BA faces summer of discontent: Michael Harrison on the prospect of the airline's first pilots' strike

BRITISH AIRWAYS is used to taking corporate risks in an uncertain world. It is, after all, one of the main reasons why the airline went into the private sector. But as the company prepares to announce a sharp drop in profits tomorrow its management finds itself distracted by a novel threat - the prospect of the first official pilots' strike in BA's history.

With the summer season entering full swing the chaos BA's 3,500 pilots could wreak on holiday plans and business travel should they vote for industrial action hardly bears thinking about. The ensuing disruption would make the stoppage by Gatwick cabin crew over the May Day bank holiday weekend appear a mere trifle.

Yet the betting is that when the ballot forms are counted and the result announced in a little over two weeks, the British Airline Pilots Association will have its mandate to ground BA. By then the airline will also know whether its 18,000 cabin crew have also voted for strike action.

Industrial stoppages are suddenly in vogue again. The miners and the railwaymen have already downed tools, the teachers have been balloted and the firemen are preparing to vote - in all cases in protest at particular strands of government policy.

The industrial unrest sweeping BA has nothing to do with politics and everything to do with company strategy. The proximate cause is the airline's attempt to stem heavy losses at Gatwick by transferring all its short-haul European operations there into a new company where pay rates are, on average, 30 per cent lower than elsewhere.

The underlying motivation behind the strike ballots - and the reason they may succeed - is the fear that what is happening at Gatwick today could happen anywhere else in BA tomorrow as one of the world's most profitable airlines seeks to make even greater profits by overhauling or closing down its loss-making operations.

Despite the image of Lord King, the former BA chairman, and his successor, Sir Colin Marshall, as tough, uncompromising businessmen, BA has never really been one for 'macho management'. Even in the dark days of the early 1980s, when the workforce was being pared back drastically for privatisation, the redundancy settlements were very generous. In the present dispute, BA has also backed away from some of its initial demands.

Nevertheless, the airline recognises it has a problem - so much so that Robert Ayling, BA's new group managing director, wrote to all 49,000 employees late last week in an attempt to assuage their worries. 'I am only too well aware of the uncertainty that change on a large scale creates and I know from talking to many of you that some of the recent changes have caused particular uncertainty,' he wrote.

BA, he went on, would continue to change in ways that could not always be predicted. But it would try to maintain present employment levels while pay and conditions of employment would be reduced only when the alternative was to close parts of the business.

This choice has already confronted staff in BA's regional division located in Birmingham, Manchester and Glasgow. Given the choice of taking pay cuts and inferior conditions of employment or of seeing their operation sub-contracted to the Danish airline Maersk, they chose the former.

It is also precisely what is now happening at Gatwick, where BA lost an estimated pounds 60m last financial year - pounds 35m of that on its European short-haul network.

The opportunity to tackle those losses came last autumn when BA paid pounds 1 to take the rival Gatwick carrier, Dan-Air, under its wing. BA took on 450 Dan-Air pilots and cabin crew and 12 of its routes and put them into a new company, European Operations Gatwick. The former Dan-Air staff, already paid 30 per cent less than their BA counterparts, were obliged to take a further 10 per cent pay cut.

Where BA ran into trouble with its own ground staff, pilots and cabin crew was when it began transferring its 10 short-haul routes from Gatwick into the same new company to achieve the same low cost-base.

The only group BA has so far settled with at Gatwick is its 1,000 ground staff who, though not invited to join EOG, have agreed a new lower pay deal. Existing staff can either stay on their present pay levels until they move or take an 18 per cent pay cut and a one-off compensation payment. All new staff go on to the lower scale.

Over the next 30 months the 100 or so short-haul BA pilots at Gatwick were given the option of either transferring elsewhere in the airline or joining the former Dan-Air pilots in EOG on rates of pay that are pounds 10,000 to pounds 15,000 lower.

To complicate matters further, BA refused to put the two groups of pilots on the same contract even though they now wear the same uniforms and fly the same planes for the same airline.

BA dropped its initial offer to pay existing cabin crew a lump sum if they moved to a new lower pay scale. Instead they were given a choice between transferring elsewhere, taking severance or early retirement or staying on after May 1995 on basic pay - about two-thirds of full-pay - while suitable openings elsewhere in BA were found. However, any cabin crew recruited from new would automatically be paid on the lower level.

Over a period of time, then, BA would slowly create a new European short-haul operation at Gatwick costing some 30 per cent less to run.

Its pilots and cabin crew are now being balloted on strike action because the first three of those 10 BA routes - to Copenhagen, Malaga and Frankfurt - were transferred into EOG on 1 May without union agreement.

Mike Street, BA's director of service delivery, says: 'Not a single BA employee - pilot, cabin crew or ground staff - is being made to join the new company and they have all been offered jobs at the same rate of pay elsewhere in BA.'

'I know that some staff think this is the thin end of the wedge but only a fool would have bought Dan-Air, a company that was losing money, and given it even higher costs.'

The message from Mr Ayling, the policy's architect, is that without the overhaul at Gatwick BA would have had to pull out of flying short-haul European flights from there altogether.

Management and unions have tried compromise. In March BA re-instated the 10 per cent pay cut it imposed on the former Dan-Air staff - it said as a reward for better-than-expected performance, Balpa says because BA could see it was heading for a showdown.

Balpa is not unsympathetic to BA's aims but it is not prepared to see BA divide and rule by offering different contracts of employment to pilots in different parts of the airline.

Chris Darke, Balpa's new general secretary, argues that this could be a recipe for conflict and dissent throughout the airline. The former Dan-Air pilots brought into EOG were placed on the bottom rung of BA's seniority ladder - the higher up the ladder the greater the scope a pilot has to chose where he flies and in what aircraft.

'Then, of course, there is the fear that if the airline can cut costs in the regions and at Gatwick then why not do it on shuttle services or Concorde or short-haul services at Heathrow,' Mr Darke adds.

The more thoughtful union negotiators understand the airline's motives and sympathise to an extent. However, even they are dismissive of the way BA is trying to drive though the changes first and explain later - a policy that has lost the airline the confidence of its workforce.

Mr Street, who is at the sharp end of negotiations with the unions, disputes this: 'Of course if you pursue costs downwards to the ultimate degree you end up with an industrial backlash that you cannot manage,' he says. 'But what we are trying to do is grow the business in such a way as to cause as little staff disaffection as possible. It's about job protection, not job deletion.'

Unless BA can persuade its unions of that, and quickly, it and millions of passengers could be in for a long, hot summer.

(Photographs omitted)