BA braced for a fresh battle with its unions

EMBATTLED British Airways chief executive Bob Ayling is to meet with trade union executives on Tuesday night to explain to them his plans to slash a further pounds 225m of costs this year.

The meeting is likely to be tense amid fears more jobs will be axed from BA's 64,000-strong workforce. "We hope Bob won't be daft enough to start a second world war" said a trade union official, referring to the 1997 strike by cabin staff that grounded BA planes for three days.

Mr Ayling announced his latest economy plan last week after reporting an 85 per cent fall in first-quarter profits, leading City analysts to lower their forecasts for the year. The savings are in addition to Mr Ayling's strategy, announced last year, to reduce spending by pounds 1bn over the next two years.

The former civil servant and supporter of the Labour government has been carrying out a charm offensive with trade unions following the strike, triggered by his mis-handling of a pounds 42m savings plan, which ended up costing the airline pounds 129m in lost profits and dealt a serious blow to the reputation of the "the world's favourite airline."

Mr Ayling said last week the latest round of cuts will enable BA " to deliver the profits the City expects."

BA's financial problems are compounded by growing competition among the airlines, especially over the lucrative North Atlantic routes. Margins have also come under pressure with business travellers switching to economy class while fuel costs rise. BA has said it is to cut the number of seats on its trans-Atlantic flights by 12 per cent and concentrate on its more up-market services to shore up profits.

A spokeswoman for BA said the new round of savings would not come from front line and cabin staff but from other areas. "A 12 per cent reduction in capacity will mean fewer people but who they will be depends on what department heads think is necessary. Those jobs are not likely to come from cabin staff," she said.

Even the City condemned Mr Ayling's handling of the 1997 strike, and he will have to tread very carefully on Tuesday. "He has been leaning over backwards to cultivate good relations with union officials since the strike. The question is how much damage is he prepared to do for pounds 125m. If you want to have a good quality airline in this business you can't afford to have staff who are jaundiced by the company's message," said a union official.

BA's shares closed at 391.5p on Friday, as analysts slashed earnings forecasts for the airline, adding to the lack of confidence that has pushed its stock down from a peak of 553p this year.

Mr Ayling received a severe blow last month, when US regulators rejected his plans to link up with American Airlines. The deal, which was signed three years ago but which encountered stiff opposition from anti-trust regulators on both sides of the Atlantic, left Mr Ayling's strategy in tatters.