Airlines

The stress on European airlines battling the current crisis has been made further evident by the job cuts and cost savings measures announced in the last 24 hours by British Airways and Aer Lingus.

BA has unveiled plans to cut the equivalent of 1,700 cabin crew jobs, while Aer Lingus has announced a further 686 job cuts under a two-stage transformation plan.

Along with announcing the 1,700 cabin crew position cuts - around 1,000 cabin crew are to take voluntary redundancy and a further 3,000 will switch to part-time working - in a structural change, BA's long-haul cabin service directors will also start to serve passengers on board from the end of next month, meaning that on the carrier's Boeing 747 fleet for example, the total cabin crew will reduce from 15 to 14.

"We have consulted on these changes and are not altering anything that requires negotiation. These changes will take place from the end of November. They will not alter contractual terms and conditions for individual crew members, and will not reduce the number of working crew onboard," BA says of the changes, which are likely to raise the stakes with cabin crew unions.

BA has been at loggerheads with its cabin crew union for some time over its attempts to secure long-term cost savings. "Thousands of staff across the airline have already made contributions to the cost-reduction programme," BA says, noting its must address its cost base as it faces recording consecutive losses for the first time in its history. "We have been talking to the cabin crew unions since the start of the year, but have made little progress on the contribution they might make.

"Without changes, we will lose more money with every month that passes. It is essential we make ourselves more efficient if we are to ensure our long-term survival."

Aer Lingus Targets Turnaround

New Aer Lingus chief executive Christoph Mueller this morning unveiled the carrier's restructuring measures. This will see it cut 489 jobs, in addition to 100 already leaving the company this year, under the first phase of a new turnaround plan announced. A further 187 positions will then be cut by the end of 2011 under a second stage cost-cutting plan driven by new technology.

The first phase of the plan targets €97 million ($143 million) in annual cost savings, around €74 million generated from staff cost savings, from 2011. This will largely be driven by the job cuts, but also by changed work practices. The second phase targets increasing revenues and reducing costs further through improving business processes and new IT developments.

"The outlook in each of our current core markets is poor and, in line with the macroeconomic outlook, we do not expect any near-term recovery," says Mueller. "Against this backdrop, Aer Lingus cannot continue with an operating cost base, which is structurally uncompetitive when compared to that of its closest peers. A significant differential in operating cost is not sustainable.

"Our plan to reduce our operating cost base and change work practices will secure Aer Lingus' future as a viable and strong airline that can prosper in one of the most competitive travel markets in the world. We regret the impact that the proposed plan may have on our employees, however, we must transform the business now to ensure that Aer Lingus has a business model for the long-term and can deliver value for all stakeholders."

European Loss Forecast Doubled

The carriers are far from alone in Europe in taking such action and the continued action come against the backdrop of heavy anticipated losses in Europe this year. In recently raising its loss forecast for the industry for 2009 to $11 billion, IATA more than doubled to $3.8 billion its loss forecast for European carriers. It now expects European carriers to post the largest losses of all regions this year.

Snapshot of recent European airline job cuts and cost savings moves

SEPTEMBER

• Aeroflot reportedly says up 2,000 more jobs could be cut in the next six month
• Finnair agrees €12.3 million cost savings deal with cabin crew union
• Air France to seek up to 1,500 job cuts in a voluntary redundancy programme

AUGUST

• CSA warns up to 860 jobs could be cut between September and March 2010
• Finnair to shed around 200 jobs through corporate restructuring
• Iberia announces plans to accelerate cost-cutting plans
• SAS to cut up to 1,500 jobs in new SKr2 billion ($273 million) cost-cutting programme

JULY

• Austrian agrees €150 million long-term savings package with works council on top of 1,000 jobs to be cut by mid-2010
• Lufthansa embarks on Climb 2011 cost-cutting programme aimed at saving €1 billion by 2011