BA accounts dept sent to Bombay to save on wages

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British Airways is to transfer part of its accounting operations to Bombay because wages levels in India are one-fifth of those in Britain. The move is part of BA's global efficiency drive aimed at producing savings of pounds 1bn a year by the end of the decade. The programme will result in 5,000 job losses.

BA's accounting operations employ 2,000 people. Initially about 10 per cent of the work will be transferred to Bombay, where qualified staff can be recruited on wages of about pounds 4,000 a year compared with pounds 20,000 in Britain.

But more accountancy work will be outsourced if the experiment proves successful. "It is a lot cheaper employing people in India," said BA's finance director Derek Stevens. "We can get high calibre people for 20 per cent of the cost of employing them here."

Bob Ayling, BA's chief executive, said the airline was looking to outsource more activities as part of the ambitious cost-cutting drive. He said the 12 per cent increase in BA's salary bill experienced in the first half of the year was not sustainable.

He was speaking as BA reported its first drop in operating profits since the Gulf War owing to spiralling fuel prices and the cost of last summer's threatened strike by pilots.

BA also confirmed that it expected Ian Lang, President of the Board of Trade, to announce this month whether its transatlantic alliance with American Airlines is being allowed to go ahead.

Mr Ayling was speaking as BA reported a 2 per cent drop in operating profits to pounds 512m for the six months to the end of September - the first time profits have fallen since Iraq invaded Kuwait in 1990.

The decline was due to a pounds 51m increase in aviation fuel costs and the pounds 15m impact of the threatened pilots strike earlier this year. BA also warned that fuel costs were likely to harden further in the current quarter because of the rise in oil prices.

With jet kerosene prices likely to hit 85 cents a gallon this winter against 60 cents a gallon a year ago, BA could be looking at an extra pounds 130m in fuel charges a year.

At the pre-tax level, BA's profits rose by 9 per cent to a record pounds 470m, helped by a pounds 45m contribution from its associate airlines. Qantas chipped in pounds 26m in pre-tax profits and a further pounds 19m of synergy benefits, while USAir, in which BA has a 24.6 per cent stake, paid a resumed dividend of $17.3m.

Mr Ayling said he still hoped to persuade USAir to maintain its long- term relationship with BA even though the US carrier has said it intends to abandon its code-share agreement with BA next March in protest at the link-up with American.

He added that USAir's anti-trust lawsuit against BA and American was "an action without merit and any hope whatsoever of success" and said the two carriers remained as determined as ever to pull the deal together.

Asked when he expected Mr Lang to rule on the alliance, Mr Ayling said: "If we haven't passed the milestone of the British competition authorities by the end of this month I would be disappointed."

Mr Ayling also said BA would continue to resist any attempt to strip it of take-off and landing slots at Heathrow as a condition for approving the alliance. "I still do not see any case for BA losing slots. It would be terribly unfair apart from anything else."

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