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British Air cuts more jobs
December 6, 2000: 6:02 a.m. ET

U.K. carrier cuts Gatwick presence in bid to return Europe operation to black
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LONDON (CNNfn) - British Airways PLC, Europe's largest airline, announced plans Wednesday to cut about 1,000 jobs, or about 1.6 percent of its payroll, trimming services from London's Gatwick airport as its new chief embarks on a broad overhaul.

The changes, to be implemented over the next few years, involve switching some services to Heathrow, the principal airport for London and U.K.'s air travel biggest hub. The move come at a time of turmoil in BA's European operations, which last year lost £310 million ($445 million) amid high oil prices and ever-stiffer competition from low-cost airlines.

"Although the heart of the European profitability problem lies at Gatwick, there's more to fixing Europe than getting Gatwick right," recently appointed CEO Rod Eddington said in an interview with Reuters. graphic

British Airways (BAY) will cut to 25 the number of long-haul destinations it serves from Gatwick, down from 43 currently.

"We need to address the problems at Gatwick, but a key part is fleet changes across short-haul operations and we also need to be clear about what destinations we can serve profitably," said Eddington.

The changes are expected to make services at Gatwick profitable within two or three years, and eventually bring in some £100 million for BA. The airline recently posted its first annual loss since it was privatised in the 1980s.

"It's the right move," said Andrew Light, an analyst at Salomon Smith Barney in London, who has an "outperform" rating on BA shares. "A 40 percent cut at Gatwick seems pretty aggressive, but it addresses just £40 million of a £300 million loss. There's plenty more to do."

The announcement, part of an expected review of BA's operations at Gatwick, had little effect on its shares, which eased 0.3 percent to 392 pence.

By trimming many long-haul services from Gatwick, Eddington is abandoning the strategy of turning the airport into a second hub for international flight transfers, a policy it developed to make up for the limited potential to expand services at Heathrow.

BA has this year tried and failed to strike a merger deal with KLM Royal Dutch Airlines, a combination that might have helped address British Airways's European woes. Talks broke down in September over the complexity of that deal.

Eddington said he was confident that the axing of 1,000 jobs which excludes another 800 staff whose jobs will be moved to Heathrow could be achieved by natural attrition and voluntary redundancies, and without forced layoffs. He was set to meet with unions Wednesday to detail the proposals.

British Airways had already cut 3,000 jobs in the past 12 months, and unions have been bracing for more cuts as Eddington accelerates a slimming-down strategy drawn up by his controversial predecessor Bob Ayling.

Unlike other European airlines -- including BA's archrival Virgin Atlantic, which continues to add more and bigger planes -- BA is switching to smaller jets with fewer economy-class seats and more high-paying business travellers.

The key challenge for Eddington is making sure that he does not damage staff morale as Ayling did one of the issues that eventually got him fired.

-- from staff and wire reports graphic


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British Airways

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