Based on the financial statements on BA’s website, there was a loss of £401

million in the mid-year of 2009 (Milmo, 2009) – it was then apparent to BA that

in order to survive in the competitive environment, changes are necessary.

Summary of threats that have affected BA’s survival are:

1. Increase in oil prices.

2. Increase in competitors – low-cost airlines with low fares.

3. Global recession which cause a drop in passenger counts (especially in

strong market like US and UK).

BA realised that cost reduction for operations is essential to sustain the

business, and they concluded that this could only be done through ceasing

pay increment and staff retrenchment.

BA’s CEO, Mr. Willie Walsh, concluded that changes have to be made only

for the purpose of cost reduction, and this business cost needs to be reduced

from top to bottom in order for BA to recover its loss.

The first change was staff reduction. In 2009, BA started a retrenchment plan

where 4900 employees lost their jobs. The reason was that BA thought the

high staff number was not in proportion with its high cost. A significant change

was that cabin crews have been reduced from 15 to 14 in long-haul flights as

the additional staff was not ‘economically’ required.

Mr. Walsh set the first example by not having his salary for one month. He

further told the employees to take unpaid leaves within a month, yet still work

for the company while on unpaid leaves. In addition, he had ceased all kinds

of pay increments for at least two years due to increase in oil prices and

recession. To cut down further costs, cabin crews’ working hours were also

extended.

Mr Walsh cautioned the staff that any resistance to these proposed changes

may eventually lead BA to meet insolvency.