Heathrow deal opens way for BA cost cuts

British Airways yesterday overcame a significant hurdle in its three- year pounds 1bn efficiency drive, after union negotiators representing almost 3,000 ground-based staff at Heathrow Airport agreed to accept new working patterns and a two-year pay freeze.

The Transport and General Workers Union had earlier balloted its staff in the heavily unionised division on the package of changes, which British Airways said would bring costs at the business, called Aircraft Services Heathrow, into line with competitors. Apart from the pay freeze, the deal includes a reduction of around 15 per cent in starting rates of pay for new recruits at the business, which employs 2,800.

In return, workers have been given a commitment by the airline to protect employment levels as long as the efficiency savings are achieved and maintained. A British Airways spokesman also said the carrier had made a commitment not to sell the division for three years.

Aircraft Services Heathrow was responsible for a variety of ground activities, an area long regarded as one of the last bastions of so-called Spanish practices in the airline. It includes ramp and baggage staff, along with employees who drive crew and passenger busses. A fortnight ago union members had voted by about two to one in favour of the deal, which will mean wide-ranging changes to shift patterns, but union officials had spent the following days negotiating the final details.

Divisional managers across British Airways were last year asked to identify cost savings to meet the pounds 1bn target by 2000. Aircraft Services Heathrow had to find cuts worth pounds 20m, or face the prospect of redundancies or the possible sale of the business to an outside bidder.

Announcing the pay deal, BA chief executive, Bob Ayling, again denied speculation that the carrier was planning to become a "virtual airline" by outsourcing many of its core operations to other companies. "Our business envisages that British Airways will have just as many employees at the turn of the century as it has now."

Mr Ayling hailed the agreement as a "milestone" in the cost-cutting drive, reflecting a view held inside the airline that ground staff were likely to be the hardest to convince about the merits of the strategy. He went on: "It demonstrates that while we are looking for efficiencies in all areas of the business, we are working with staff - not against them - to achieve these."

At the centre of the three-year plan is the move to cut 5,000 jobs in some parts of the group and create 5,000 new posts in expanding areas such as customers services out of the existing 49,000-strong workforce. Less than a fortnight ago BA announced the creation of more than 700 jobs at its expanding operations at Gatwick Airport. Other businesses, including Ground Fleet Services, which operates and maintains airport vehicles, have been sold.

Separately yesterday, BA said it would be investing an additional $100m on expanding its terminal facilities at New York's John F Kennedy International Airport, the airline's biggest long-haul destination. The programme will include new road and rail access to the terminal, a shopping plaza and entertainments complex. BA is the only British carrier with its own terminal at the airport.