BA to unveil pounds 1bn cost cuts

British Airways will this week confirm plans for an unprecendented restructuring as part of a three-year pounds 1bn cost-cutting exercise announced in May.

At Heathrow on Wednesday, chief executive Robert Ayling will tell a meeting of 350 key managers that plans include spin-offs of BA's huge engineering and cargo divisions, more franchising of short-haul routes and the introduction of lower pay scales for many of its 55,000 employees.

The plans were first revealed in the Independent on Sunday in July, when analysts estimated that the engineering division alone might fetch up to pounds 500m.

Official BA sources say the proposals will be presented as "under consideration" only in the context of the increasing competitive pressure BA is facing in the run-up to the millennium.

Declining to put a figure on likely job losses, they also also deny speculation that up to 10,000 redundancies will result.

"No conclusions have been reached, but Bob's ruling nothing out, save for the continuation of BA's global ambitions, commitment to customer service and profitability," one BA source said this weekend.

Trades unions, however, will see the next step - the setting up of manager- only review groups - as further evidence of Mr Ayling's determination to push his agenda through intact.

Last Sunday, at the Trades Union Congress in Blackpool, union negotiators presented a 10-page memorandum to BA directors, which fiercely opposed changes without consultation.

The document, Step Change - Keeping Staff on Board, warned of increasing mistrust and falling morale among BA's workforce and possible damage to profitability as a result of the proposals. "Our members under- stand that change at work is inevitable in today's economic climate," it stated.

"However, they believe that the company has set the new pounds 1bn efficiency target simply to please investors with no regard for the views of staff. They are concerned that the new target is unattainable, unneccessary and counter-productive," it added.

BA's delegation included executives Alistair Cumming and Valerie Scoular, but not Mr Ayling, whom the unions have been asking to meet since the planned pilots strike was settled in July.

Negotiators have asked Mr Ayling to attend the unions' monthly BA Forum meeting, also this Wednesday, but this weekend BA sources could not confirm whether or not he would appear.

The stand-off sets the scene for further industrial unrest at Britain's flagship airline, though union sources say no strike action has yet been discussed. It also comes at a sensitive time for BA, whose planned transatlantic alliance with American airlines is currently under review by the Office of Fair Trading.

BA has already transferred many staff from high-cost Heathrow to lower pay areas such as Wales.