Walsh wields axe at British Airways

One-third of managers to go. Compulsory redundancies likely. Cost-cutting plan to save £50m
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The Independent Online

Willie Walsh, the new chief executive of British Airways, is to axe more than one-third of the airline's management in one of the most ruthless culls ever witnessed in the aviation industry.

Almost 600 senior and middle managers - 35 per cent of the total - face the chop in a £50m cost-cutting plan over the next three years. A number of them are likely to be made compulsorily redundant, despite a pledge when Mr Walsh took over that any job cuts would be on a voluntary basis.

BA said the number of senior managers would come down by 50 per cent from 414 now to 207 by March 2008, while there would be a 30 per cent reduction in middle managers from 1,301 to 911 over the same period.

News of the cutbacks was given to shocked managers during a 75-minute meeting with Mr Walsh and his executive team yesterday morning, leaving hundreds of them not knowing whether they would have a job after Christmas. "There is considerable uncertainty across the airline," one manager said.

The brunt of the cutbacks will be felt at BA's Waterside headquarters close to Heathrow where there are 3,800 employees - more than the entire workforce of Ryanair.

The average salary of a senior manager at BA is £86,000, while middle managers are typically paid £45,000. BA would not say how much the redundancy programme would cost. The average pay-off is likely to be in the region of £85,000 but some senior managers will get cheques for more than £100,000.

Mr Walsh denied the management job cuts were designed to soften up BA's unions for the wider redundancy programme he is due to announce in February covering the airline's entire 45,000 staff. He also deflected suggestions that the scale of the management cull amounted to an indictment of his predecessor Sir Rod Eddington for putting up with such a bloated and over-bureaucratic organisation.

"We are restructuring the airline to remove duplication, simplify our core business and provide clearer accountability," Mr Walsh said. "The decision to embark on a major reduction in management numbers is not one I have taken lightly. But it is essential that we streamline our business further and I believe it is right that we have started by looking closely at the number of senior managers."

The cutbacks follow the warning Mr Walsh issued alongside BA's second-quarter results last month, when he disclosed that unit costs had begun to rise again for the first time in more than three years. Mr Walsh made it plain that BA's performance was not acceptable, saying the airline needed to "re-energise" its cost-cutting drive, but few outside observers had expected him to act quite so quickly or savagely.

The BA chief executive said he believed the job cuts were something people would understand as it strove to achieve its target of a 10 per cent operating profit margin. "I don't think they will come as a significant surprise to people within BA. We are cutting out things that slow the business down."

Mr Walsh said the £50m of savings formed part of the £300m cost-reduction programme BA announced two years ago. The efficiency plan due to be unveiled in February will be much more ambitious and could involve up to 3,000 job losses, with parts of the workforce cut by up to 15 per cent. At the same time, BA has begun talks with its unions and employees about filling the £1.6bn hole in its pension fund - a deficit which is preventing it from resuming dividend payments or making major strategic investment decisions.