British Airways cabin crew will strike over the busy Christmas period, throwing the plans of thousands of holiday travellers into uncertainty. The Unite union said yesterday that crew members planned to walk off the job on December 22 and strike for 12 days. The union says 92.5 per cent of the workers who voted were in favour of the action in a dispute over job conditions, which they say the airline imposed illegally.
The carrier, which had a record loss of £217 million (Dh1.29 billion) to September 30, the midway point in its financial year, was trying to trim costs as it struggled amid lower passenger numbers. BA says it plans to cut thousands of jobs, freeze pay and offer lower wages for new employees, steps it says are necessary for survival. The union's decision came as BA revealed that its pension deficit had swelled to £3.7bn, a 76 per cent increase from £2.1bn three years ago. The huge shortfall risks scuppering BA's proposed merger with the Spanish airline Iberia, which has the right to walk away from a planned £7bn tie-up agreed last month should BA fail to resolve the problem. BA will work with the trustees of its two pension funds on a recovery programme after reaching agreement on how to value the shortfall, the airline said yesterday.
Andrew Fitchie, an analyst at Collins Stewart in London, said: "The pension saga will create ongoing adverse headlines and we look set to enter a period of significant labour unrest. To reduce the deficit, we'd expect a combination of an extension of the recovery plan and a reduction in members' benefits." BA must agree with the UK pension regulator by June 30 on how to deal with the deficit. The airline said yesterday the regulator's "provisional view is that the technical provisions" used in the valuation "may be materially below a level it feels appropriate".
The pension deficit valuation was done using methodology consistent with that used for the last triennial study in 2006, BA said. The airline was advised by Hewitt Associates and KPMG, while the trustees were helped by Watson Wyatt Worldwide. The funding review was done by PricewaterhouseCoopers. Under the last plan agreed on by BA and the trustees, the carrier would make a payment of £800m and pay as much as £50m a year over three years on condition that its cash balance remained above £1.8bn. The company also raised the retirement age to help lower the shortfall.
BA said it had asked Roger Maynard, the director of investments and alliances, to step down from his role as trustee chairman for the pension funds to prevent any perception of conflict of interest, as he worked on the Iberia deal. Mr Maynard led the trustees for five years and BA said a replacement would be appointed soon. * with agencies