Final Boarding Call: Defusing the BA Pilot Dispute

By: Matthew Unsworth

“We love you Britain” proclaimed British Airways in a star-studded advertising campaign to mark their centenary this year.  After industrial action cancelled 1,700 flights last week, the feeling is unlikely to be mutual.  Britain’s flag-carrier was hit by strikes on 9-10 September which, supported by 93% of BALPA (British Airline Pilots’ Association) members, wasn’t driven by a few lone radicals.  Management had been braced for a further walkout on 27 September; while this will not now go ahead, the threat of further strike action looms.  In this hiatus, it’s worth reflecting on how the self-proclaimed world’s favourite airline ended up in such a tailspin and how it might escape.

Factors behind the strike:

1. Pilot remuneration:

At the heart of the strike action is a bitter dispute over pay.  Pilots rejected the offer from BA of an 11.5% pay rise over three years, which the airline argued would bring remuneration for experienced long-haul captains to over £200,000.  A lofty figure, for sure, but not one which compares favourably with international rivals.  According to an analysis by the Financial Times, Lufthansa and Air France-KLM both already pay captains upwards of £200,000, though pay is expectedly lower among budget airlines such as Ryanair and EasyJet, and even at prestigious Emirates.  Salaries are even more generous stateside;  the 2018 Pro Pilot Compensation Salary Study suggests US carriers such as American Airlines, Delta and United Airlines each pay captains in the region of £200,000-£255,000.

Admittedly, comparing pilots’ salaries across airlines is no easy task as it can be tricky to value various perks (Emirates offers a housing allowance and even school fees contributions).  The American comparison is of particularly limited utility for two reasons.  The first is that the above airlines benefit from the quasi-oligopoly which exists in US domestic aviation.  Thus they are not, nor do they need to be, terribly competitive.  The second is that all three have entered Chapter 11 bankruptcy protection in the last two decades: a process criticised for distorting competition by temporarily shielding American companies from their creditors.  Nevertheless, what BA billed as a first-class offer to pilots can still be seen, comparatively, as more premium economy.

Remember, also, that airline cockpits aren’t inhabited solely by those on anything like such high-flying salaries.  The headline £200,000 offer is, on a cynical view, a smokescreen to detract from remuneration lower down the ranks: think 40% of that figure for new captains and 25% for first officers.  Then, of course, there’s the cost of flight school to consider: as much as £120,000 over two years, with no recourse to the loan infrastructure from which university students benefit.

2. BA’s changing fortunes:

BA’s pilots, much like the Avios-savvy among its clientele, expect to be rewarded for their loyalty.  It has been a turbulent journey from 2010 to 2019, from losses upwards of £500m to profits of almost €3bn.  Having accepted pay cuts during the airline’s more difficult years, air crew feel they deserve to share in more recent financial success, as have BA executives; CEO Álex Cruz, formerly of low-cost airline, Vueling, received a remuneration package worth an extra £530,000 back in 2017.

What BALPA is seeking on pilots’ behalf is a profit-sharing scheme.  This is no flight of fancy; the practice is common among US carriers and both Lufthansa and Air France-KLM operate such schemes too.  If these latter airlines can afford to offer pilots a slice of their profits, despite those profits being lower (€2.14bn and €410m respectively) it might be asked why can’t BA’s parent company, IAG.

3. “Dumbing down” of the brand:

This is BALPA’s phrase and it refers in a general sense to pilot malaise vis-à-vis the way BA is being (mis)managed.  On one level, the prestige of Britain’s national airline has been tarnished by an increasingly miserly approach to passenger experience.  Free meals have been jettisoned on short-haul flights and an extra seat has been squeezed into each row in long-haul economy.  Furthermore, frequent flyer points are now harder to come by (awarded based on the price, not distance, of each journey) yet do not go as far; it has been claimed that a $500 spend equates to only enough points to redeem against a bottle of still water.

On an entirely different level, BA stands accused of incompetence, especially where technology is concerned.  Over 500 flights were delayed or cancelled in August amidst an IT systems failure at London Heathrow, Gatwick and City airports.  Meanwhile, the airline is currently facing a £183m fine after “poor security arrangements” left the personal data of 500,000 customers compromised last year.

Perhaps this change of course has touched a nerve with staff in light of BA’s illustrious past.  A scroll through the company YouTube channel is sufficient to uncover some of the heritage BA’s marketing team continues to trade on today; the airline has been no less than a pioneer in luxury air travel, jet travel and, for a time, supersonic travel.  Its status as a flag-carrier also shouldn’t be ignored.  It is much harder to hide mistakes or usher in unpopular changes under the radar when a Union flag is plastered on all aircraft.  Even Loganair (the national airline of Scotland, boasting barely three dozen tiny planes) hasn’t dared to do away with its complementary shortbread biscuits or Tunnocks caramel wafers.

What next?

At time of writing, the threatened further strike on 27 September will not take place.  However, this doesn’t mean that either side is backing down; BALPA has made clear it reserves the right to announce further industrial action at a later date if there is no serious negotiation on the part of the airline.  By contrast, rumour has it that BA management would rather buckle up and try to mitigate disruption from any subsequent walkouts as best they can rather than capitulate.  They may not have this luxury.  Whilst IAG shares have now climbed back to pre-strike levels, this still represents a 1/3 loss in value since January.  Shareholders are already alert to what they see as an airline on autopilot.

So what course of action would be most effective?  A higher pay offer seems somewhat unnecessary; though the proposed increase would not make pilots the highest-earners in the aviation market, they could certainly do worse.  At any rate, with the collapse of a number of European airlines in recent years (such as Primera Air) a shortage of pilots has become more of a glut.  The unions consequently have a lot less leverage in salary negotiations.  There seems to be a stronger case for profit sharing as a means of keeping up with competitors and ensuring pilots feel valued in prosperous times.  If nothing else, it might pre-empt the Shadow Chancellor’s promise of corporate ownership funds; better BA bring staff into the profit fold on its own terms, as John Lewis has done.

How, also, to propel BA back towards reputability?  The sacrifice of onboard luxuries is a vexed issue.  On one hand, commentators argue that IAG’s tight grip on landing slots at Heathrow Airport leaves disgruntled British passengers with few other options than their national airline, free sandwich or not.  Such other options as exist tend to be taking similar action anyway; Air France-KLM have also ceased to award frequent flyer points based on distance and Emirates, too, has ten seats per row in economy.  From this perspective, BA is free to cut costs to seduce passengers away from budget rivals without fear of losing its own stalwarts.  On the other hand, there is the distinct possibility that the changes made are eroding the attraction of choosing BA full-stop.  Much like flying a plane, one assumes, what we are dealing with here is a balancing act.  Far more straightforward is the urgent need to upgrade BA’s IT, particularly cyber-security, systems.  Further failures on this front risk staff and passengers taking flight forever.

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