BA to jettison 10,000 workers

Exclusive: Secret plan for airline to save pounds 1bn with BBC-style break-up of company

British Airways is planning to shed at least 10,000 jobs and hive off large chunks of its operations, cutting down the airline to concentrate operations on little more than flying planes and dealing face-to-face with customers.

Under the secret proposals, which are similar to, but more radical than, John Birt's plans for a slimmed-down BBC, a whole raft of BA operations - including baggage and cargo handling, engineering and maintenance and information technology - could be sold off.

According to sources close to the company board, the plan is part of a drive to to cut costs by pounds 1bn by the year 2000.

A result of this strategy by BA, which employs more than 40,000 in Britain and is one of the country's flagship companies, would be an increase in profits to more than pounds 1bn by the end of the decade.

Speech notes written by the director in charge of the project - and meant for the ears of fellow board members - call for some services to be "out- sourced" and other activites to be halted altogether. The company, which made record profits of pounds 585m last year, is also to switch work to "cheaper locations".

It has already set up computer-based functions in India to take advantage of a numerate English-speaking population, who will work for less than a tenth of the pay received by British staff.

Such moves by a large blue-chip company could presage a wholesale export of jobs to the third world elsewhere in British industry. If BA succeeds with such a policy, other companies, such as banks, could follow suit, with serious implications for hundreds of thousands of jobs.

It has long been a BA ambition to hive off its engineering function into a separate company, but the new strategy, given the title "Step Change" by senior managers, will probably mean the sale of the baggage and cargo- handling functions, crew support operations and other activities, company sources said.

Far more radical than the changes envisaged by John Birt at the BBC, the strategy will mean that, within the next four years, BA will simply fly aircraft and provide the face-to-face contact with customers. All the rest will be sold or split away from the main company as part of management's plan to slash costs, which have already been cut by around pounds 700m over the last five years.

The speech notes, written by John Patterson, BA's director of strategy, also declare that there will be lower pay rates for new recruits to the airline and that "market rates" of pay will be adopted elsewhere - a euphemism for wage cuts. Large parts of the company are to be "streamlined", and Mr Patterson concedes that there are "immense people issues" involved.

It is understood that worried union leaders have asked senior BA directors to a meeting in Blackpool this week, where the annual TUC Congress is being held. However, the full details of the BA blueprint and the number of jobs it will affect are not due to be revealed to union officials until 18 September.

Robert Ayling, chief executive of the company, first announced his intention to cut pounds 1bn from costs at a presentation to the City earlier in the summer. Despite the record profits, Mr Ayling told financial analysts that there would be a drive to increase profits even further.

The company has already achieved massive savings through astute purchasing deals, new working methods and reducing labour costs.

George Ryde, chief negotiator for the Transport and General Workers' Union at BA, said he was aware of that the company intended to save the pounds 1bn through the "Step Change" intitiative. "Unions have no detailed information yet, but we are seeking a meeting with directors to discuss how they are going to go about saving this money." He said he was not prepared to comment further until details were provided by BA.

While some union leaders will be keen to call a ballot on industrial action, BA has a reputation for "hosing people down with money", as one company source said. It is thought likely that BA will continue its policy of voluntary redundancy rather than force individuals out. While Mr Patterson's notes register concern that only 38 per cent of employees were aware of the strategy to slash costs, company sources are also aware that morale has slumped among workers who have taken on board the full implications of "Step Change".

A spokesman for BA said no decision had yet been taken on how many jobs would go.

However, he said the airline was exploring every option available in order to maintain profitability including selling off services which were not part of the company's "core" activities. Other airlines were adopting similar strategies, he said. In order to stop "scaremongering", staff would be briefed next week.