BA freezes pay and looks for job cuts after £70m loss

Airline hit by collapse in premium traffic and the decline of the pound

British Airways is freezing staff pay and looking for further voluntary redundancies after global recession and the weak pound pushed the airline to a £70m loss in the first nine months of its financial year.

Although BA's revenues were up 6.2 per cent to £7bn due to rises in the dollar and the euro, sterling falls took a £100m chunk out of profits, leaving them 109 per cent down from last year's £816m. Fuel costs were also a factor, shooting up by £723m over the first three quarters as the oil price spiralled to an all-time high of $147 per barrel.

BA's biggest problem is the fall in premium traffic. The company makes more than half its revenues from corporate travel, but the business has been hurt by both the overall economic situation and the ructions in banking, an industry on which airlines are particularly reliant. Although economy traffic rose by 1.4 per cent last month, the number of passengers in BA's premium cabins was 13.7 per cent lower than in 2008, and the trend is still downwards.

With little optimism about the economic outlook – BA's planning assumption is that tough conditions will continue for 24 more months – the airline is forecasting full-year losses of £150m, and is in talks with trade unions about cost-cutting plans. Formal negotiations will start next week. Willie Walsh, the BA chief executive, said: "We've said to the trade unions that in the currentenvironment, given the deterioration in financial performance, we can'tenvisage any rise in base pay this year."

Headcount will also come down, though BA will not give any indication on numbers. The company has already cut 480 managerial positions, 35 per cent of the total staff at this level, and the voluntary redundancy scheme will now be offered elsewhere. "There will be some targeted voluntary redundancies where we know people can bereleased without replacement," Mr Walsh said. "We know there are people looking for the opportunity and when we mentioned this to the trade unions there was recognition that there are people who are willing."

BA's market capitalisation is still below that of Iberia, the Spanish flag carrier with which it is in merger talks. Although both airlines profess support for the deal, negotiations have been protracted as BA's ballooning pension deficit and plummeting share price belied the 60/40 merger ratio targeted by Mr Walsh.

Earlier this week, the chairman of Caja Madrid, which owns 23 per cent of Iberia, said an agreement was imminent, and hinted at a 55/45 split. Mr Walsh said yesterday: "A lot of progress has been made in a short time, but a number of critical issues are still to be agreed."

The merger may make sense for the airlines, but it will be difficult with so many fluctuating variables, said Gert Zonneveld, an analyst at Panmure Gordon. "It is like trying to hit a moving dartboard and still get maximum points," he said.

Start your day with The Independent, sign up for daily news emails
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Pricing Analyst

£30 - 35k: Guru Careers: We are seeking a Pricing Analyst to join a leading e-...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K YR1: SThree: At SThree, we like to be dif...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: Did you know? SThree is a mul...

Guru Careers: C# Project Team Lead

£55 - 65k (DOE): Guru Careers: A unique opportunity for a permanent C# Develop...

Day In a Page

Fifa corruption: The 161-page dossier that exposes the organisation's dark heart

The 161-page dossier that exposes Fifa's dark heart

How did a group of corrupt officials turn football’s governing body into what was, in essence, a criminal enterprise? Chris Green and David Connett reveal all
Mediterranean migrant crisis: 'If Europe thinks bombing boats will stop smuggling, it will not. We will defend ourselves,' says Tripoli PM

Exclusive interview with Tripoli PM Khalifa al-Ghweil

'If Europe thinks bombing boats will stop smuggling, it will not. We will defend ourselves'
Raymond Chandler's Los Angeles: How the author foretold the Californian water crisis

Raymond Chandler's Los Angeles

How the author foretold the Californian water crisis
Chinese artist who posted funny image of President Xi Jinping facing five years in prison as authorities crackdown on dissent in the arts

Art attack

Chinese artist who posted funny image of President Xi Jinping facing five years in prison
Marc Jacobs is putting Cher in the limelight as the face of his latest campaign

Cher is the new face of Marc Jacobs

Alexander Fury explains why designers are turning to august stars to front their lines
Parents of six-year-old who beat leukaemia plan to climb Ben Nevis for cancer charity

'I'm climbing Ben Nevis for my daughter'

Karen Attwood's young daughter Yasmin beat cancer. Now her family is about to take on a new challenge - scaling Ben Nevis to help other children
10 best wedding gift ideas

It's that time of year again... 10 best wedding gift ideas

Forget that fancy toaster, we've gone off-list to find memorable gifts that will last a lifetime
Paul Scholes column: With the Premier League over for another year, here are my end of season awards

Paul Scholes column

With the Premier League over for another year, here are my end of season awards
Heysel disaster 30th anniversary: Liverpool have seen too much tragedy to forget fateful day in Belgium

Liverpool have seen too much tragedy to forget Heysel

Thirty years ago, 39 fans waiting to watch a European Cup final died as a result of a fatal cocktail of circumstances. Ian Herbert looks at how a club dealt with this tragedy
Amir Khan vs Chris Algieri: Khan’s audition for Floyd Mayweather may turn into a no-win situation, says Frank Warren

Khan’s audition for Mayweather may turn into a no-win situation

The Bolton fighter could be damned if he dazzles and damned if he doesn’t against Algieri, the man last seen being decked six times by Pacquiao, says Frank Warren
Blundering Tony Blair quits as Middle East peace envoy – only Israel will miss him

Blundering Blair quits as Middle East peace envoy – only Israel will miss him

For Arabs – and for Britons who lost their loved ones in his shambolic war in Iraq – his appointment was an insult, says Robert Fisk
Fifa corruption arrests: All hail the Feds for riding to football's rescue

Fifa corruption arrests

All hail the Feds for riding to football's rescue, says Ian Herbert
Isis in Syria: The Kurdish enclave still resisting the tyranny of President Assad and militant fighters

The Kurdish enclave still resisting the tyranny of Assad and Isis

In Syrian Kurdish cantons along the Turkish border, the progressive aims of the 2011 uprising are being enacted despite the war. Patrick Cockburn returns to Amuda
How I survived Cambodia's Killing Fields: Acclaimed surgeon SreyRam Kuy celebrates her mother's determination to escape the US

How I survived Cambodia's Killing Fields

Acclaimed surgeon SreyRam Kuy celebrates her mother's determination to escape to the US
Stephen Mangan interview: From posh buffoon to pregnant dad, the actor has quite a range

How Stephen Mangan got his range

Posh buffoon, hapless writer, pregnant dad - Mangan is certainly a versatile actor