British Airways: Can't Get Your Money for Nothing So Get Your Workers for Free

I was reminded of the Dire Straits' song: "Money for Nothing" when I read about employees at British Airways (BA) working for free. Yes, free. BA is an example of dire straits -- dire financial straits. The CEO, Willie Walsh, is foregoing his salary of $100,000 this month to set the example for employees. Of course, he can better afford to do so with a basic annual salary of $1.2M than most of his employees, who have been asked to volunteer to work for free or for cuts in pay in order to keep BA afloat.

BA was hard hit by fuel prices last year and slumping business class passengers, contributing to a $612M loss last quarter. As of the June 24th deadline, approximately 7,000 employees out of 40,000 had volunteered to take pay cuts or temporarily work without pay . And according to a Supply Management article, the Head of Procurement, Tim Richardson, reported that most of the procurement staff was either taking unpaid leave or working without being paid. BA is now negotiating with unions that are considered by some to overstaff their functions compared to other airlines. However, according to the July 7th WSJ, the 14,000 member union has rejected the job cuts and pay freezes and has implied that they are willing to strike if necessary.

What's the motivation behind BA employees’ going along with these draconian measures? Probably not everlasting devotion to the company. More likely that employees feel pressured to take the pay cuts and keep their jobs, rather than risk losing them in a layoff. By cooperating, employees are trying to demonstrate to management that they are team players worthy of being retained and avoid the axe.

What about the role of suppliers? In a discussion last fall at Chartered Institute of Purchasing and Supply (CIPS), CEO Willie Walsh underscored the need for good supply management and seemed to understand the importance of spend management, as summarized in this post on Supply Excellence last fall. However, suppliers are also impacted by the recession and BA is closely monitoring a select group of them for risk. BA is trying to prevent potential supplier failures from exacerbating BA's ever-growing mix of woes. Given the shakiness of some suppliers, BA may need to tread lightly with price concessions. If, in fact, there can be some give and take between BA and its suppliers at this time, BA is more likely to engender future supplier loyalty and cooperation in better times.

Whether British Airways can make it through this difficult time in one piece, with its workforce making sacrifices, without key supplier collapses and without strikes, remains to be seen. I'm wondering, however, what the atmosphere on board BA flights is right now, with crews who are threatening to strike if they are forced into taking pay cuts, serving the flying public, who themselves can be on the cranky and demanding side.

- Sherry Gordon

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