£100m and counting - the real cost of BA dispute?
26 March 2010
The BA current cabin crew dispute may be costing the airline far
more than the City, its shareholders and its investors realise,
Unite the union claims today (Friday).
As cabin crew are set to walkout for the second time in one week
over the four days from March 27-30, Unite believes that the
financial and reputational damage to BA is far in excess of what
the company has acknowledged.
The union says the seven day dispute will cost the airline some
£100m - twice the £7m per day, or £49m for the week, that BA told
the City earlier this week.
With wider concern over BA's strategy mounting, the union is
calling upon the investment community to play its part in bringing
about a negotiated settlement that addresses staff concerns about
crew complements, pay and the impact on them of “new fleet”, while
giving the company the efficiencies and economies it needs.
The union calls again for BA and its Board to stop this
"self-inflicted trashing of its brand" and work with Unite "on a
sensible, negotiated agreement which will be money in the bank for
shareholders, and will keep a world-famous brand airborne."
In a briefing to City investors and analysts issued today, Unite
says any attempt to place a more accurate figure on the cost of the
dispute must take the following costs into consideration:
- On Thursday, March 18, media were reporting that BA had put the
figure at £27 million in lost bookings alone, a figure the company
did not deny;
- According to JP Morgan Cazenove, BA’s average daily passenger
revenue is £20 million, not allowing for seasonal
fluctuations. At a conservative guess, around one-third of
this - £7 million or so – could have been lost for each day of the
strike, accounting for a further £49m for the week of dispute;
- A source within BA has told Unite that on one contract alone,
the hire of twenty planes for the three-days strike last weekend
came to £7 million. All together, we believe BA used around
40 “wet-lease” planes, which would mean on this head alone, BA has
probably spent around £14 million over the three days;
- Revenue lost to competitor carriers will be considerable.
Of the 65% of passengers BA claims to have carried, many were
booked onto other carriers, which retained the revenue
themselves. Competitors like Virgin and Lufthansa, kept this
money (and may also keep the customers). JP Morgan Cazenove
estimates that the cost of re-booking passengers on other flights
at short notice amounts to around 20% of average daily revenues, or
around £4 million per day, or £28m for the seven day dispute;
- BA will also sustain further losses not directly attributable
to a “strike day” and therefore not included in BA’s own
figures. A strike of this nature unavoidably has knock-on
effects leading to cancellations and other disruption in the days
following a strike which will add considerably to BA’s lost
revenue.
Unite's briefing goes on to state:
"It would seem that the analysts estimates of a daily loss of
£15-20 million may be correct. If you add together the cost
of lost bookings, of revenue effectively transferred to other
airlines along with BA passengers, the cost of “wet-leased”
aircraft and the cost of knock-on “post-strike” disruption, this is
the ball-park area we are in.
"Over three days of strikes we could then conservatively
estimate the total cost as around £45 million. Over seven
days of strikes, this dispute will therefore have cost British
Airways over £100 million."
For a company that claims to be on course for major losses this
year, Unite says the financial logic of this costly dispute is
puzzling in the extreme and suggests that BA's management is
actually pursuing another agenda, that of smashing union
organisation at the airline: "This is a staggering amount to be
spent on an avoidable dispute. It begs the obvious question:
why is BA spending so much?
"Certainly, BA has a motive for trying to put the best “gloss”
possible on its situation. Unite believes that the company
has embarked on an ambitious and expensive attempt to destroy trade
unionism among its cabin crew. Some may perhaps see this as a price
worth paying if trade unionism is fatally weakened in part of BA’s
operations. But at any price? And is this damage
compatible with the survival of the British Airways brand as it is
presently seen?
"Shareholders must ask themselves – is management the right one
for the airline’s long-term prospects and prosperity? These
are questions shareholders and investors should be asking of
British Airways’ board."
Last week's attempt to cow the media from reporting statistics
that challenged their own was, Unite says, "a scandalous attempt at
censorship". The union's briefing makes it clear that it does not
have access to all the information which BA management holds but
states that its figures come from reliable sources.
ENDS
For further information, please contact Pauline Doyle on 07976
832 861 or Andrew Murray on 07773 764 455
For a copy of the briefing, please visit www.unitetheunion.org/pdf/100milldispute.pdf
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