BA cuts staffing costs during turbulent times

British Airways is in the process of reducing its workforce by almost a
quarter following the economic downturn and the events of 11 September. Mervyn
Walker, BA’s director for people, explains how HR is playing a key role in
helping the airline streamline the business

Q How many jobs will be lost as a result of 11 September?

A We have faced tough market conditions. An economic downturn, the
foot and mouth crisis, and an increasingly competitive market were all
affecting our business performance. Then the terrorists struck on 11 September.
As a result of these combined pressures, we plan to reduce employee numbers by
13,000, taking our workforce from 56,700 to 43,700 – a 23 per cent cut.

Within days of 11 September, we instigated a series of emergency measures
based on our best assessment of the short-term situation. On 20 September, we
announced the grounding of aircraft to cut capacity. This cut drove a
corresponding need to reduce our headcount by 7,200.

This was followed by a wide-ranging analysis of the business to address the
underlying problems facing the airline.

In February 2002, we announced the conclusion of the three-month review.
This included a further reduction in manpower of 5,800 over the next two years.

With the help of our employees and the trade unions, we have already
achieved 6,700 cuts towards the 13,000 target.

Q How has HR dealt with job losses and staffing changes?

A We have a tradition of achieving our manpower reductions using
voluntary means, avoiding compulsory redundancies wherever possible and we were
clear from the outset that we wanted to maintain that approach.

Ensuring transparency across all areas has also been important. Line
managers responsible for people issues came together with the HR team to review
and discuss the departmental targets on a weekly basis and ensured a consistent
and clear approach to headcount reduction.

This has been invaluable in securing the support and acceptance of our
employees and the unions.

Q What have been the main challenges facing HR during this process?

A When faced with a revenue crisis, cash is king and the normal
challenges of headcount reduction are magnified. The more traditional methods
of reducing headcount were not an option, so to achieve the 7,200 target
announced in September, we had to keep costs to a minimum to preserve cash in
the business.

We released all but a small number of sub-contractors and we stopped all
non-essential overtime. This cut manpower by 2,000 within six weeks.

The HR team then set about devising an innovative range of schemes that
would achieve our remaining target without draining money from the corporate
cash reserves.

The commercial environment has now improved, although traffic remains
depressed. However, this improvement in trading conditions has meant we have
been able to make some provision for restructuring costs, giving us greater
flexibility to use voluntary severance and early retirement. We will also
continue to offer the voluntary options we have used so far.

Q How have changes been communicated to staff?

A Communication has been essential. From the outset, we have
communicated decisions quickly and honestly, providing financial and revenue
data to help people understand the gravity of the situation. A high priority
was placed on the importance of face-to-face communication. Special weekly
meetings, hosted by the chief executive, were arranged for our top 300 managers
and with our trade unions. Directors held regular workplace visits and
managers’ briefing packs were provided on a weekly basis to support team

Q How has the company tried to support those who lost their jobs?

A We have a robust structure of support services including a career
advisory service, training support and confidential telephone lines. Over the
coming months, we are hosting a series of job fairs for employees who have
opted to leave, involving a broad spectrum of reputable companies.

Q What impact will BA’s Future Size and Shape review, announced in
February, have?

A The objective of the Future Size and Shape review is to transform
BA into a simpler, leaner and more focused airline that is better able to
thrive and prosper in an increasingly competitive market. A major part of that
is a permanent reduction in our employee costs.

Our ability to secure a profitable and successful future for the airline is
dependent on us delivering the targets set by the Future Size and Shape review.
This is the priority for the whole airline for the coming months.

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