Irish high-flier sets a survival course others would be happy to exploit

AS chief executive of British Airways, Willie Walsh is one of the most prominent Irish people in global business. He is the head of an iconic airline of a scale much bigger than Aer Lingus where he was a massively successful chief executive earlier in the decade. Unfortunately, he may have undermined his own authority seriously in his efforts to reverse huge losses at the British company.

The airline recently reported losses of £401m for its last financial year, which ended on March 31, 2009. Things are likely to get worse unless costs are reduced, as Walsh believes the airline is flying through the greatest economic turbulence in its existence. He has warned it is in a fight for survival.

Walsh wants pay cuts and redundancies. BA is looking to reduce its 14,000-strong cabin staff by about 2,000. He has set a deadline of June 30 for achieving wage cuts and if he fails, he has threatened compulsory redundancies.

To set a good example, Walsh has said he is going to work for free in July. This “gesture” will be an expensive one for him. He received £735,000 in basic salary last year and BA topped up his pension fund by £90,000. This latest initiative will cost him £61,000 personally, more than twice the average annual pay for cabin crew.

The BA chief does not seem driven by the desire to make money, as workers in Aer Lingus will remember: he used to drive to work in an old car and made no ostentatious shows of wealth. It genuinely seems to be the desire to do the job correctly that drives him – not money as such. Further proof of that came last year when he waived a £700,000 bonus to which he was entitled under his contract because of the damage done to BA by the fiasco of the opening of the new Terminal Five at Heathrow Airport. It was a noble gesture that some thought unnecessary because the Heathrow fiasco wasn’t really his fault, but it set the right example.

Walsh made his offer to work for free during July when the results were announced. He has gone further now though by asking all staff to do the same. And that’s where he has come unstuck. He made the suggestion in the staff’s newsletter – it was not a formal request.

“People will be able to opt for blocks of unpaid leave or unpaid work, with salary deductions spread over three to six months, wherever possible,” he suggested. “The new unpaid work option means that people can contribute to the cash-saving effort by coming to work while effectively volunteering for a small cut in base pay.

“It really counts... Our survival depends on everyone contributing to changes that permanently remove costs from every part of the business.”

The reaction has not been good, which is hardly surprising. As the Unite trade union put it bluntly: “Willie Walsh can afford to work a month for free; our members can’t.” Baggage-handlers start on about £17,000 per annum, for example. The average annual pay (including overtime) in BA is about £39,000, which puts Walsh’s own action into a different context.

As it happens, he may not be overpaid, given that he runs a company with more than 40,000 employees. He is known to work 80 hours a week; in fact, he is one of these people who gets consumed by his job and lives it. He has enormous responsibilities to shoulder.

Walsh’s pay pales by comparison with some of the top executives in Irish companies have received over the years. Ryanair’s Michael O’Leary received more than €1.2m last year, for example. Recently he sold €18m worth of shares and still owns more shares worth hundreds of millions. Bank bosses in Ireland consistently earned double and treble what Walsh receives.

However, his idea that staff should work a month for free was misplaced. Lower paid people have less flexibility to cope with a financial crisis. Many people are just one pay cheque away from disaster.

People who buy into Walsh’s idea can only hope they’ll not be picked for compulsory redundancy – but they are not being offered that guarantee, which makes you wonder why they’d bother.

Some people have opted to take an unpaid holiday and others have done a deal where the financial impact of the month’s free working is spread out over six. But as one blogger put it this week: “Most of us work because we have to, not because we have so much money that we can do it without needing a salary.”

Walsh has had some success with his cost-cutting measures. For example, BA pilots have agreed to a small number of redundancies, a 2.6% cut in pay and an increase in non-flying hours they have to work. In return they will get options over shares.

It’s interesting to see the difference between what’s happening in Ireland and Britain. Whereas in Britain the idea of pay cuts or working for free (which is a pay cut in effect but by another name) is arousing controversy, here pay cuts have become the norm in large chunks of the private sector. And of course the public sector has received a pay cut by another name in the form of the pension levy, although at least most of these workers have a guaranteed pension at the end of their working days.

The Irish trade unions are right to point out though that some profitable companies are taking advantage of the situation to reduce their costs at the expense of workers.

In some cases workers are suffering because of the mismanagement of highly paid executives. Workers at Independent News & Media, for example, took pay cuts of 5% late last year, even though the Irish operations remain highly profitable.

Unfortunately, the parent group is struggling to repay unwise borrowing that its multi-millionaire directors decided upon and the pain is being felt by those who had no responsibility for the actions taken.

THE bosses may be doing without dividends and their shares may have fallen in value, but even after pay cuts they are still doing substantially better than the bulk of workers.

Unfortunately, it seems there is little option open to many companies other than to cut costs. RTÉ, for example, this week persuaded employees to accept severe pay reductions, although those at the lower end of pay will take a proportionately lower hit. It had little option given the shortfall in its revenues and the hefty losses it is making. It seems to be considered a better alternative than making lots of people redundant.

But Walsh’s initiative at BA should warn us against one possible trend in the Irish workforce: the idea that people should work for nothing. That is the way to exploitation.

People may be desperate for things to do to fill their time, to stimulate their brains, but profitable companies should not be allowed to exploit that willingness of either young people eager to make an impression as they start their working lives, or older people who are determined not to fall out of sight and out of mind.

There is something wrong too with the idea of people who have no real interest in working receiving payments from the state, which the country is hard-pressed to afford, while those who are willing to work for nothing lose their entitlements because, ironically, they are deemed not to be available for work.

The Last Word with Matt Cooper is broadcast on 100-102 Today FM, Monday to Friday, 4.30pm to 7pm.