4,000 jobs to go as BA slashes costs

Rod Eddington, the chief executive of British Airways, will write to staff this week outlining a fresh assault on costs, which will lead to around 4,000 redundancies.

The letter will arrive on Thursday after BA executives have held face-to-face meetings with the workforce on plans to strip £300m a year out of the business.

The latest round of cuts is expected to affect operational staff following the introduction of electronic ticketing and check-in facilities. It comes on top of the 13,000 redundancies that resulted from BA's last major review, known as the Future Size and Shape project.

BA confirmed that it would announce its latest business plan to staff this week, but refused to comment further. However, an insider said the airline was attempting to limit the number of compulsory redundancies.

It is understood that BA is also planning to offer its 40,000 staff a range of new working practices to cut costs, including part-time employment and unpaid leave.

The airline has discussed the plans in detail with the unions, in an attempt to avoid a repeat of the unofficial strikes by check-in staff that crippled the company last summer.

BA has already carved £1.7bn worth of expenses out of the business under the Future Size and Shape project, which concentrated on head office costs. But executives remain concerned that the airline's cost base is still bloated compared with its European rivals.

The business plan is expected to be unveiled in detail to the City next month ahead of BA's third-quarter results on 10 February.

The City has high expectations for BA after the company issued an unexpectedly upbeat trading statement earlier this month. It reported increased demand for the higher-yielding long-haul first and business class tickets.

This led investment bank JP Morgan to radically rewrite its forecasts, from a pre-tax loss of £110m in the financial year to a pre-tax profit of £100m. As a result, the company's shares are trading at close to their highest level since the terrorist attacks of 11 September 2001.

BA, which rejoined the FTSE 100 in December, still faces some serious financial challenges. The company, which has a market capitalisation of £3.07bn, has announced a pension fund deficit of £900m and is in talks with the unions and staff about how to plug the gap. It also has debts of £4.8bn.

Despite signs of recovery, ticket sales are still down, although the loss of income is currently being compensated for by BA's earlier drive to strip costs out of the business.

The airline industry is beginning to recover from the quadruple whammy delivered by the war on Iraq, global security fears, the outbreak of the Sars virus, and the shaky world economy. But many travellers are still nervous of long-haul flights, and another terrorist incident would immediately dent confidence.