Wednesday, 16 December 2009

BA:Turkeys DO vote for Christmas

This story has been running for a few days. It seemed at first that the Union was trying to play hardball by threatening something very over the top.

But lo and behold, they actually meant it. Loony Communist Derek Simpson has decided to lead his Union members out on a strike over Christmas.

Will this strike finish BA? No, BA has £1.9 billion of cash at hand and facilities. Even if the strike costs £200 million, there is plenty of slack for BA management to fight with. However, as the airline is still loosing £2 million a day anyway so this cash reserve is dropping at a fairly fast rate. If BA was unable to turn itself around by the middle of 2010 then the problems could be very serious.

All of this ignores the horrendous pension deficit that the company has to manage of £3.7 billion, which is also draining annual cash flows.

In all this the staff at BA seem like lost sheep. Paid more than their rivals they don't want to lose their jobs and at a personal level, who would? But the reality of changes in air travel, from full service to no service as a rule, has changed the game. As has the massively volatile oil price and the recession. The crew are being led into a charge of the light brigade by very poor union leadership. There is no turning back the clock in the airline business and wishing easyjet and Ryanair would go away will not solve their problems. The strike should be called off before it turns really bad. BA's brand is suffering and their rivals are gaining by the actions of BA staff.

BA is in a bad way long-term. They have a top management team in Willie Walsh and his crew, but the mountain they face is huge; I could not buy the shares at 196p.

17 comments:

Johan Nilsson said...

Good management team, seriously?

Price fixing charges, fuel hedging gone very wrong and clearly taking employee relations to an all time low. Or T5 where the CEO famously said "the buck stops with me" and then dismissing two of his lieutenants for it. Or his comment regarding the obvious conflict of interest in having his director of investments and alliances also being the chair of the pension trustees: "Roger is capable of separating out his responsibilities better than anybody else I know”. Doesn't really matter if you are that conflicted, and sure enough, he has since had to step down. The list goes on...

Uncle Bob said...

So winter of dixontent II it is then. Wonder which union will be next or are they going to wait for Cameron to get in first?

Dex said...

Already changed my flights home because of this nonsence at christmas. I really don't see how this is going to help them, i'm more pissed at them than at BA.

El-Kevo said...

Up the workers.

(RIGHT up 'em)

Turkeys voting for Christmas could apply equally to green lobbyists.

Anonymous said...

I don't think BA management will be too unhappy with this strike. Having introduced new working practices, there was the predictable knee-jerk reaction from the cabin crew. Their unbelievably stupid union then rushed to strike over the Christmas/New Year period, when there's not a premium passenger to be seen normally, but there's a million bargain hunters, each with a sob story, few of whom will blame BA management. Come January, cabin crew resume the new working arrangements, union doesn't dare to strike again, premium passengers back on board, and BA management will congratulate themselves on a job well done.

Steven_L said...

OT - Minerva 69p now, I think a few of us owe you a drink on this one CU!

Sebastian Weetabix said...

since I endure the un-pleasurable experience of flying with them very frequently, I can only hope Walsh takes this opportunity to fire every single last one of these troglodytes. On the flight I was on 2 weeks ago I heard the "cabin service director" make the following announcement to us poor sods who actually paid to be on board: "if there's anything you can do to make our flight more pleasant, do let us know". Freudian slips can be very revealing.

El-Kevo said...

BA air hostesses are a bit disappointing to say the least.

mutleythedog said...

Working for BA requires either living in some of the worlds most expensive real estate, or driving hours to work. Neither is justified by BA's 'extra high' wages - they are still pretty low in the scale of things. I am aware this problem afflicts all of the London area - which is why all the waiters, cleaners etc. live 30 to a three bed roomed house...

CityUnslicker said...

JOhan - All those are mistakes I agree, but price fixing was very early in Willie's appointment.
Staff issues are going to happen when a large company needs to reduce its staff by tens of thousands and the final point it quite a technicality- Roger Maynard is a fine man and no push of for Willie Walsh etc.

CityUnslicker said...

Mutley I agree with you re some of the ground staff - but the cabin crew earn good money by national standards. There are plenty of cheap areas to live in around heathrow too (not pleasant I give you that).

Not all BA staff are Heathrow either, they have Gatwick etc for over 30% of their flights.

Either way, other airlines pay less and are more profitable, that is what BA has to compete against. I totally understand if it was my job I would be unhappy, but air travel economics are not what they used to be. Nice to see you here today.

Blue Eyes said...

It's the classic "union" idea that the world can carry on as it always has done. The posties have not yet realised that many people use email and are not happy with the reduced mail service. BA staff have not realised that their cosy cartel has been smashed apart and that cheap airlines are two a penny.

Will BA prefer to go bust and be taken over before it sorts its problems out?

Letters From A Tory said...

You never know, buying shares when they're low means you might get lucky if the strikes are called off....

CityUnslicker said...

LFAT - All money tied up in MNR and GKP at the moment. Happy with that.
BA shares are not low, BD shares are fair value at about 150 and so anything below that is an OK price. Currently there are nearer £2 - way too high given all the problems.

Mark Wadsworth said...

More fascinating facts. According to Radio 4 this morning, total liabilities of pension funds (which are assets, from the point of view of employees) are £16 billion, minus pension fund assets £12 billion = shortfall £4 billion.

Mkt cap of BA about £2.5 billion. So in economic terms, taking BA and its pension funds together, it's a worker-owned co-operative.

PS, the bulk of BA's income is derived from landing slots they were given for free, which annoys me as much as the carbon permits that were dished out for free.

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