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Last Updated: Tuesday, 24 August, 2004, 16:10 GMT 17:10 UK
How did BA fly into such chaos?
Thousands queue at Gatwick airport
Up to 5,000 people are thought to have been hit by the cancellations
British Airways has just headed off one crisis over pay only to fly into another crisis over flight cancellations.

BBC News Online looks at how the airline has managed to get itself into such trouble at the height of the holiday season.

Why did BA cancel flights?

The airline blames its decision to cancel flights on staffing shortages, bad weather and technical difficulties.

The situation was made worse by the fact that when BA tried to clear its backlog on Monday it was hampered by a European night ban which regulates when planes can take off and when they can land.

But staffing remains its biggest problem as new employees are unable to start work until detailed security checks have been carried out, the airline says.

At Heathrow alone, the company employs 2,000 passenger handling staff - such as ticket and check-in workers - but as a result of sickness they are about 150 workers down.

One expert suggested that staff decided to "pull a sickie" after the Bank Holiday strikes were called off.

Others claim BA's staff problems are due to a fundamental unhappiness in the workplace, reflecting the fact that staff have been pressured by management to work harder for less.

"Basically I think their problems, looking at the surprise walkouts by check-in staff a year ago, go back to a lack of communication from front-line more senior management," said aviation analyst Daniel Solon.

The situation has been exacerbated by the fact that August is the busiest month of the year at Heathrow.

What other problems does BA face?

BA and other airlines are facing three key problems.

BA planes
Last year ,wildcat strikes cost BA an estimated 40m
The rise of crude oil prices to near the $50-a-barrel mark in recent weeks has pushed aviation fuel costs ever higher.

Already, BA has passed on the increase to passengers by raising its fuel surcharges.

The airline has hedged its fuel supply, essentially agreeing to buy fuel at a certain fixed price until March 2005. After that, the airline may have to buy fuel at a new higher price.

"Fuel prices have risen by 45% in the last 12 months and our fuel costs are expected to be 225m higher than last year," BA chief financial officer John Rishton said earlier this month.

BA is also competing with other airlines for fewer passengers, as people have become nervous about taking to the air in the wake of terrorist attacks and the Sars outbreak in 2003.

BA was one of the quickest airlines to respond to lower passenger numbers after the September 11 attacks. It axed 7,000 jobs and cut routes to keep costs low. Since then the airline has cut a further 6,000 posts to reduce costs.

But BA's aggressive retrenchment may have come back to haunt the group, with staff shortages behind the latest flight cancellations.

Lastly, the aviation giant is also battling against tough competition from no-frills rivals on its short-haul flights.

"The low cost carriers are beating their brains out competitively, fuel prices are placing constantly growing pressure on the cost side, and no one can confidently foresee a path out of the morass," aviation analyst Daniel Solon said.

What impact will the strikes and cancellations have on BA?

Analysts anticipate that the financial cost of the cancellations will be minimal.

"I'm sure they'll recover. It won't be that significant a cost - hotels and compensation will cost hundreds not thousands of pounds per passenger," said Mike Powell of Dresdner Kleinwort Wasserstein.

The real danger for BA is that the threatened strikes and flight cancellations have cost it customer goodwill.

BA has cancelled 15 return flights for Tuesday
BA usually carries around 100,000 passengers on a normal day, and more during the current peak summer holiday period.

As many as 5,000 people are thought to have been affected by the cancellations - which have seen more than 30 BA flights cancelled.

Also, although BA reached a deal with the baggage handlers averting a strike over the August Bank Holiday weekend, the threat of a strike had already led many travellers to cancel trips or rearrange holidays.

And while the company may boosted its finances by putting a 12 surcharge on the price of a long haul ticket to cover rising fuel costs, the decision may also have lost it customer goodwill.

How can BA fight back?

The BA line is that the problems are temporary and the airline will bounce back.

Director of operations Mike Street has described the cancellations as a "hiccup", claiming that current delays are a result of cancellations on Monday.

BA is now back to its "normal smooth service" he claims and all the passengers on the cancelled 31 flights have been allocated to different flights.

Weather, staff and technical difficulties conspired against the company, he said.

The company is now "back in the recovery position", he added.

Aviation analyst Mr Solon argued that BA could be a very different entity in five years time, a much smaller one, different in all but name.

Time will tell.

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