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Troubled times for British Airways

Plagued by industry-wide losses, British Airways, the widely admired flag carrier, has been brought to its knees by an expensive surprise strike just as it was poised to fly back into profitability.
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Plagued by industry-wide losses, British Airways, the widely admired flag carrier, has been brought to its knees by a costly surprise strike just as it was poised to fly back into profitability. The labor dispute was resolved Wednesday, but the mid-summer crisis has cost the airline its prized image, analysts say, and convincing tens of thousands of stranded holidaymakers to fly the “world’s favorite airline” again may be a tough sell.

THE POST-9/11 airline industry has seen the fall of several flagship airlines. The Belgian and Swiss national carriers collapsed under massive debts after an industry downturn followed the 2001 terrorist attacks on New York and Washington.

Even before the attacks, however, British Airways was in a slump, struggling to keep up with budget airlines whose cheap fares and no-frills service ate away at BA’s passenger base.

Sept. 11 and the wars in Afghanistan in Iraq prompted British Airways to launch a massive restructuring, including 10 percent layoffs, moves which began to bear fruit this year. Struggling under heavy debts from pre-9/11 plane purchases, BA announced Thursday a net loss of $73 million for the three months to the end of June, compared with a $105 million profit last year. But the company showed a profit from day-to-day operations, which analysts say is a rare achievement in the ailing airline industry.

FATAL BLOW Yet just as BA, Europe’s biggest airline, is regaining market confidence, it is losing the trust of its passengers. A wildcat strike on July 18 dealt a fatal blow to the airline’s summer profits. Two hundred and fifty check-in staff walked off their jobs for 24 hours, bringing operations to a standstill at London’s Heathrow airport, among the world’s busiest. Hundreds of flights were canceled, and it took the airline five days to work though the backlog of 80,000 tearful and resentful passengers, whose travel woes were played out on 24-hour news channels.

The potential long-term impact of the strike became immediately apparent. British Airways rival Virgin announced a surge in bookings until the end of the year. The airline had to add more phone operators to handle the increased sales volume. Low-cost BA competitors Easyjet and Ryanair also saw a rush on their services, as passengers switched carriers for future travel.

“The stoppage has … dealt a severe body blow to the heart of the airline’s current marketing theme, which emphasizes the passenger care and lack of disruption that a full service airline like BA offers compared with the no-frills carriers,” wrote the aviation trade magazine Airline Business in its July issue.

British Airways officials estimate the carrier has lost up to $65 million as a result of the one-day surprise strike, which centered on a dispute over a new employee swipe card system that the airline said will streamline accounting procedures. Check-in staff countered that electronic timekeeping would allow management to enforce split shifts during quiet periods. The check-in union’s mostly female workers say such disruptions would upset the balance of workplace and childcare demands on their time.

On Wednesday, after more than a week of tense talks, British Airways and the check-in staff unions announced a deal that delayed the introduction of the swipe card system until Sept. 1 and reportedly gave staff guarantees of how it would be used.

QUINTESSENTIALLY BRITISH The lasting damage of the strike will impact an industry leader and a company acknowledged for setting milestones in aviation history.

A quintessentially British institution with roots dating back to 1916, British Airways pioneered routes between colonial-era Great Britain and far-flung destinations in Asia and Africa. The company developed the supersonic Concorde aircraft, due to be retired in September after nearly 30 years in service, jointly with Air France.

During Prime Minister Margaret Thatcher’s 1980s deregulation, BA was privatized. The company went on to acquire holdings in Australia’s Qantas, Hong Kong’s Cathay Pacific and Spain’s Iberia. British Airways sold off a 25 percent stake in U.S. Airways in 1997.

Using its hubs in London’s Heathrow and Gatwick airports, British Airways flies over 300 aircraft to nearly 270 destinations in some 97 countries.

A recent multi-million dollar advertisement campaign cited passenger surveys naming British Airways the “world’s favorite airline.” Since the July 18 strike, BA’s popular and profitable business class services have seen high-paying passengers cancel tickets, for fear of missing business meetings as other BA employees threaten to strike.

DRIVE FOR PROFITABILITY The threat of more industrial action has divided British Airways unions. During the recent labor dispute, representatives of one pilots’ union urged check-in staff unions to settle differences with management, pointing out that normally packed summer flights were half full, and that the rest of the company was being dragged down by the check-in staff’s actions.

Rod Eddington, BA’s Australian-born chief executive who took the helm of the company from an unpopular predecessor in 2000, said earlier this week that the strike and its aftermath could threaten the airline’s existence. British Airways has “no God-given right to survive,” Eddington said, though on Thursday, announcing BA’s quarterly results, he remained hopeful further labor disputes could be avoided in the airline’s drive for profitability. “We will work hard to restore British Airways’ reputation with our customers,” Eddington said in a statement.’s Preston Mendenhall is based in London.