Unions fear engineering sell-off at BA

Airline accused of 'hidden agenda' as opposition grows to pounds 1bn cost-cutting programme

British Airways faces a summer of mounting staff discontent over its pounds 1bn cost-cutting programme and widespread fears of a "hidden agenda" to hive off its huge engineering division.

Following the resolution of the pilots' dispute last week, unions are now pressing BA's chief executive, Robert Ayling, for a meeting as soon as possible over the cuts, which were announced in May alongside record profits of pounds 585m.

Tomorrow BA will also face a fresh onslaught on its planned transatlantic alliance with American Airlines. US rivals Delta, United, Continental and TWA will follow Richard Branson's Virgin in opposing the link-up before the House of Commons' transport select committee.

The pilots' strike threat was just the tip of the iceberg of discontent among BA's 55,000 employees, as morale hits rock bottom amid a lack of communication by Mr Ayling over the flagship carrier's future strategy.

Disaffection is highest among the 9,000 staff of BA's engineering arm, as a future sell-off is widely perceived as an open secret among senior executives.

"You won't see it written down on paper, but if you ask senior management privately, they say that's the way things are going," one senior union source said.

"The big issue for the next 12 months is strategy. It still affects the pilots as much as anyone. Their dispute's not the end of it," he added.

The division carries out engineering and maintenance work for 100 other airlines as well as on BA's 300-strong fleet of aircraft. It has a total turnover of around pounds 1bn a year.

In April last year, it became a profit centre in it own right, and analysts estimate it could fetch up to pounds 500m if sold or floated off on to the stock market. A disposal would not be unique: four years ago, BA sold its engine overhaul business to General Electric of the US. Cargo, another new profit centre with pounds 540m of sales, may also be a candidate, analysts say.

Around 200 engineering shop stewards gathered for an angry meeting on 28 May at Heathrow's Ramada hotel to voice opposition to the cuts and changes in contracts, pay and conditions that BA is already forcing through. All the main unions were represented - the TGWU, GMB, Manufacturing, Science and Finance Union and the Amalagamated Engineering & Electrical Union. A subsequent request to meet Mr Ayling has yet to receive a response.

But with the pilots' strike now cancelled, national negotiators are to press their demands following completion of a paper by George Ryde, the TGWU's National Secretary for Civil Aviation Employees.

"There is an underlying concern with employees generally when the company makes a statement about a level of cost-cutting but does not explain how it is going to be achieved," said Graham Fowler, the secretary of BA's Joint Trades Unions Committee and assistant general secretary of Balpa, the pilots' union.

BA averted an indefinite strike by pilots starting from Tuesday through marathon talks into the early hours of last Thursday.

Mr Ayling had threatened to cancel bonuses, defer pounds 10bn of capital spending and to sell off the Euro-Gatwick operation before the pilots accepted a company-wide 3.6 per cent pay increase. "It was not just bluff. We were forced to face some unpalatable truths," a senior BA source said this weekend.

Officially, BA has yet to reveal how it intends to make the pounds 1bn cuts by the year 2000 and has denied talk of an engineering sell-off. Working parties, however, are now reviewing the group's structure, from ticketing, sales and catering to engineering and cargo, with the American Airlines link-up just part of the picture.

"We're investigating the whole way we do business. We're looking at every aspect of the business," a BA spokesman said.

With relentless pressure on prices, analysts believe further franchising of flight operations is also on the agenda, which may bring fresh conflict with BA's 3,000 pilots. "In fact, they don't really need to run an airline at all. They're more and more a scheduling and marketing operation," one City analyst said.