Join our community of smart investors

BA pilots strike over pay and conditions

Shares in parent company IAG sunk as two days of strike action began
BA pilots strike over pay and conditions

International Consolidated Airlines' (IAG) woes were exacerbated after British Airways pilots began a two-day strike, forcing the airline to cancel almost all the 1,700 flights it was scheduled to operate over those days. The 4,000 pilots involved in the strike believe that profits have not been shared fairly with employees, claiming that managers have received all the benefits, and in turn are demanding higher pay and better conditions. This comes at a time when airlines are grappling with rising costs across the sector.

IC TIP: Sell at 425p

Brian Strutton, general secretary of pilots’ union British Airlines Pilots Association (BALPA), claims that the company’s management is “refusing to negotiate” with pilots despite having made a “fair, reasonable and affordable claim for pay and benefit”. Balpa’s latest proposal would cost British Airways less than £5m more than that previously offered by the airline, the union said, while each day of strike action is estimated to cost the airline around £40m. If an agreement is not reached, pilots will strike for a third day on 27 September.

A spokesperson for British Airways said the average captain earns £167,000 a year plus £16,000 in flying allowances on top of basic pay. British Airways offered an increase in pay of 11.5 per cent over three years, plus a one-off payment in 2019 of 1 per cent. If pilots accepted the offer, it would take them to over £200,000 a year, when £167,000 is already five times the UK average salary.

Parent company IAG is already facing a number of cost headwinds. Fuel, oil costs and emissions charges increased by a fifth during the first half of the current financial year to €2.94bn (£2.68bn), while non-fuel costs per available seat kilometre increased by 1.2 per cent to €4.93. Overall, total expenditure on operations increased by 10.3 per cent to just under €11bn. If current fuel and exchange rates persist, then 2019's operating profit before exceptional items is expected to be flat on that generated in 2018.

British Airways is not the only airline struggling with pay disputes. Pilots at Ryanair (RYA) went on strike in August, with further walkout dates scheduled through September, as they seek “the same kind of policies and agreements that exist in other airlines”, taking issue with pensions, loss of licence insurance, maternity benefits, allowances, and pushing for harmonised pay across the UK.