Staff action costs BA up to £40m

Thursday, 31 July 2003 12:00 AM

British Airways today revealed that the recent industrial action by its staff cost the company between £30 and £40 million.

Unveiling its first quarter results, the company said that the impact of the global slowdown, the war in Iraq and the outbreak of the SARs virus led to a pre-tax loss of £45 million in the first quarter of 2003.

The airline stated that some of the losses were offset by the company's restructuring plan. However, it warned that the industrial action would continue to impact on forward bookings and future revenues. The loss compared to a pre-tax profit of £65 million in the three months to the end of June 2002.

Rod Eddington, British Airways' Chief Executive, commented, 'This is the most testing period in aviation history. It continues to be an extremely challenging revenue environment due to the effect of SARS, the war in Iraq plus the ongoing economic weakness. Future Size and Shape cost efficiencies have partially offset the weak revenue in the first quarter.'

The company's restructuring plan has achieved annual cost saving of £632 million so far against a target of £650 million by March 2004. The airline has reduced its staffing levels by 11,227 since August 2001 and stated that it was 'on track' to achieve the planned 13,000 job cuts.

British Airways has achieved reductions in most areas of its operating costs including aircraft operating lease costs, selling and distribution costs, landing fees, en route charges and engineering costs. Employee and handling costs were flat whilst fuel costs increased by 7% to £229 million.

The airline claimed that whilst the prospects for air travel were improving the outlook remained unpredictable. Lord Marshall, chairman of British Airways, stated that the company expected revenues in the second quarter of 2003 to also be lower than that recorded in the same period a year ago.

Mr Eddington added that the company would be working hard to restore its reputation with customers after the damage caused by the wildcat action by staff at Heathrow.

The dispute was about the use of swipe cards to clock workers entering and leaving work. It was resolved last night when it was agreed that the cards would be voluntary and a 3% pay rise was agreed.

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