Rumours & News Reporting Points that may affect our jobs or lives as professional pilots. Also, items that may be of interest to professional pilots.

Demise of BA

Old 1st Sep 2001, 12:37
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i agree with roobarb.The management have been taking the p#8s for to long.Down here in the engineering world of BA,are salarys have just been blown out of the water by all of the american nationals.AA have just been given a massive rise to there engineers putting them on around 50k a year,as have Delta,Northwest,and soon United.Puts our crap of 33k a year in the shade.What will we we get?,more than likely 1.2% over 2 years,and a hard luck story.All of these carriers are affected by the same market forces as BA,so there`s no excuses!.If your reading this waterworld personnel,it`s time to get your`e fingers out of your asses,and start paying pilots and engineers the market rate!!!!!!
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Old 1st Sep 2001, 14:09
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For info...which pay round comes first, the CAs or the pilots? Or will there be some attempt to put up a united front?
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Old 1st Sep 2001, 16:07
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nhl

From your second post:

They [BA] are basically a civil service type operation with practices dating back to the 1960s
Maybe the government will bail them out, or maybe it will be politically advantageous to allow them to fold in an attempt to demonstrate the folly of privatisation
I think you've got yourself a bit confused here. How can you complain about BA's civil service style operation in one breath and then talk about the folly of privatisation in another? Nationalised industries, by definition, are a part of the civil service!
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Old 1st Sep 2001, 19:53
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Plenty of lessons to be drawn from the following Wall Street Journal article:

August 28, 2001

High Fares, Mediocre Service Cause Business Travelers to Mount Rebellion

By Martha Brannigan, Susan Carey and Scott McCartney
Staff Reporters of The Wall Street Journal

It's payback time.

In a startling change of behavior, business travelers are mounting a rebellion that could reshape the way the airline industry operates for years to come. Fed up with spiraling fares and mediocre service, road warriors are using technology and other means to beat the system airlines have long stacked against them.

The last thing the carriers need right now is to lose their most profitable passengers. After years of bottom-line growth, the airline industry suddenly finds that everything seems to be going wrong. First, jet-fuel prices skyrocketed. Then, the long economic expansion that sent business and leisure fliers jetting around the globe stalled. And now, labor costs are going up just when the airlines need to keep them in check.

The result: Caught in a vise between rising costs and falling revenue, the U.S. airline industry is careening toward an estimated $2 billion to $2.5 billion loss for 2001, ending a six-year profit streak.

Spooked by the faltering economy, fliers who long seemed indifferent to high ticket prices are scouting for cheap fares, shuffling travel plans or staying home. The first quarter of 2001 marked the biggest drop ever recorded in the percentage of full-price coach and first-class tickets booked on a large sampling of routes tracked by American Express Travel Related Services since 1992. The percentage of passengers paying full-fare coach fell to 7% from 12% a year earlier. Those buying first-class tickets dropped to 2% from 3%.

"None of us has ever seen this kind of collapse in business travel," says Doug Hacker, chief financial officer of UAL Corp.,
the parent of No. 2 United Airlines.

The loss of those high-priced seats is taking a toll on the carriers' bottom lines. In May, domestic unit revenue, a closely watched indicator that measures revenue per available seat mile, plunged 11.8% from a year earlier among U.S. carriers -- the biggest monthly decline in two decades. June and July proved even worse, with drops of more than 12% in both months. In a survey of 200 companies earlier this month, the National Business Travel Association found that only 16% plan to boost travel spending next year.

New Tools

The new mentality among business travelers suggests the airlines milked their profit cow too hard. And just as computer technology let airlines precisely match prices to demand and seat inventory to squeeze the most from passengers, it's now equipping travelers with tools to buy smarter and save money -- threatening airlines' pricing power.

Leading the consumer revolt are frequent fliers such as Neil Butani, a Los Angeles physician working on a start-up medical publisher. For a trip to Chicago earlier this year, he bid $168 on Priceline.com (www.priceline.com ) and ended up with a $198 round-trip ticket just one day before his departure. With empty seats to fill, American Airlines charged him one-tenth the normal walk-up fare.

Dr. Butani normally flies no-frills carrier Southwest Airlines. "But when you can get this fare for a nonstop, you take it," he says.

"Anybody who has a modicum of Internet capability and wants to take what is now a modest amount of time can very rapidly find out and comparison shop," says Leo F. Mullin, chairman and chief executive of Delta Air Lines. "There is almost perfect information out there."

Checking Your Agent

Michael Guirlinger, a senior managing director for Profit Technologies, a Davidson, N.C., consulting firm, says he routinely researches trips on the Web to find the best fare before booking through an agent.

Travel agents, he says, might not ferret out combinations that have one or two extra legs but save a lot of money. For a trip next week between Columbus, Ohio, and Dallas, Mr. Guirlinger checked several airline Web sites and found that a nonstop flight cost $1,300, but going via Atlanta was "nearly $500 less,"
he says. "That's a lot of money. And when you travel as much as our firm does, it adds up." He says when the economy rebounds, he expects he and other frequent fliers at the firm will maintain such price sensitivity.

At Intel Corp., employees using a new online booking program linked to its corporate travel department have turned into bargain-hunters. As travelers scroll down a computer screen and see they can often save several hundred dollars by shifting to an earlier or later flight, many have become more willing to do so. The big chipmaker slashed travel spending 25% in the second quarter from a year earlier with such measures, as well as handling more meetings by phone and videoconferencing. And even senior executives at Intel are booking coach tickets between the U.S. and Asia.

Robert Africk, head of investment banking at Blaylock & Partners L.P. in New York, had long been among the travelers who flew "any time, any price." That changed when he saw the price of a full-fare ticket between New York and Houston, a route he travels often, double to more than $2,000. "Several flights go through Houston to Cancun, and the guy going all the way pays significantly less," he says. "That doesn't make any sense."

With air fares soaring and business softening, Mr. Africk began focusing on booking ahead whenever possible, hunting for
bargain fares and buying restricted tickets. "Travel and entertainment so overwhelm other expenses, it's really the place where you can make a difference," he says.

Royal Cutbacks

Royal Caribbean Cruises Ltd. cut its own corporate-travel spending by 28% in the first half of 2001 from a year earlier by forcing many employees to forgo first-class and business-class seats in favor of economy class -- even on long international flights. The cruise giant is dispatching fewer employees to meetings, and those who do fly are urged to book well ahead to get cheap fares.

"We're not paying those $2,000 and $4,000 tickets anymore," says Nick Hafner, a Royal Caribbean vice president who manages corporate travel. "We're paying the $400 tickets. It's a pretty dramatic change." While Royal Caribbean's employees miss the first-class and business-class seats, "my expectation is probably it will not come back," he says.

The airlines' pricing strategy over the past five years has made them an easy target. Cocky that business travelers needed to fly
no matter what, the big carriers aggressively pushed up business fares -- six times during 2000 alone. Meanwhile, they held flat or even reduced discount fares, mostly used by leisure travelers.

By the second quarter of 2001, the typical business fare had climbed to 4.91 times the price of the lowest discount fare, compared with 2.61 times in the first quarter of 1996. That's the widest gap ever between ticket prices, according to American Express Travel Related Services.

Lucrative Customers

The Air Transport Association, an industry trade group, estimates business travelers take about half of all airline trips but generate as much as 65% of carriers' revenue. Full-fare business travelers are far more lucrative to the carriers than that:
United, during the boom times in the late 1990s, figured 9% of its passengers accounted for 46% of its revenue.

During the recent go-go economy, the strategy worked. Fare increases didn't dent demand for business seats, as euphoric dot-com executives and high-tech consultants roamed the country. Carriers boosted their yields and reaped record profits.

But as companies and individual fliers scrutinize spending in the weak economy, the yawning gap between business and leisure fares makes the cost of a business-class seat seem more irrational and unfair than ever. "Why should a seat be twice as expensive five days out than a seat purchased 14 days out?" asks Dennis Kivikko, a frequent traveler and official with the garment division of the AFL-CIO. "Their primary mission is to gouge the business traveler."

Unstable Situation

Many observers think the changes may be here to stay. "We're increasingly thinking 2000 and 1999 were business travel bubbles that aren't going to be duplicated any time soon," says Jim Higgins, an airline analyst with Credit Suisse First Boston in New York. "As that bubble has burst, it has revealed an inherently unstable pricing situation in the industry," Mr. Higgins says. "The implication is that business travelers may be in the process of retraining themselves as to what they are willing to pay for business travel tickets."

Meanwhile, more travelers are getting used to high-tech alternatives to travel, such as online meetings and videoconferences. "Travelers are learning this stuff works," says Scott Gillespie, chief executive officer of Travel Analytics, a Solon, Ohio, concern that analyzes corporate-travel patterns for companies negotiating airline contracts. "I don't get frequent-flier miles, but at least I get to see my wife at night." He
predicts a sizable portion of air travel won't rebound when the economy does. "It's going to peel away the marginal travel," he says.

Pushing for Discounts

Many corporate travel managers say they have begun pushing for bigger percentage discounts from full-fare in negotiations with carriers. Full-fare coach, says Harlan Bennett, vice president of revenue management at Delta, has become like the rack rate posted on the back of a hotel door. It's the standard used for cutting deals, but the percentage of travelers paying it has fallen to "the single digits."

Also tipping the scales toward the buyer are sophisticated software systems that crunch data on employees' travel patterns to ensure they stick to travel rules and to use as leverage in negotiating discounts with airlines. In-house travel managers now also use software that distributes employee travel among carriers to meet volume targets for negotiated discounts.

"I doubt we'll see the high margins of the late 1990s in the next upturn," says Philip Baggaley, an analyst with Standard & Poor's Corp.

Not Permanent

Many airline executives dispute the suggestion that a permanent shift in business travel is under way. Some recall similar dire predictions that air travel wouldn't rebound after the recession and a widespread fear of terrorism in the early 1990s temporarily curtailed demand.

Doug Steenland, Northwest Airlines' president, expects a revival in last-minute business bookings when the economy rebounds. "The time of our corporate customer is as valuable today as it was before," he says.

"The memo never comes out saying start traveling again," says M. Michele Burns, executive vice president and chief financial
officer at Delta. "But it just happens."

In the meantime, the major airlines are slashing capital expenditures, freezing hiring, and paring capacity to shed unprofitable routes and ground older, fuel-guzzling planes. The double-whammy of higher labor costs and lower business travel
is "going to mean a rebalancing of supply and demand in the industry," says Tom Horton, chief financial officer at American.

Last month, Northwest announced a second round of layoffs, a move likely to spread to other carriers. Earlier this month, American lowered the cap on the commissions it pays travel agents to $20 from $50 for a domestic round-trip ticket and to $10 from $25 for one-way. The move, quickly matched by several other airlines, could generate $365 million in pretax savings for the industry next year, according to Brian Harris, an analyst with Salomon Smith Barney.

Northwest has already reduced the number of flight attendants on its Airbus A320s and A319s to the legal minimum of three, down from four. United has quit stocking grapefruit juice and yanked the linen place-mats from domestic first-class cabins. Delta is substituting regional jets for larger jets on its shuttle between Boston and Washington.

Labor costs are headed in the other direction. David Swierenga, chief economist for the Air Transport Association, an industry trade group, estimates that labor costs at U.S. carriers will rise by $6.6 billion, or 15%, to $51.9 billion by 2002 from about $45.3 billion in 2000.

Tough Talks

Both American and Continental Airlines are facing tough contract negotiations with their powerful pilots unions that are expected to result in significantly higher labor costs. "We don't have a choice," says one executive at a "Big Three" airline. "It isn't worth burning the house down trying to save it."

United, which set the pattern for higher labor costs with a rich pilots' contract last year, is expected to post a loss nearing $1 billion for 2001. No. 3 Delta just signed a pilots' contract that will top United's pay rates and boost its costs by $500 million a
year -- more than its entire profit in many past years. No. 1 AMR Corp.'s American is facing even higher pay demands from its own militant pilots, even as it tackles a tough integration of recently acquired TWA.

Mr. Swierenga says elements of the current industry decline -- including a run-up in jet-fuel costs followed by an economic downturn -- are reminiscent of the bleak days of 1990 through 1994. During that period, the industry lost $12.6 billion -- more than it had earned throughout its entire prior history.

Cutting Fares

In light of the soft demand, the airlines have been offering a host of targeted fare sales -- including one launched just Monday by Northwest and matched by other carriers. In some markets, they have relaxed restrictions on leisure fares -- such as advance purchase and Saturday night stays -- mostly to draw back business travelers from low-fare rivals.

Meanwhile, the sophisticated revenue-management systems that help airlines predict demand have begun holding back fewer
seats for the last-minute business traveler in many markets. In other words, the airlines are peddling more cheap seats to match the times.

Says Mr. Bennett, Delta's vice president of revenue management: "Some fare is better than no fare at all."

-- Melanie Trottman contributed to this article.

Write to Martha Brannigan at [email protected], Susan Carey at [email protected] and Scott McCartney at [email protected]
 
Old 2nd Sep 2001, 11:33
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One must remember that BA was part of the civil service until 1984, so as a commcercial organisation it is only really just over 16 years old.

Profound change takes many years to achieve and I have certainly seem sound progress in terms of both customers service and business improvement over the years.

Sure, they have their problems, but they also have a solid strategy which will work over the long run, once the present economic downturn stabilises and recovers.

People always talk about low staff morale, but IMHO having worked with the company as a an external consultant, they have a workforce that is remarkably committed to the airline, even if they do not always appreciate some of the management moves ... but then again what large organisation (65K employees) does not find it difficult to maintain perfect morale?

If BA is contrasted against other flag carriers, it looks pretty good; not the best business performance, but a strong performer moving in the right direction.

Also, remember that BA's main base is LHR, where the airline has 40% of the slots and Star Alliance 26%. Contrast that with FRA where LH has 70%. Everyone wants to service LHR and so BA is constantly under strong attack in it's own backyard.

I am not anti bmi, British European, Virgin et al (as a Brit I think that they are good companies and part of the reason that BA is constantly forced to improve), but ask yourself what real internal competition SA or Alitalia have.

All in all, BA is doing okay. The industry is suffering from a downturn at the moment and Merril Lynch's statement is pretty fair comment. But over the long term, BA will do well for the country as an ambassador and an earner of foreign "hidden" income.
 
Old 2nd Sep 2001, 14:49
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A BA Purser showed me her pay slip last month. Her take home pay was 3500. How can that be justified? How can you work for an airline that pays a Purser more than a pilot?
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Old 2nd Sep 2001, 20:48
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Interesting article in today's Sunday Telegraph which illustrates the scope of BA's problems. The Atlantic stuff is doing OK-ish (like all the Atlantic carriers), but short-haul is really struggling against the low-cost carriers. It does make you wonder if BA's shift of emphasis towards the now rapidly-disappearing business class passenger was badly timed and will hurt. One very interesting statistic quoted was BA's passenger/employee ratio of 650, compared to Ryanair's 6000. Virgin's is around 3000. That's expensive, and will need to change. However, I don't doubt that they will survive and, at around 3, the shares are probably a very good buy.
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Old 2nd Sep 2001, 21:06
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Carpe - easily! A Purser/CSD has a considerable amount of responsibility and experience. I see nothing wrong at all with someone in that position being paid the same as - or more than - a junior pilot. Bear in mind, though, that the total pay will of course include allowances and per diems ... what's the basic like?
 
Old 2nd Sep 2001, 21:09
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Guvnor,

Please lets not get into the 'why should I get paid more than you' type arguments again. It's very dull.
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Old 2nd Sep 2001, 21:24
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Carpe

BA believe in paying people what they perceive them to be worth.

You may not agree with their view in respect of cabin crew and you are quite entitled to your differing belief, but BA are paying what they think is a fair rate for the job.

If you contrast this attitude with some carriers, it is actually quite refreshing.
 
Old 2nd Sep 2001, 21:52
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Guvnor,

I'm sorry, you can build it up as much as you wish but I can not see how a Cabin Attendant can reasonably be paid that amount of money.

I don't know who you work for, but if your junior pilots are taking home 3500 a month I want to work there. I'm sure they're not though, our Captains aren't even earning that, flying the same long-haul routes as this Purser.

I wish BA pilots every success in their pay negotiations.

[ 02 September 2001: Message edited by: Carpe ]
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Old 2nd Sep 2001, 22:04
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Carpe - are you seriously telling us that BA long haul captains don't earn 3,600 per month?
 
Old 2nd Sep 2001, 22:18
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Guv,

You misunderstand me, I don't work for BA, but for the bearded one, whose Pursers would take more than 3 months to pull in what BA dish out in 1
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Old 2nd Sep 2001, 22:27
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Cool

Know nothing about BA's culture or internal politics. But after having ridden aboard 67 of the world's airlines, BA is my favorite.
28 BA flights, 12 trans atlantic, left me most impressed with consistent excellent cabin service. And if a BA purser makes 3,500 then so be it.
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Old 2nd Sep 2001, 22:53
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I read on FT.com that SR are cutting 7 to 8 % of capacity and also cutting 5% of jobs (don't know from which areas).

I think BA is planning to be 12% down on ASKs vs last year yet as far as I know there has been no noticeable reduction in staffing (apart from Air Liberte coming off books).

SR obviously seem to believe that cutting jobs is going to help them - what do BA manangement know that they don't I wonder ?
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Old 2nd Sep 2001, 22:55
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Guvnor - who actually pays your wages at the moment?
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Old 3rd Sep 2001, 00:10
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Finals 3Gs,

Do you really believe what you have just written? If BA, or any other airline for that matter, paid you what they believed you were worth, you would be on income support.

BA pay exactly what they can get away with and not a penny more. But my understanding is that cabin crew run BA and that, to bring the discussion neatly back to the point, is one major contributor to the company's demise
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Old 3rd Sep 2001, 01:06
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Having read the thread through re BA, I can only comment on their daily flight from LGW to RIX and back again.

That flight is usually about 80% booked, both business class and cattle class. If such an out-of-the-way place like Riga has 80% booking, where, oh where, are they going wrong?

The only competition BA has flying to London out of this city is a BT-SK connection out of Copenhagen (pretty much the same price, mind you) but it takes three hours longer.

I always thought that if you had more than a 55% payload you were making money. At 80% this short-haul operation definitely is making money for BA. So, if they go long-haul only, they will lose income by eliminating RIX. In that case someone else will come in and make money.
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Old 3rd Sep 2001, 11:29
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I think Carpe ,the BA purser's pay you saw recently is certainly not typical of the rest of the company.

Maybe it was a -one-off-,where they triggered some outstanding allowances.

I have friends who are psrs within the company,and earn half that or less.

Meanwhile, like many airlines , the new crew are lucky to take home 1,000/mth,and then try to survive in W.London.

There are some that are highly paid in the company,and get destination payments for places they don't like going to,alot of time off,and v.large long flight payments (clue:these people are not on s/haul) , but as we have just been asked to save a further 17m in cabin services ,perhaps these are the people who will be targeted for the shortfall.
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Old 3rd Sep 2001, 12:04
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An Economic rebound is predicted by City
Analysts Sunday Telegraph 020901 This will
be BAs renaissance

Details follow...

EXPERTS are predicting a stock-market rally in the coming months that could lead to the market rising by 21% by the end of the year.
The big City investment banks are united in predicting that the market will be higher by the end of December, despite its recent drubbing and a succession of profit warnings.
Last week, the London market took another battering when falls on Wall Street sent share prices tumbling. The FTSE 100 index of the biggest shares finished the week at 5,345 - near its three-year low.
Although experts are unwilling to say that the market has hit the bottom, most expect considerable progress before the year ends. Everything, however, depends on a recovery in America, which would help to propel the British market out of its current lows.
Steve Russell, a British equity strategist at HSBC, said: "We anticipate a market rally as we pass through the low point of the American cycle in September and October. The recent downturn in Britain's market is being driven more by negative sentiment in America than domestic woes."
HSBC expects the FTSE 100 to hit 6,500 by the end of the year - one of the more optimistic predictions.
An upturn in the American economy may, however, seem improbable in the wake of all the bad news that came out of Wall Street last week. On Wednesday the American government reported the slowest economic growth in eight years. Gross domestic product figures for the three months to June were revised down to 0.2% from 0.7%. Investors took this as a sign that a recovery was still a long way off.
But expectations are growing that the Federal Reserve's policy of aggressively cutting interest rates could start to have an impact on the American economy.
America's central bank has cut rates seven times in the past eight months - so far, to no effect. But historically, the benefits of lower interest rates have taken six to nine months to filter through to the economy.
Hasan Tevfik, equity strategist at Credit Suisse First Boston, predicts an end-of-year level of 6,000. He said: "The interest-rate cuts in America will start to feed through over the next few months. This will signal a turnround in the American economy and will boost the markets in Britain and Europe."
Private investors already in the market are advised to sit tight. Historically, some of the sharpest rises occur just after the market hits its low point, which even the finest minds in the country cannot predict with any accuracy.
Anna Bowes of Chase de Vere, an independent financial adviser, said: "There is no point trying to time the market by selling out and then buying back in when you think the time is right. The market is always full of surprises."
The bottom of the current downturn was initially called back in March. It caused the FTSE 100 to rally by more than 10%. But prices quickly fell back after it became clear that worse news was still to come.
Hilary Cook of Barclays Stockbrokers said nervous investors should stay out of the market until the economic outlook is clearer. "We expect the FTSE to be at 5,900 by the end of the year. There is upside from these levels, but it is going to be a rocky ride."
Jeremy Batstone, head of research at NatWest Stockbrokers, is even more cautious. Although his company is predicting an end-of-year FTSE level of 6,300, he believes this may be difficult to achieve given current market conditions. He said: "I can't see the markets moving out of this range because corporate profits will continue to be eroded."
Even so, Batstone believes there is money to be made from shares for braver investors. He favours defensive stocks such as utility firms and drug companies. Even though these have performed well over the past 18 months and now look expensive, he said it was too early to move into cyclical shares that would benefit most when the economy staged a recovery.
When there are signs that the economy is stabilising, investors are advised to start buying stocks such as housebuilders, chemical firms and engineering companies, as these should be among the first to feel the effects of a pick-up.
But even if the market rallies, investors should not expect the returns they have enjoyed over the past two decades.
Low inflation means prices are expected to rise more slowly than in the past, with most experts predicting returns of much less than 10% a year.
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