BA - the actual announcement
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BA - the actual announcement
From Chief Executive Rod Eddington:
Today we are announcing our Business Plan for the next two years which aims to reach our goal of achieving a 10 per cent operating profit margin.
This is the target we must hit if we are to secure our future and become profitable and successful.
The business plan sets out a £300 million cost reduction target on employee costs for the years 2004-2006. Clearly we cannot achieve that target without some further headcount reduction.
The new savings will run alongside £450 million savings announced last year being delivered from existing programmes, including ceBA, ESS and reduced external spending.
We will not be specifying the headcount reduction required as we have done previously. There are many other ways of reducing employee costs as we have seen in the past two years and we will maintain our voluntary approach to redundancies.
We have a range of options under the business response scheme including unpaid leave, part-time working, voluntary severance and early retirement. We also lose jobs through natural turnover and restricted recruitment.
Of the required savings, we believe a reduction of 30 per cent needs to come from head office and support functions, with 15 per cent from the operational areas. The size of our flying programme will be largely unchanged.
We want to do things differently this time by giving people greater opportunities for involvement and discussion. We want you to talk to your managers and trade unions about these business issues and discuss the possible solutions.
We also want you all to share in the airline's success. To that end, the Leadership Team plans to take a proposal to the BA Board to launch a new employee reward plan linked to the operating margin.
I recognise that everyone in the company has been through a difficult couple of years with cost cutting and personal sacrifice. We have made considerable progress and I offer you my thanks for that.
Your local management teams will set up a series of action planning sessions in the coming weeks to discuss how your area will achieve its target in the next two years.
It is critical that we modernise our business and deliver excellent customer service to become a profitable and successful airline.
Today we are announcing our Business Plan for the next two years which aims to reach our goal of achieving a 10 per cent operating profit margin.
This is the target we must hit if we are to secure our future and become profitable and successful.
The business plan sets out a £300 million cost reduction target on employee costs for the years 2004-2006. Clearly we cannot achieve that target without some further headcount reduction.
The new savings will run alongside £450 million savings announced last year being delivered from existing programmes, including ceBA, ESS and reduced external spending.
We will not be specifying the headcount reduction required as we have done previously. There are many other ways of reducing employee costs as we have seen in the past two years and we will maintain our voluntary approach to redundancies.
We have a range of options under the business response scheme including unpaid leave, part-time working, voluntary severance and early retirement. We also lose jobs through natural turnover and restricted recruitment.
Of the required savings, we believe a reduction of 30 per cent needs to come from head office and support functions, with 15 per cent from the operational areas. The size of our flying programme will be largely unchanged.
We want to do things differently this time by giving people greater opportunities for involvement and discussion. We want you to talk to your managers and trade unions about these business issues and discuss the possible solutions.
We also want you all to share in the airline's success. To that end, the Leadership Team plans to take a proposal to the BA Board to launch a new employee reward plan linked to the operating margin.
I recognise that everyone in the company has been through a difficult couple of years with cost cutting and personal sacrifice. We have made considerable progress and I offer you my thanks for that.
Your local management teams will set up a series of action planning sessions in the coming weeks to discuss how your area will achieve its target in the next two years.
It is critical that we modernise our business and deliver excellent customer service to become a profitable and successful airline.
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not the big blood bath that we were all expecting
I have not been in BA long (well less than 10yrs) and have had at least 5 of these "major" announcements. But we're still flying the same routes, in the same way blah blah...
NoD
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Another huge missed opportunity. This looks like ending up in another fudge and doesnt address the fundamental problems of organisational complexity, which drives the overall numbers/overhead costs. Disappointing.
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Reductions required in employee costs:
30% off head office & support
15% off front line operational areas
Of the £300 million cost reductions, £100 million is required in the first year, £200 million thereafter.
Tough targets indeed.
Mark.
30% off head office & support
15% off front line operational areas
Of the £300 million cost reductions, £100 million is required in the first year, £200 million thereafter.
Tough targets indeed.
Mark.
""headcount reduction"
What a marvellous touchy-feely, new Labour sort of phrase. I'll have to remember that one.
"
What a marvellous touchy-feely, new Labour sort of phrase. I'll have to remember that one.
"
Back to the topic...
I especially like this paragraph
"Your local management teams will set up a series of action planning sessions in the coming weeks to discuss how your area will achieve its target in the next two years."
Yeah, right! Methinks these sessions will be of the one way variety.
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Only half the Equation ? Revenues ?
10% operating margin on a sustained basis is a very tall order, but Rod Edington has stated this objective previously (it was mentioned back in the 2001/2002 annual report if not earlier)
A quick scan of airline financial performance throws up very few airlines in the 21 st centaury that have made this sort of operational return, BA did report at this level during the July – September period of 2002 at 11.8%
The only other airlines that appear to have consistently turned in figures around/above 10% are Southwest, Ryanair, easyJet and Cathay Pacific and Singapore, who operate using different business models/ markets.
What’s more concerning is that lots is said about costs, but that’s only half the operating margin story, not a mention of revenues in the whole statement.
Where is the revenue going to come from? in the European short haul market (where BA’s figures are poorest), the market has changed forever since the arrival of the low cost carriers.
A difficult conundrum for BA.
Average fares in this market sector are still spiralling downward, yet I suspect that BA makes a loss on every seat it sells at the low fare end of the market, but the “suits” who used to tip the balance have also changed travelling habits, again I also suspect for ever.
Sadly I don’t think anything short of whole scale remodelling of the European operation is going to solve the problem, to get near the 10% operating margin figure.
A quick scan of airline financial performance throws up very few airlines in the 21 st centaury that have made this sort of operational return, BA did report at this level during the July – September period of 2002 at 11.8%
The only other airlines that appear to have consistently turned in figures around/above 10% are Southwest, Ryanair, easyJet and Cathay Pacific and Singapore, who operate using different business models/ markets.
What’s more concerning is that lots is said about costs, but that’s only half the operating margin story, not a mention of revenues in the whole statement.
Where is the revenue going to come from? in the European short haul market (where BA’s figures are poorest), the market has changed forever since the arrival of the low cost carriers.
A difficult conundrum for BA.
Average fares in this market sector are still spiralling downward, yet I suspect that BA makes a loss on every seat it sells at the low fare end of the market, but the “suits” who used to tip the balance have also changed travelling habits, again I also suspect for ever.
Sadly I don’t think anything short of whole scale remodelling of the European operation is going to solve the problem, to get near the 10% operating margin figure.
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They could save quite a bit by scheduling aircraft according to demand with a bit more effect.
A lot of the larger aircraft like the 767, especially on European routes, are hardly ever full. Half the time just about generate enough payload to justify an A319 being used.
Just a thought....
A lot of the larger aircraft like the 767, especially on European routes, are hardly ever full. Half the time just about generate enough payload to justify an A319 being used.
Just a thought....
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BA sickness
In the news (today's times, see link below for full story):
http://business.timesonline.co.uk/ar...981705,00.html
"sick leave costs the airline about £70 million a year"
"Staff in BA’s 46,000-strong workforce take on average 15 days sickness each year. The average for the private sector is 6.5 days, and for the public sector 8.5 days."
"No specific plans to tackle the problem have been published"
15 days is staggering, if true ?
Anyone know how this compares to other major/flag carriers, or the newer low cost operators ?
http://business.timesonline.co.uk/ar...981705,00.html
"sick leave costs the airline about £70 million a year"
"Staff in BA’s 46,000-strong workforce take on average 15 days sickness each year. The average for the private sector is 6.5 days, and for the public sector 8.5 days."
"No specific plans to tackle the problem have been published"
15 days is staggering, if true ?
Anyone know how this compares to other major/flag carriers, or the newer low cost operators ?
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BA haven't come close to addressing the problem. It needed a tough and aggressive stance to resolve the innefficient working practices and ended up fiddling around on the edges!
Just look at the cost/productivity of some of the key handling areas such as Despatch, Ramp. Equipment costs, etc. Union agreed working practices in certain areas are ridiculous and result in staff doing a restricted number of flights per shift, and sitting idle when others are called in on overtime (at a minimum payment ox xx hours) to cover the remaining flights.
What is the average salary of a BA Despatcher? How does this compare to the UK average?
BA will never resolve its problems until these fundamental issues are resolved.
Just look at the cost/productivity of some of the key handling areas such as Despatch, Ramp. Equipment costs, etc. Union agreed working practices in certain areas are ridiculous and result in staff doing a restricted number of flights per shift, and sitting idle when others are called in on overtime (at a minimum payment ox xx hours) to cover the remaining flights.
What is the average salary of a BA Despatcher? How does this compare to the UK average?
BA will never resolve its problems until these fundamental issues are resolved.
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There is only one way to deal with problems such as attendance, Bribery!
Nothing else seems to work. Whilst it seems odd to have to give people extras to just do what they are contracted for, bribes such as cars, holidays etc. for staff who have been in everyday does make a massive difference. It also helps engender a sense of goodwill from the staff, something BA isn't doing very well at the moment.
Nothing else seems to work. Whilst it seems odd to have to give people extras to just do what they are contracted for, bribes such as cars, holidays etc. for staff who have been in everyday does make a massive difference. It also helps engender a sense of goodwill from the staff, something BA isn't doing very well at the moment.
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Some one I know works for BA, and has been off sick (with a sick note) for 8 weeks with a bad back.
He is due back at work next week, and so has enjoyed 8 weeks off sick on full pay ( I get 5 days per year with my employer regardless of sick note or not). But the best bit is, when he goes back, he will work a week of half days, then a week of 6 hour days and then go back to full time working. Very nice, and a great deal for the lucky sod going back to work, but in the current economic climate is this a good thing for the company??
Until BA drops its dinosaur working practices, that have no doubt existed since Pre Maggie Thatcher union bashing days, it will never drag itself into the 21st century.
He is due back at work next week, and so has enjoyed 8 weeks off sick on full pay ( I get 5 days per year with my employer regardless of sick note or not). But the best bit is, when he goes back, he will work a week of half days, then a week of 6 hour days and then go back to full time working. Very nice, and a great deal for the lucky sod going back to work, but in the current economic climate is this a good thing for the company??
Until BA drops its dinosaur working practices, that have no doubt existed since Pre Maggie Thatcher union bashing days, it will never drag itself into the 21st century.
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BA Dispatchers
Pay ranges for new starters from circa £18000 - £ 27000 plus shift pay, plus bank holiday premiums of 66% of the daily rate, plus overtime when you want it. All this for about 32 hours per week. Not a bad job ?