Flights to be grounded this month, as the dispute bites.
The planned strike by British Airways (LSE: BAY) cabin crew, originally intended to disrupt holiday flights over Christmas, but thwarted then by an illegal ballot, is back on. This time, the Unite union has done it by the book, and a three-day strike is due from March 20th, followed by a 4-day stoppage starting March 27th.
The dispute centres on measures introduced in November last year to reduced the number of cabin staff on long-haul flights, and introduce new pay deals. BA argues that it needs to cut costs in its attempt to turn round its loss-making operations, and that much, at least, really can't be disputed.
A long way apart
BA made a new offer to staff earlier this week, and the union had agreed to put it to a ballot, but the offer was subsequently withdrawn as, according to chief executive Willie Walsh, it had been conditional on lifting the threat of strike action. Despite both sides insisting they are still ready to talk, they appear to be as far apart as ever.
BA's employees don't appear to be getting much support from the government, with Prime Minister Gordon Brown calling the strike "deplorable", and transport secretary Lord Adonis describing it as "totally unjustified", calling it a threat to “the future of one of our great companies.”
If the strikes do go ahead, they'll be bad news for everyone. Despite BA hoping to keep 60% of its scheduled flights in the air during the stoppages and offering alternatives to further passengers, the cumulative losses will hurt badly -- both in terms of money lost during the strikes themselves, and longer-term damage to the company's ability to attract flyers.
No winners
It will be bad news for cabin staff, too. They won't get last November's new policies reversed, because BA simply can't afford it. The days of high-paying premium airlines are over, and unless both BA management and staff adjust to the new reality, the airline will be on a slippery downwards slope with a real possibility of serious job losses.
And it won't be good for the government. With an election looming, strike chaos could seriously harm Labour's chances of re-election and reverse any credit they may currently enjoy for the country's lifting out of recession -- so quite a few might opine that some good would come from a strike after all.
Perhaps surprisingly, while all this dispute has been going on, BA's share price has actually been doing well -- it's up more than 20% so far this year. Maybe shareholders are happy with Mr Walsh's hard line, and see his battle with the unions as one that inevitably has to be fought.
The shares
BA recorded a pre-tax loss of £400m in 2009, and is forecast to lose a massive £580m in the year ending March 2010 -- which will make it a pretty miserable month for the company all round if the strikes go ahead as scheduled.
This is a company that made a record pre-tax profit of £880m in 2008, to top off an impressive 4-year run. Today's share price of around 246p isn't far from the 330p or so that it reached in early 2008 (though admittedly, that was a low valuation at the time, based on the expected slump in earnings that was to come).
With BA forecast to just about break even by March 2011 (and that's dependent on getting its staff problems sorted), I think the share price, unlike many of BA's planes come the end of March, is too high. An airline is a tough business to run at the best of times, and that's certainly not the kind of times we're in now.
More from Alan Oscroft
