James Moore: Staff must be in to dig BA out of its hole

Outlook It is hard to remember any time during the past few years when British Airways hasn't been in the thick of one crisis or another. But past troubles pale in comparison to the hole the company finds itself in today. All the various "stakeholders" seem to know it too. That is perhaps why the expected bloodletting at yesterday's annual meeting failed to materialise and; while the unions offered a little theatre outside with a colourful demo and cages full of lemmings, nobody is talking about strikes.

The problem BA faces is that while it is, on the whole, better run than many national flag carriers, it still has deep-seated problems that will be anything but easy to fix. Put simply, BA has more and better paid staff than rivals, together with a gargantuan pension deficit that makes actuaries blanch.

It may not be as bad as chief executive Willie Walsh has been saying – this is very likely a negotiating tactic and if the premium market is as awful as he has been hinting, why is BA pressing ahead with plans to operate business-only flights to New York out of City airport? Nonetheless, there is no question that BA needs to make cutbacks, deep cutbacks, if it is to weather the storm.

What Walsh does need to do, though, is find a way of making those cuts while still bringing the remaining staff along with him. Make no mistake, BA is a premium airline and it is very difficult to see it moving into another niche. It is just not set up to do that but a premium airline with grumpy, disaffected and demoralised staff will not remain a premium airline for long. There has been much talk of giving staff stakes in the business in return for pay cuts/freezes. That might dilute shareholders but pain is far easier to bear when it is shared.