British Airways: cabin crew dispute tests the airline's resolve to reduce unit labour cost

A vote on 14-Dec-2016 by British Airways 'mixed fleet' cabin crew raises the real threat of strike action - and, as is often the case, in the lead up to a peak holiday period. This would be the first serious industrial action since strikes by cabin crew protesting at the 2010 introduction of mixed fleet crew. BA, and its parent IAG, have been praised by many observers (including CAPA) for their resolve in driving through important restructuring programmes in legacy airlines, while their European peers have fallen behind the field. A crucial part of this has been to generate labour productivity improvements, often in the face of union resistance.

British Airways has a good track record in improving the efficiency of its workforce, as measured by ASKs per employee. In 2015 it made its highest-ever operating profit margin, beating Europe's other major legacy airlines, and it looks likely to improve on this once again in 2016. However, it does not have a great record of lowering unit labour cost.

Moreover, BA is currently experiencing falling unit revenue. With help from lower fuel prices receding, cutting ex fuel unit cost will be vital if BA is to fight off the margin squeeze resulting from unit revenue weakness. Labour is a key element of ex fuel cost, so the cabin crew dispute is a test of BA's resolve.