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BA bosses take pay cuts
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September 28, 2001: 4:04 a.m. ET
British Airways executives to take pay cuts as industry struggles to survive
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LONDON (CNN) - British Airways Chief Executive Rod Eddington is taking a 40,000 pounds ($58,800) cut in salary, as the airline industry struggles to survive.
The airline industry across the globe has seen more than 100,000 job losses since the terror attacks on New York and Washington, amid fears of more hijackings.
While most of the airline industry has reduced employee numbers, Eddington has instructed all his executives to take a 15 percent pay cut and 600 other managers have accepted a 10 percent cut from October 1.
"It is part of their contribution as leaders to helping BA through this most difficult of situations," Eddington said.
BA chairman Lord Marshall has agreed to take just half of his £250,000 salary, while 11 other executives on salaries between £100,000 and £250,000 will take pay cuts of about £18,000. All salaries will be reviewed in April, the company said.
British Airways, Europe's biggest airline, last week detailed plans to cut 5,200 jobs in response to the terror attacks. But the airline industry was already in trouble as a U.S.-led economic slowdown was hurting profits.
Other European airlines have taken the opportunity to take drastic cuts. Debt-laden Swissair plans to axe 3,000 workers and Italy's Alitalia will shed 2,500 jobs, while German airline Lufthansa has cancelled jet orders.
The continent's beleaguered airlines were thrown a lifeline last week from the European Union. For a month governments will provide essential war risk insurance, that is no longer available in the insurance market. The emergency measure stops far short of the $15 billion aid package the United States is providing for its airlines that are facing bankruptcy.
But the Italian government's decision to offer its national airline Alitalia $140-$190 million in state aid that includes a reduction in value added tax on tickets and payment for heightened security procedures could see it falling foul of European Union rules.
Troubled Belgian airline Sabena, which plans to axe 1,400 jobs as it struggles for survival with heavy losses and debt, cancelled more than a third of its mornings flights on Friday after pilots went on strike over its latest restructuring plan.
BA, which has already announced 1,800 job losses, is grounding 20 aircraft and reduce scheduled flights by 9 percent. The company, which derives about a third of its revenue from transatlantic flights, has already outlined plans to cut capacity by 18 percent over four years to March 2003, as part of its effort to counter a global economic slowdown.
The company has lost £48 million of revenue and £40 million at the operating level in the two weeks after September 11.
Mike Powell, an aviation analyst at investment bank Dresdner Kleinwort Wasserstein, told Reuters that BA's warnings on the revenue and operating levels were below his estimates.
"It's below our estimate of the hit that we reckoned they would receive during that period," said Powell, adding that his full-year forecasts at this stage for BA included an operating loss of £52 million.
"And were that to happen, it would be the first operating loss in BA's history. It's something they would be working very hard to avoid," said Powell. 
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