Business View: BA needs to find the subtle knife not the 70s cosh

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The Independent Online

To be fair, you have to feel sorry for BA. Only a few days ago, it was celebrating record profits. Now it is facing oil at close to $67 a barrel and has found itself drawn into a dispute it was not originally a party to. The carrier hived off its catering business into the (awfully named) Gate Gourmet eight years ago. So you could easily argue that the problems that the galloping Gate Gourmet is suffering now should not be BA's concern.

But it is not that simple. For a start, BA is suffering from the problem that many companies that outsource a key part of their business fret about: what if the supplier runs into trouble? It found itself having to send long-haul passengers off to far-flung places with little more than a bag of nuts and a fizzy drink. Those premium passengers that BA is desperate to bring back to shore up its profitability won't see this as a fair alternative to filet mignon and a selection of fine wines. Virgin Atlantic and United Airlines suddenly seem more attractive.

Second, BA really should have better comprehended the village nature of Heathrow. While Gate Gourmet may now be owned by an American private equity firm, Texas Pacific, its staff still seem to regard themselves as being an arm of BA. And crucially, BA staff feel that too. This is because so many people who work at Heathrow come from the surrounding area, travel to and from work together, and are often close friends or even relations. It is not unknown for whole families to work as ground staff in Heathrow. Indeed, on Thursday and Friday, many BA passengers were getting better information about what was going on from someone at WH Smith in Terminal 4, married to a Gate Gourmet employee, than they were through official channels.

Third, BA knows all too well the hair trigger that the workers have at Heathrow. It suffered days of disruption last summer after an attempt to bring in quite sensible clocking-on and off procedures led to a walkout by ground staff. Then BA was mired in cross-union disagreements, while senior officials of the Transport & General Workers' Union (T&G) and Amicus struggled to control their members. This time, the BA workers - all of them T&G members - appear to have walked out without first warning their union, never mind their employer.

Because of these factors, BA should perhaps have taken a keener interest in what was going on at Gate Gourmet. The company has been losing money hand over fist, and that is not something the hard-nosed Texas Pacific was about to tolerate. Out went the guys who led the buyout from BA, and in came some American company doctors. Out went old working practices, and in came "flexible" arrangements. Out went decent employee relations, and in came sit-ins and lock-outs.

Assuming Gate Gourmet survives this dispute (and one should not take that for granted), BA will have to manage its supplier relationship more actively. This could either be bad for Gate Gourmet - with BA getting others in to replace it on some of its contracts - or good, with BA realising it has to cough up more if it wants a healthy, reliable supplier.

This is the issue that Willie Walsh will find on the top of his in tray next month when he takes over from Sir Rod Eddington as BA's chief executive. In Ireland, our Willie was known as an aggressive cost cutter. At BA, he will need to wield a subtle knife.