12 September 2008

BA to dump 1400 Managers

The British Press report today that British Airways will offer severance packages to 1400 managers across their system.

Leaving aside the fact that they have 1400 managers that they can cut, this obviously indicates a company that (hopefully) wisely will seek to streamline its bloated organization structure.

I have always equated BA to Microsoft Software. Its big, its bloated, but you can't live without it. However over the years its importance comparatively speaking has been diminished. Its passenger shares have fallen in most of its markets. Turmoil at the top has resulted in what used to be called Continental disease. Where employees would in-fight, customer service plummeted and the prime role of the staff went from providing a service to working almost exclusively to retain their jobs. Well congrats to Willie for figuring that out. However why has it taken him so long to do that?

Willie's reign at the top has not been a happy one. BA is now blaming the fall of the pound against the dollar for its ills while pointing to its staff costs as "Employee costs are now second only to fuel costs." A BA spokesman was quoted in today's Daily Mail.

Before the run up in fuel prices they (labour costs) were the largest cost percentage in BA's P&L, so what is "now" about that?

After reporting huge profits over the last few years even through first quarter of this year, BA's decision to cut costs does seem to be a little too late. They should have invested for the down times more carefully.

Thanks to Professor John for the lead on this one.

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