Cost cutting is vital for survival, says BA chief

The boss of British Airways today spelled out his determination to achieve a "fundamental" change to employment costs as he warned that the airline was in the "eye of the storm", battling against the recession.

Chief executive Willie Walsh told the company's annual meeting in London that he wanted to achieve 3,700 job losses by next March on top of 2,500 which have gone since last summer.

"There is no point trying to skirt around the fact that we need a fundamental and structural change to our employee cost base.

"These changes are essential to our short-term survival and, more importantly, to our long-term viability."

Mr Walsh said talks, which are continuing with trade unions to achieve the job losses and agree a pay freeze, were delivering some "very positive" results but he warned unions that he was not exaggerating the difficulties BA faces.

"We have pulled no punches. It is essential for our short-term survival and long-term viability that we secure permanent change in our employee costs."

BA chairman Martin Broughton said the aviation industry was facing the biggest crisis it had ever known and he warned that the market for premium air travel may never fully recover.

He told shareholders that BA made an operating loss of more £300 million in the final quarter of the last financial year, the worst quarterly result in its history.

"This is no ordinary aviation downturn. This is no cyclical swing that will automatically turn up again."

Mr Broughton also warned that the deficit in BA's pension funds is likely to have worsened by more than £1 billion in the last year.

The company has paid £1.8 billion into its two pension schemes in the past three years - more than its profits.

"The deficits remain huge and, in the current climate, the company will not be able to afford to increase its own contribution."

Despite BA's financial problems, Mr Broughton said the company remained opposed to state aid for airlines and took a swipe at Virgin boss Richard Branson, who had raised the issue recently.

"We should not be too critical of Richard Branson. After all, he is rather worried about his own airline and he knows quite a lot about subsidies because he's been welcoming them into his train operations for years."