British Airways sets target of £300 million in reduced staff costs

British Airways today set a target of £300 million for reduced staff costs in its business plan for the next two years. The airline said it will target improvements to working practices and seek to introduce more efficiencies to lower unit costs.

The plan includes a 30 per cent reduction of employee costs in head office and support functions and 15 per cent in operational areas. The airline envisages the size of the current flying programme being maintained.

Options to achieve any necessary headcount reductions will include unpaid leave, part-time working, early retirement and voluntary severance. Further reductions will be achieved through natural turnover and restricted recruitment.

The savings will be in addition to the 13,000 manpower reduction due to be achieved by March 31 this year under the airline’s Future Size and Shape review announced in February 2002.

Chief executive Rod Eddington said: “We must make the necessary changes in partnership with our staff and trade unions, and without impacting on the service our customers have rightly come to expect.

“We have shown we are able to meet our targets through voluntary means and that will remain our aim.

“The last two years have been about survival – now we want to be in a position to prosper.”

The new cost target will run alongside £450 million savings being delivered from existing programmes, including greater use of technology and reduced external spend.

Proposals for a new bonus scheme for all employees will be taken to the British Airways board. The scheme will be linked to an operating profit margin.

Mr Eddington added: “We have made considerable progress on reducing our costs over the last two years, but revenue fell sharply during the same period.

“Our outlook on revenue is slightly better, however it is clear our cost base still remains too high.

“To maintain our position as a world-leading airline we must further reduce our costs so we can invest in our products and people.

“These changes will help deliver an operating margin of at least 10 per cent, allowing us to share further benefits with all our people.”