From Andrew Lobbenberg, European Transport Equity Research RBS.
On Friday afternoon the aviation leadership team at Unite briefed city analysts on the ongoing cabin crew dispute at BA. Relations seem very poor between the union and management, with the union in our view resenting the company’s efforts to drive through a cultural shift that secures decision making for head office. We think the strike vote will be close. The key technical issue is whether BA’s recent operational changes have imposed contractual changes or not. This will not become clear until the February court ruling. We therefore think that the union, if it does win a mandate, will look to delay strike action until the spring.
Unite’s position is that it has engaged with BA and from the start of negotiations has recognised the need to make concessions given the current acute downturn facing the industry. Unite said that BA’s opening proposal to them, many months back, was remarkably similar to what BA has now imposed. This cost cutting package was not deemed acceptable to members and was rejected. Unite came forward with its own package of cost saving measures, centred on a two year pay freeze, a 2.61% pay cut (as offered by pilots) and increased flexibility in the context of disrupted operations. The union’s view was that this package would be worth around £100m. The company had Price Waterhouse evaluate the package. They evaluated its impact at £54m. The union sees this as ironic since the value BA ascribes to its imposed changes is £50m, less than was offered by the union.
Following the failure to agree a mutually satisfactory package of cost saving measures, the company is imposing cost cutting measures, including the reduction of staffing levels on long haul and short haul aircraft and is planning in the future on implementing a new set of terms and conditions for future new joiners, which will cross utilise crew between short and long haul operations. The company claims that staffing levels are not contractual and can be changed without union agreement after consultation. The union claims they are contractual and that proper consultation did not take place. The company has already implemented the long haul staff reductions and is due to implement short haul during December.
Unite applied to the High Court to have an injunction placed on BA to stop it implementing new staffing levels. The injunction was not granted but an expedited court date in February was set for a hearing on the matter. The union characterises this as a victory: it says that BA sought to have the injunction dismissed and setting an expedited court date recognises that there is some merit to their case. The union says that BA sought to be awarded costs but failed. The union also said the judge offered to impose an interim injunction but said the union would be liable for damages had it lost in the final hearing – a risk it was not financially able to take.
The union is now balloting for industrial action. The ballot will conclude on December 14 allowing the union, if the vote is successful, to launch industrial action from 21 December. The union said it was confident of a strong vote in favour of industrial action. The union also said it would not be surprised if BA sought an injunction against the ballot on technical grounds. Unite said it did not expect its ballot to fall foul of the same problems that the BALPA pilot union strike vote did last year – challenging BA’s right to maintain operations in other European countries. The pilot case also related to concerns about future use of the open skies airline, which is not permissible under UK labour law – ballots may not be about potential future action by the company. But the union does still expect a legal challenge. It argued that if BA does find a technical flaw in the ballot procedure, the union could correct and re-ballot immediately. They argued that in such scenarios the blocking of industrial action typically strengthens union’s case towards staff and results in stronger votes for industrial action in subsequent ballots.
The union also flagged that if it were successful in winning the injunction in the February Court date, staff would be able to claim damages. Under BA’s previous operating conditions crew who operate flights short of a cabin crew member can claim an extra £200-260 per sector (depending on seniority) and get a day off in additional compensation. If BA were found to have forced staff to operate with fewer crew than contractually agreed, the union expects to be able to claim this level of compensation for all flying since the introduction of the currently imposed conditions. It estimates this as a cost of £10m per month in additional sector pay, with the cost of extra leave on top.
The union also argued that building up this dispute with cabin crew will only make its pension deficit negotiations all the more fraught and could jeopardise the June 2010 deadline for finalising the deficit recovery scheme.
Our thoughts
There are three key issues. Can the union win a strong strike mandate from staff? Are the changes made by BA contractual or not? What is the timing of events?
On the strike mandate, the union sounded confident to us, but they could not hold a briefing and do otherwise. The union accepted under questioning that this dispute did not have public support. We do think this will play a role and will weaken support. We do not expect staff eying part time working or voluntary redundancy to support the strike. We would expect weaker support for strike action at Gatwick – somewhat simplistically, management are trying to make Heathrow staff productivity as good as Gatwick – the only reason Gatwick staff might chose to support industrial action would be to keep alive hopes of transferring in the future to the significantly more lucrative operation for them at Heathrow. Otherwise, the union is working hard to get a positive vote with a strong turnout. We do not think the union will get a very very strong mandate, though it might or might not get a majority for action. We think it will be close.
We are not employment law experts and have no clear view as to whether the changes made by BA are contractual. The company states confidently that they are not contractual. The union argues the reverse.
In terms of timing, we think the union would probably prefer for strike action to be delayed until after the court has judged on the contractual/non contractual issue. Were the union to call strike action before there is legal certainty on whether BA’s changes to terms and conditions are contractual, then should they lose that legal question, they would be liable for very significant damages that might bankrupt the union. We therefore think the union wants to threaten strike action over Christmas, to deter passengers from booking BA, but will want to defer action into the spring. The union will be looking for the cycle to improve and hence strengthen its hand. The union will be looking to run the dispute on towards the June 2010 pension deadline. If there is a vote for strike action, it is possible that there could be a real game of poker, with the union hoping for an injunction from the company to protect its holiday operation, whilst the company could choose to hold back and see if the union dare actually strike without legal certainty of its position.
Underpinning this battle there does appear to be an ideological dispute. The union contends that the new HR leadership and senior BA management are seeking to exclude unions from having a say in operations. The significant cuts to management ranks have seen many operational leaders who had good links with unions, leave the company – this has cut off the working relationships. Repeatedly, the union contended that the reductions to staffing ratios were weakening BA’s premium positioning and threatening the brand.
We do not think BA management would dispute that it is seeking to exclude unions form management decisions. We think BA’s leadership is keen to force cultural change on the institution and breaking established union management links is key. Rebasing management of the company so that decisions are made in head office and not by labour, is a key part of the management change being sought.