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It’s no secret that we’re in the midst of the biggest crisis the airline industry has ever seen so it’s no surprise that a large number of airlines are currently taking significant measures to protect their business. One such airline is British Airways and the measures that British Airways is taking have led the airline into direct conflict with a key part of its workforce – the cabin crew.
I’m not going to get into the minutiae or the details of what British Airways is proposing as they’re not relevant to the discussion I’m setting out – all that’s really key to starting off this discussion are the following facts:
- British Airways cabin crews are divided into multiple “fleets” and sub-fleets with the crews in each fleet working under very different pay scales and conditions. Crew members who joined the airline before 1997 are, generally speaking, paid best, while those joining from 2010 onwards are paid worst.
- British Airways is suggesting that it will need to make up to 12,000 staff redundant if the business is to survive the current crisis (link)
- British Airways is proposing substantial pay cuts for all front line staff with some cabin crew seeing their earnings cut by over 50% (link)
That’s the situation as it stands and, if you’re viewing the scenario with no real understanding of the history of the airline and its management, you could be forgiven for thinking that what’s being proposed is simply the airline being very upfront with what has to be done to ensure its survival. In reality, things aren’t that simple.
First, allow me to add a bit of history to the discussion:
The reason why cabin crew who joined British Airways from 2010 onwards are on noticeably lower pay than their longer-serving colleagues is that, in 2009/2010, the airline failed to win a pay & conditions dispute with existing cabin crew members so it created a new “fleet” (“mixed fleet”) to allow it to employ all new cabin crew on contracts that are considerably less favorable than the contracts under which the legacy crews operate.
Ever since then it has been a key mission of British Airways management to do whatever it can to encourage legacy crews to accept lower pay and worse conditions or, better yet, to have them leave. Management has long seen the British Airways legacy crews as a cost center that needs culling.
With that little bit of history in mind, let’s now turn to what British Airways is trying to do at this moment in time – it’s attempting to cut jobs and lower pay across the board with the longer serving cabin crew being among the hardest hit. That’s a fact that no one appears to be trying to dispute.
People defending these move are generally using the following two arguments to justify the proposals:
- These are highly unusual times and the airline is simply doing what it has to do to ensure its survival.
- The legacy cabin crew contracts are noticeably out of alignment with current pay rates so it’s understandable that management wants to impose significant cuts.
People making these arguments are missing two very key points.
The idea that British Airways needs to make such dramatic and permanent cuts to cabin crew pay doesn’t stand up to scrutiny.
At the very beginning of this crisis back in March, IAG (British Airways’ parent company) was happily telling anyone who would listen that it had over €9bn in cash and untapped loan facilities (link) and, since then, Willie Walsh (CEO of IAG) has told the press that British Airways does not need government aid to survive (link). He repeated that assertion as recently as 8 days ago when giving evidence to a UK parliamentary committee so, presumably, it’s true (link).
If British Airways can do without government handouts and has access to as much liquidity as its parent company claims (which is more liquidity than any other global airline), it’s hard to believe that it’s in such a desperate situation that it needs to make the dramatic cuts it’s proposing.
Temporary cuts would be understandable (although we shouldn’t lose sight of the fact that the UK government’s furlough scheme is currently paying a substantial portion of British Airways’ payroll costs) but what British Airways is proposing isn’t temporary. Far from it. The airline isn’t suggesting that cabin crew take temporary cuts until the travel world returns to a semblance of normality, it’s suggesting that all cabin crew should accept pay and conditions that are, essentially, a little worse than the conditions that the “mixed fleet” crew members are offered.
This has nothing to do with survival. If it was all about survival British Airways would be feasting on the cheap, low-interest loans the UK government is more than happy to provide. What British Airways management is trying to do is to renegotiate the cabin crew contracts that it has long wanted to rip up and it’s using the current crisis as an excuse to do just that.
Willie Walsh can’t have it both ways: Either he lied to the markets when he said that IAG has €9bn in liquidity and that British Airways doesn’t need a bailout (I’m reasonably sure that would constitute securities fraud) or the airline isn’t in a situation which requires such drastic measures.
Anyone arguing that British Airways legacy cabin crew contracts are out of line with current pay rates never seems to mention how profitable the airline is. In the 2019 financial year, British Airways posted an operating profit of £1.92 billion (~$2.34bn) according to a presentation made to investors (link)…
…so the airline doesn’t appear to be doing particularly badly with the cabin crew contracts as they are.
If British Airways can make this much profit with cabin crew pay and conditions as they are, why is there a need to make drastic and permanent cuts to pay and conditions? Why not ask cabin crew to accept cuts that will last 12 – 18 months (to see the airline through the worst part of this crisis) and then return them to the contracts they were on?
I have no idea if cabin crew are being paid more then the current market rate and I have no interest in speculating how much anyone else should be earning, but I don’t understand why some people are so keen to benchmark salaries to the lowest common denominator. So what if other airlines are paying less (and I don’t know that they are)? Most other airlines aren’t making anywhere near as much money as British Airways (and that’s despite their supposedly “overpaid” cabin crews) so why should the airline be benchmarking salaries to them?
As the financials show, British Airways is by far and away the biggest contributor to IAG profits and since 2015 IAG has performed so well that it has been able to return €4.4bn (~$4.82bn) to shareholders in dividends and share buy-backs…so why the need to decimate long-term pay?
Note: the figure of €4.4bn would have been considerably higher had IAG not been in the process of trying to buy Air Europa.
I’d understand the fixation with cutting long-term staff costs if we were discussing an airline whose performance was bad, whose cash reserves were low, and whose existence was in doubt…but none of that applies here. If an airline is capable of making billions in profits with its existing salary structure (profits that have, generally speaking, been increasing year on year) wouldn’t it be fair to say that salaries don’t need to be tampered with?
Yes, we’re living through “unprecedented times” (the most overused phrase of 2020) but that doesn’t mean that all actions that are taken now need to be long-term and permanent. If British Airways was proposing short-term measures to get itself through the toughest months of the current crisis it would be hard for anyone to complain…but that’s not what the airline is proposing. What is being proposed is clearly very permanent.
British Airways is one of the most profitable airlines in the world and, by its own admission, it doesn’t need government aid. That makes the cuts it’s proposing impossible to justify and, when examined closely, it makes them little more than a cynical and opportunistic ploy to achieve what the airline failed to achieve just over a decade ago. That’s wrong, and on so many different levels.