BA cuts 5,800 more jobs

February 13, 2002 Posted: 1709 GMT

LONDON (CNN) -- British Airways announced another 5,800 job cuts as Europe's largest airline attempts to stem mounting losses.

The latest round of job reductions takes the total to 13,000, or almost a quarter of its workforce, over the last six months. The London-based airline hopes the planned cuts will save an annual £650 million ($931 million).

BA is heading toward its biggest financial loss since going private 15 years ago. The airline is struggling to cope with a sharp global economic slowdown, which has been exacerbated by the events of Sept. 11, while it faces increased competition from budget airlines.

It plans to restructure its short-haul operations to compete with low-cost airlines like Ryanair, EasyJet and Go, which have reported increased growth in passenger numbers over the last few months.

"We will not become a no frills airline nor will we launch one," Chief Executive Rod Eddington said. "We will compete profitably and intelligently alongside them by adopting what they do well."

BA is setting aside £200 million over two years, in part to fund the additional layoffs and reorganize its business.

Earlier this month, the company posted a third-quarter loss of £144 million, compared with a £36 million profit a year earlier. Sales slumped 20 percent to £1.8 billion.

The Sept. 11 terrorist attacks were a disaster for the airline industry as passenger numbers slumped by about a third, but BA suffered more than its rivals as its transatlantic route, it most profitable, struggled.

The market was unconvinced by BA's long-awaited "future size and shape" review. Its stock fell 2.3 percent to 199 pence in midday London trading Wednesday.

"It hasn't gone fare enough," a London-based analyst told CNN. "BA can not compete with the low-cost airlines, not with its cost base." Analysts said the airline had been making losses for years on European routes.

Eddington said the review marked a "significant change to the size of British Airways as it takes further steps to address its cost base and sets the company on course to achieve a 10 percent operating margin."

As part of the review, BA plans to cut 60 percent of its capacity at London's Gatwick airport by summer 2003. The airline plans to sell two Boeing 777 aircraft by this spring and another five long-haul Boeings later.

Eight routes will be transferred from Gatwick to Heathrow, London's biggest airport and BA's hub.