Lakhasly

World Airlines was created from the merger of two publicly owned state enterprises, Empire World Air Travel, which operated long haul flights all over the world, and Open Skies, which operated domestic and short haul routes between the UK and Europe.It stated that it would be recruiting new staff on substantially worse terms and conditions than those enjoyed by people already in post; and it stated that company final salary pension scheme would now be closed to all new starters except for senior managersWorld Airlines has state of the art offices in London, New York, Milan, Hong Kong, Sydney, Tokyo, Buenos Aires and Cape Town, and these too are staffed with people on excellent salaries.Ground crew, sales, support and office staff terms and conditions are the envy of the whole global airline industry - each of these categories is paid at least 30 per cent above the industry norm, and in all cases for working shorter hours than competitors and alternatives.The unions reacted with a mixture of horror and anger: horror at the nature of the proposals and the levels of job cuts demanded, and anger at the fact that World Airlines had gone back on its word not to introduce any changes, including compulsory job losses, for the next two years.After merger, the newly formed venture became for a time the largest airline in the world in terms of route network, passengers carried and planes in operation.The terms and conditions of employment of the two previous institutions were consolidated simply by taking the best of each; and the result was that by today, the company's pilots earn up to GBP150,000 per annum for an eleven day working month; while the cabin crew earn up to GBP50,000 per annum each including bonuses and allowances.Accordingly, when World Airlines was privatised ten years ago it attracted a lot of interest, and as well as corporate holdings, many individuals flocked to buy shares.The shares then went through all stages of market development, from small individual holdings, to corporate giants and finally major global financial institutions.World Airlines management now faced having to come up with proposals that would both reinforce the cautious optimism and support from the unions, and also address the costs issues in a meaningful way.Travis consultancy exercise cost World Airlines over GBP7 million, and their findings were as follows:

o Cost-cutting measures would not wait for two years; and the staff cost especially had to be tackled now.Accordingly, earlier this year, the company approached its four recognised trade unions and presented them with a cost reduction plan.The consultants, Travis and Partners, were one of the one of the world's top international consulting firms, and they were engaged to conduct a full review of the business of World Airlines.

World Airlines was created from the merger of two publicly owned state enterprises, Empire World Air Travel, which operated long haul flights all over the world, and Open Skies, which operated domestic and short haul routes between the UK and Europe. After merger, the newly formed venture became for a time the largest airline in the world in terms of route network, passengers carried and planes in operation. It was World Airlines proud boast that they could get anyone from any of their destinations to anywhere else in the world in forty-eight hours.

Accordingly, when World Airlines was privatised ten years ago it attracted a lot of interest, and as well as corporate holdings, many individuals flocked to buy shares. The shares then went through all stages of market development, from small individual holdings, to corporate giants and finally major global financial institutions. The whole process took the value of the company up from its original share price of 300p at the point of privatisation, to a high of £29.90 per share last year. This high was achieved despite the crisis in both air travel and also financial services, and in spite of the stock market declines of the previous two-year period.

When World Airlines was privatised, several things happened. The terms and conditions of employment of the two previous institutions were consolidated simply by taking the best of each; and the result was that by today, the company’s pilots earn up to £150,000 per annum for an eleven day working month; while the cabin crew earn up to £50,000 per annum each including bonuses and allowances. Ground crew, sales, support and office staff terms and conditions are the envy of the whole global airline industry - each of these categories is paid at least 30 per cent above the industry norm, and in all cases for working shorter hours than competitors and alternatives. The company today employs a total of 47,000 people worldwide. Of these, about 19,000 are employed as pilots, cabin crew, ground crew, maintenance and ticket sales; and the rest are engaged in management and corporate functions. World Airlines has state of the art offices in London, New York, Milan, Hong Kong, Sydney, Tokyo, Buenos Aires and Cape Town, and these too are staffed with people on excellent salaries. Added to the costs of their highly modern, prestigious and city locations, the result is that World Airlines now have a huge cost base which they have to do something about.

Accordingly, earlier this year, the company approached its four recognised trade unions and presented them with a cost reduction plan. This would take effect in two years’ time and would involve:

• a pay freeze for all staff for two years;
• an undertaking not to engage in any job loss or compulsory redundancy exercise until the two year period was up;
• a commitment to start new employees on reduced terms and conditions which would take effect from 1 March the following year (ie the third year from now). The new pay scales and other terms and conditions were not yet published, but would be drawn up and presented to everyone at a later date.

The initial response from the unions was cautious but generally supportive; though they all agreed to wait and see the details when they did come out.

World Airlines management now faced having to come up with proposals that would both reinforce the cautious optimism and support from the unions, and also address the costs issues in a meaningful way. Their first action was to look around for experiences elsewhere, and to see what others had done. They also needed expert advice, and so decided to engage consultants to advise on both strategy and process. The consultants, Travis and Partners, were one of the one of the world’s top international consulting firms, and they were engaged to conduct a full review of the business of World Airlines. Travis consultancy exercise cost World Airlines over £7 million, and their findings were as follows:

• Cost-cutting measures would not wait for two years; and the staff cost especially had to be tackled now.
• Staffing levels in fact were about 15% too high, and so up 7,000 staff needed to be cut. The cost cutting measures needed to be aligned with a process of business development that would secure a sound commercial base for the long-term future.
• The results would see a leaner and fitter organisation, well equipped to carry out business in the future.

World Airlines’ board of directors met to discuss these findings. They agreed that these findings would now be presented to the trade unions, with a view to implementation as soon as agreement could be reached.

The unions reacted with a mixture of horror and anger: horror at the nature of the proposals and the levels of job cuts demanded, and anger at the fact that World Airlines had gone back on its word not to introduce any changes, including compulsory job losses, for the next two years. After the initial meetings with the unions had broken up without any agreement, the company now took matters into its own hands and pressed on regardless. The company now asked for volunteers for redundancy, and backed this up with very generous terms - staff were offered up to three years salary as a severance payment if they agreed to go immediately, and anyone who asked for this severance would get it, regardless of occupation. It stated that it would be recruiting new staff on substantially worse terms and conditions than those enjoyed by people already in post; and it stated that company final salary pension scheme would now be closed to all new starters except for senior managers