Page last updated at 17:10 GMT, Friday, 6 November 2009

BA to cut 1,200 jobs amid losses

BA chief executive Willie Walsh: "This is the most difficult year in the history of the aviation industry"

British Airways says it plans to cut a further 1,200 jobs after reporting a first-half loss for the first time.

The job loss announcement means the airline will have shed a total of 4,900 positions by March 2010.

The company suffered a loss before tax of £292m ($485m) for the six months to the end of September, compared with profits of £52m a year earlier.

The first half of BA's financial year is usually stronger because it covers the summer holiday season.

BA said revenue over the six-month period was down 13.7% to £4.1bn, compared with £4.75bn in 2008.

"Aviation remains in recession with revenue likely to be £1bn lower this year," said BA chief executive Willie Walsh.

He told the BBC that this had been the "most difficult year in the history of the aviation industry".

"All airlines are facing the same pressure. Operational changes at British Airways are absolutely necessary to improve the performance of the business," he said.

BA has already achieved 1,900 global job reductions by natural wastage, voluntary redundancies and reduced overtime.

Strike ballot

BA is currently in a battle with unions over changes to jobs and pay. It wants to cut the number of cabin crew staff on its long-haul flights from 15 to 14, with the change coming into effect on 16 November.

A BA plane

The company is also proposing a two-year pay freeze. It says the changes are essential to its survival.

On Thursday, the Unite union said it would continue with a strike ballot of British Airways cabin staff over the changes, despite its legal challenge to the new working patterns being delayed.

Unite had sought a High Court injunction to have the changes blocked, but the full trial will now not go ahead until 1 February.

Unite said staff would "unwillingly" work the new schedules from this month but it would still ballot for a strike. The result of the strike vote will be known on 14 December.

Analysts said the latest figures could be used as ammunition by the union.

"These weak results will underscore their fragility to unions opposed to wholesale restructuring that is required if BA aims to survive this downturn," said Saj Ahmad from Gerson Lehrman Group.

Shares in BA closed higher, up 6.7% to 198.8 pence, as the market welcomed news of the extra job cuts and measures to reduce costs.

BA said its half-year operating costs were down 8.7%, despite the weakening of the pound, and fuel costs were also lower by 17.8% compared with the same period last year.

Pension scheme

BA's half-year results revealed a growing problem with its two final-salary pension schemes.

Both are now closed to new joiners, but although the older scheme (APS) now consists mainly of BA pensioners, just under half of the 70,000 members in the newer scheme (NAPS) are still working for the airline.

In the past six months, the surplus in the older APS scheme fell from £860m to £27m while the deficit in the NAPS scheme ballooned from £1.167bn to £2.66bn.

The value of the assets in both schemes rose, largely due to this year's huge rebound in share prices.

But this has been outstripped by the rising cost of paying for the pensions once they come into payment.

The BA pension scheme trustees, in their interim valuation, have assumed that the scheme's assets will earn a smaller income in the future.

The implication is that BA will have to increase the already large deficit payments it makes to its final-salary schemes, which it is obliged to do to ensure that they eventually return to balance.

A spokeswoman for the airline said it was currently paying in £335m per year into APS and NAPS, and that over the past three years, the company has paid in £1.8bn to cover its current payments and the deficit.

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