BA's Problems Turn from Volcanic Ash to Labor

BA faces more strike actionBritish Airways, already one of the big losers when ash from Iceland's Eyjafjallajokull eruption in early April halted air traffic over Europe, now faces a second round of crippling strikes. An earlier strike in March caused the airline to cancel 1,100 flights on March 20. CNN estimated that the action cost BA as much as $200 million.

The latest labor action will last five days and will affect flights out of BA's Heathrow hub. Unions expect the airline to reinstate travel concessions for staff that walked out in March. According to the BBC, "BA has said it plans to fly more than 60,000 customers a day during the strike, operating 60% of long-haul flights and 50% of short-haul services from Heathrow."

BA is in a tough position. The company lost £401 million ($578 milliion) in the first quarter, saying its earnings were crippled by high fuel costs and low passenger traffic. The carrier is also faced with a £3.7 billion ($5.3 billion) pension deficit, an obligation that almost scuttled its merger with Iberia. The British company cut 8,000 jobs last year in the hope of saving £1 billion ($1.4 billion).

BA faces the same hurdle all airlines do when they try to outlast unions. It may get its workers to take permanent benefit cuts and lower salaries, but in the meantime the strikes badly hurt the carrier's bottom line and force passengers to be stranded or turn to competing carriers. it's a game of chicken that BA could lose. It doesn't have the resources to face quarter after quarter of losses like these.

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