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December 1, 2005
British Air Announces Big Job Cuts for Managers
By THOMAS FULLER,
International Herald Tribune
British Airways announced one of the most drastic white-collar layoffs in recent European corporate history yesterday, saying that it would eliminate half its executive staff positions and almost one-third of its managers over all.
Willie Walsh, a former pilot who became chief executive of the company in October, said the cuts were intended to make British Airways a "more competitive and efficient airline."
The number of senior managers will be reduced to 207, from 414, while the number of middle managers will fall to 911, from 1,301. The company has about 47,000 employees worldwide.
Mr. Walsh, 44, appears to be trying to replicate the success he had in his previous job at the Irish carrier Aer Lingus, where he reduced staffing by one-third and turned that airline around.
But the layoffs announced yesterday stunned management experts, who noted that British Airways was a much bigger airline and a profitable one, earning £415 million ($711 million) last year.
The company estimated that the cuts would save £50 million ($86 million) a year.
In a statement, Mr. Walsh praised the company's "extremely talented managers" and thanked them for "transforming" British Airways in the last four years, a time when the company cut 14,000 jobs.
"But it is essential that we streamline our business further," he said, "and I believe it is right that we have started by looking closely at the number of senior managers we need to deliver a sustainable, profitable future."
Gérard Cortey-Dumont, a human resources consultant who helped oversee large-scale layoffs at Gemplus, an identification card company, said, "I've never heard of something like this."
British Airways is trying to create "an enormous psychological shock," Mr. Cortey-Dumont said, both to get the attention of investors and to push employees to increase their performance, but cutting so deeply into management risks "paralyzing" the company, he said.
"A company needs to be managed," he said. "When you don't have enough experienced people to carry out management and daily operations, you pay for it."
Michael Segalla, a professor of management at HEC, a leading French business school, compared the broad scope of the layoffs to a medical emergency, saying: "In the American Civil War, the best field surgeons could saw off your leg in 12 seconds." He said that "a similar kind of thinking is going on here: get it done quickly."
"The worst thing is to do a little bit and then come back six months later and say, 'Oh, sorry, we didn't quite clean up enough.' That kills the morale of the organization. Nobody can feel safe or secure."
Airlines in Europe are facing increased competition from low-cost carriers over short and medium-haul routes. Some analysts say it is only a matter of time before competition increases on international routes as well. In the long term, British Airways also faces a large deficit in its pension plan.
"The decision to embark on a major reduction in management numbers is not one I have taken lightly," Mr. Walsh said. "We are restructuring the airline to remove duplication, simplify our core business and provide clearer accountability. Managers will have greater accountability for making decisions, delivering results and leading the business."
The reduction in middle managers was described as a "proposed" cut. The company said the reduction of executives would be done in three phases, leaving the possibility of a reversal in case the plan backfires.
As to whether the cuts will make British Airways more competitive, analysts were divided.
"This is good news for shareholders," Hilary Cook, director of investment strategy at Barclays Private Clients in London, told Bloomberg News. "If you cut at the bottom, you end up with a top-heavy company, and then you don't have enough staff facing customers."
But Mr. Segalla of HEC doubted the long-term benefit. Mass layoffs, he said, make it look like management is taking action, "but it rarely produces any lasting value for a firm."
British Air Announces Big Job Cuts for Managers
By THOMAS FULLER,
International Herald Tribune
British Airways announced one of the most drastic white-collar layoffs in recent European corporate history yesterday, saying that it would eliminate half its executive staff positions and almost one-third of its managers over all.
Willie Walsh, a former pilot who became chief executive of the company in October, said the cuts were intended to make British Airways a "more competitive and efficient airline."
The number of senior managers will be reduced to 207, from 414, while the number of middle managers will fall to 911, from 1,301. The company has about 47,000 employees worldwide.
Mr. Walsh, 44, appears to be trying to replicate the success he had in his previous job at the Irish carrier Aer Lingus, where he reduced staffing by one-third and turned that airline around.
But the layoffs announced yesterday stunned management experts, who noted that British Airways was a much bigger airline and a profitable one, earning £415 million ($711 million) last year.
The company estimated that the cuts would save £50 million ($86 million) a year.
In a statement, Mr. Walsh praised the company's "extremely talented managers" and thanked them for "transforming" British Airways in the last four years, a time when the company cut 14,000 jobs.
"But it is essential that we streamline our business further," he said, "and I believe it is right that we have started by looking closely at the number of senior managers we need to deliver a sustainable, profitable future."
Gérard Cortey-Dumont, a human resources consultant who helped oversee large-scale layoffs at Gemplus, an identification card company, said, "I've never heard of something like this."
British Airways is trying to create "an enormous psychological shock," Mr. Cortey-Dumont said, both to get the attention of investors and to push employees to increase their performance, but cutting so deeply into management risks "paralyzing" the company, he said.
"A company needs to be managed," he said. "When you don't have enough experienced people to carry out management and daily operations, you pay for it."
Michael Segalla, a professor of management at HEC, a leading French business school, compared the broad scope of the layoffs to a medical emergency, saying: "In the American Civil War, the best field surgeons could saw off your leg in 12 seconds." He said that "a similar kind of thinking is going on here: get it done quickly."
"The worst thing is to do a little bit and then come back six months later and say, 'Oh, sorry, we didn't quite clean up enough.' That kills the morale of the organization. Nobody can feel safe or secure."
Airlines in Europe are facing increased competition from low-cost carriers over short and medium-haul routes. Some analysts say it is only a matter of time before competition increases on international routes as well. In the long term, British Airways also faces a large deficit in its pension plan.
"The decision to embark on a major reduction in management numbers is not one I have taken lightly," Mr. Walsh said. "We are restructuring the airline to remove duplication, simplify our core business and provide clearer accountability. Managers will have greater accountability for making decisions, delivering results and leading the business."
The reduction in middle managers was described as a "proposed" cut. The company said the reduction of executives would be done in three phases, leaving the possibility of a reversal in case the plan backfires.
As to whether the cuts will make British Airways more competitive, analysts were divided.
"This is good news for shareholders," Hilary Cook, director of investment strategy at Barclays Private Clients in London, told Bloomberg News. "If you cut at the bottom, you end up with a top-heavy company, and then you don't have enough staff facing customers."
But Mr. Segalla of HEC doubted the long-term benefit. Mass layoffs, he said, make it look like management is taking action, "but it rarely produces any lasting value for a firm."
