BA plans more jobs as profits fall sharply

BRITISH AIRWAYS yesterday shrugged off a sharp fall in profits by hinting that approval for its long-delayed alliance with American Airlines is in sight and unveiling fresh plans to expand the workforce and increase efficiency savings.

Bob Ayling, chief executive, said BA had identified further efficiency measures worth pounds 300m - putting it on target to achieve pounds 1bn of cost savings by 2000. He also said the workforce would increase by 7,500 to just under 70,000 over the next three years.

Mr Ayling said that BA was now in the "final straight" in its long battle to gain regulatory clearance from London, Washington and Brussels for the tie-up with American. But he conceded that even with regulatory approval by this autumn the alliance would not now be launched until next summer - three years after the agreement was signed.

The BA chief executive also brushed aside reports that he was thinking of quitting the airline to take up a senior position within the Blair government. "I have not received any offer, I don't expect to receive one and I am not seeking one," he said. "The chairman [Sir Colin Marshall] has asked if he could count on me staying at BA and I said he could."

Mr Ayling was speaking as BA announced a 10 per cent fall in pre-tax profits last year to pounds 580m. The strength of sterling knocked pounds 200 off profits and last summer's cabin crew strikes cost a further pounds 125m.

The airline also lost "tens of millions of pounds" because of the terrorist attack on Luxor, the decision to stop flying to Nigeria and the security stand-off at Paris airport over BA's insistence that its check-in area be moved away from that of Air Algerie.

But these losses were offset by a pounds 115m saving from lower fuel prices and higher than expected efficiency savings.

The efficiency measures so far implemented by BA - mainly outsourcing and renegotiating wage deals - saved pounds 250m last year and are expected to save pounds 500m in the current year.

By 2000 they will be contributing pounds 700m in savings. But BA has identified scope for a further pounds 250m in savings at its subsidiary airlines and in areas like overseas ground handling, distribution, telesales and travel agents' commissions.

As part of its expansion plans BA intends to take on another 15,000 employees in the next three years in customer service, cabin crew, flight deck and telesales.

At the same time, it will shed about 7,500 jobs in areas such as ground handling and engineering but also cabin staff and check-in staff through voluntary redundancy programmes.

This means that staff turnover - currently running at about 2 per cent a year - will need to double. BA set aside pounds 127m in 1996 to cover redundancy charges, of which it has about pounds 55m left.

Despite the latest obstacle put in the path of the AA alliance by the US Justice Department, Mr Ayling said: "I am hopeful that there is now a basis for agreement which will satisfy the various regulators and the two companies."

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