms staff fears, arising from his past record turning around Irish flag carrier Aer Lingus that he would be savage in bringing down costs at BA.
He said that overall, 597 jobs would be cut out of 1,715 in management grades. 207 senior executives will go, a 50 percent reduction, and the ranks of middle managers will be cut by 30 percent from 1,301 to 911.
The airline plans to carry out the reduction in the number of senior managers in three phases. Phase one will see 94 of the top executives leave the business by the end of March 2006. The ones who remain will have greater responsibility and be under pressure to deliver results in a leaner airline.
"We are re-structuring the airline to remove duplication, simplify our core business and provide clearer accountability. Managers will have greater accountability for making decisions, delivering results and leading the business," said Walsh.
"The decision to embark on a major reduction in management numbers is not one I have taken lightly. We have extremely talented managers and they have led the way in transforming our company during the last four years since the tragic events of 9/11," said Walsh.
"But it is essential that we streamline our business further and I believe it is right that we have started by looking closely at the number of senior managers we need to deliver a sustainable, profitable future."
Full proposals and a timetable for achieving the planned 30 percent reduction in middle managers will be developed and communicated to BA staff in the Spring of 2006.
"I said when we reported our second quarter financial results last month that our costs were up in most areas and that, as a result, we need to re-energize our efforts to deliver a competitive cost base," said Walsh.
BA reported an operating profit of EURO261 million for the three months to September, despite the cost of disruption during the summer caused by the dispute with Gate Gourmet, its in-flight meals supplier, and sympathy strikes by BA's own staff. The quarterly results were described by Walsh at as "reasonable," but they would have been greater if fuel had not also taken its toll. Fuel costs at BA have gone up by over 50 percent in the past year.
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