Boarding Will Not Begin Shortly: Let’s Talk Profit Sharing
Walking down the deserted halls of London Heathrow last Monday morning was a relatively earie experience. Heathrow — one of the world’s busiest airports — is the hub of British Airways’ (BA) activity, in which 213,000 passengers per day may pass through and a plane lands or takes off every 45 seconds. A two-day strike by BA pilots lead to the cancellations of 1,700 flights carrying 280,000 people; the first ever BA pilot strike.
The conflict is essentially a question of wealth and profit distribution. Pilots had rejected an 11.5% pay increase over three years proposed by BA in July. While such a pay raise would seem to outstrip inflation in the UK and pilots are paid much more than their earth-bound colleagues, the pilots union (BALPA) says its members took deep pay and benefit cuts during the financial crisis. Now that BA’s financial performance has improved — its parent company IAG reported a 9% rise in profits last year — they should see a greater share of the returns. Since the global economy began to recover in 2013, airlines have been raking in the profits. In 2018, that added up to $30 billion — with BA contributing around $2 billion.
The airline strike is notable because pilots rarely go on strike — the disruption to passengers and global travel is enormous (it’s practically impossible in the US). However, more than 90 percent of the airline’s pilots voted to authorize a strike. The decision by BA pilots is an example of worker unrest in a greater global phenomenon, where worker action has increased from historic lows. Strikes nearly doubled from 2016 to 2018, with 106 million workers involved last year. Examples include Uber drivers who held a strike ahead of the rideshare app’s IPO in protest of low wages and lack of rights in the gig economy. Pilots for Ryanair, Europe’s largest budget airline, recently went on strike in the UK, and have more strikes planned this month. Amazon warehouse employees in Europe have been striking to protest low pay and tough conditions.
Profit and wealth distribution pose difficult questions for corporations that more increasingly must consider a variety of stakeholders in their business, outside of shareholders alone. BA’s case is particularly curious as the two sides were at most only GBP 50 million a year a part and the strikes alone are estimated to cost GBP 40 million a day to BA. Another economic downturn may be on the horizon and keeping fixed-costs down might be essential — we have even seen a few recent airline closures in Europe. But in times of economic profitability, reputation and stability are at stake when workers are not feeling much of the financial gains.
Derek Brooks, Asset Management
BALPA called off next week’s pilots’ strike, claiming the walkout last week made its point.
In the sustainability report on airlines by RobecoSAM states that they have benefited from stabilizing economic conditions, but a big priority now is to understand their customers better and adapt their offerings.
Labor Day was at the beginning of the month. The New Yorker looked at the recent history and reaction to labor activism.
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