BA to sell off stake in engineering operations

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British Airways is to press ahead with plans to sell off a stake in its engineering operations following the arrival this Monday of a new managing director to head up the business.

Colin Matthews, a former senior executive with the US giant General Electric, takes over at British Airways Engineering with a remit to bring in fresh outside investment.

The move forms part of BA's radical strategy to cut pounds 1bn from its operating costs over the next three years and shed 5,000 jobs.

At the same time, however, BA plans to take on a similar number of staff in customer support jobs and yesterday announced that it will be hiring 1,000 customer service staff over the coming year.

Bob Ayling, BA's chief executive, said that the intention was to convert BA Engineering into a separate limited company in due course. The injection of outside capital is expected to happen at the same time.

BA Engineering employs 9,000 staff - about one sixth of the airline's workforce - and accounts for around pounds 800m of BA's pounds 8bn turnover. It was converted into a separate profit centre in 1995 with the aim of increasing its independence from the main airline operations.

Mr Matthews, an engineer and management consultant, who formerly ran GE's Canadian hydro-turbine business, will also be expected to develop BA Engineering's sub-contract work. It already carries out work for 100 other airlines.

As part of its strategy of becoming a "virtual airline" BA has already announced the closure of its ground handling division at Heathrow with the loss of 750 jobs and the sale of its ground fleet services division which employs 470 people at Heathrow and Gatwick. The airline is also outsourcing part of its accounting operations from west London to Bombay where wages are less than a fifth of their UK level. A total of 600 jobs are going from the 1,100 employed in BA's passenger revenue accounting operations over the next three years.

The airline, which is waiting for final government approval to proceed with a transatlantic alliance with American Airlines, has stressed that wherever possible job losses will be achieved through early retirement, voluntary redundancy and redeployment elsewhere within the company.

BA has also pledged that it will take on broadly the same number of staff as it is cutting under the cost reduction plan. To this end it yesterday announced a recruitment drive to hire an extra 1,000 customer service staff over the next 12 months. Most of the new staff will be employed as cabin crew based at either Heathrow or Gatwick and will be expected to have a second language.