BA drops division spin-off project

British Airways yesterday scrapped plans to spin off its engineering division and sell a stake in the business to outside investors amid mounting fears that it was pushing the concept of a "virtual airline" too far.

Bob Ayling, BA's chief executive, said the plan to turn the engineering department into a limited company had been postponed until at least 2000 unless there was a radical restructuring of the industry as a whole.

A spokesman said that while anxieties among the 9,300-strong workforce had been a factor, BA had decided to postpone the plan because market conditions were not right.

However, BA is pressing ahead with a programme to streamline the engineering division. This will involve the sale of its wheels and brakes and landing gear overhaul units to private buyers, the establishment of the parts supply operation as a profit centre, the outsourcing of its information technology functions and a pounds 20m investment in a new pneumatics and hydraulics workshop.

"Achieving these improvements will satisfy our customers and allow us to sub-contract less aircraft engineering services," said Mr Ayling. "This will provide the job security we all want.

"There are no plans at this stage to seek buyers for any other parts of engineering nor to invite outside investors in the overall business."

The aim of the business efficiency programme launched last year by BA is to save pounds 1bn from its costs. The plan will involve 5,000 job cuts but BA has pledged to take on a similar number of staff in other areas, mainly customer services.