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British Airways is preparing to slash pilots’ pay by as much as 9pc amid soaring inflation as the airline seeks to fund salaries for staff left out of work during the pandemic.
The flag carrier is braced for a row with pilots over the controversial pay deal that means they will be forced to sacrifice thousands of pounds of their salaries to pay for colleagues that would have otherwise lost their jobs during the Covid crisis.
The row comes with BA poised to return to profitability this summer and its FTSE 100 parent company, IAG, planning to increase lucrative share awards to executives.
Bosses were accused of “dipping their snouts back into the bonus and dividend troughs” by the leader of the pilots union.
Earlier this month, pilots rejected a new version of the pay deal, that includes a mechanism called a “long-term pay delta”, which was originally agreed during the height of the pandemic. It would have reduced the percentage cut to salaries to 7.5pc over the rest of 2022, falling to 4.5pc next year. However, pilots would have been locked into the schedule until 2028, when they would be docked 2.3pc of their pay.
Industry sources said that unless another deal can be thrashed out, pilots would fall back on the Covid crisis arrangement, leading to an estimated 9pc reduction in salary.
Union leaders are now understood to be pushing for the deal to be ripped up and replaced with a new pay round that will also include changes to working practices and benefits. Industry sources said that unions and BA have spent much of the last week discussing options for a new agreement.
BA has been hit by fresh turbulence as the skies reopen after two years of Covid-related travel restrictions.
The airline has been forced to cancel thousands of flights in recent weeks after grappling with widespread staff shortages. The Easter break was also marred by long queues at some airports and reports of hours-long waits to speak to the company’s customer service.
Grant Shapps, the Transport Secretary, accused aviation leaders of failing to “gear up” for the Easter break after sacking tens of thousands of employees during the Covid crisis, a remark that sparked fury among airline and airport executives.
Sean Doyle, BA’s chief executive, has vowed to hire hundreds of new call centre staff to reduce waiting times.
The Telegraph revealed earlier this year that BA was offering £1,000 sign-on bonuses to poach cabin crew from rival airlines as well as setting out its first-ever short-haul cabin crew base overseas to tap the Spanish employment market.
Despite the chaos, Luis Gallego, chief executive of BA parent IAG, announced earlier this month that the FTSE 100 company would return to profitability from April to June onwards and for 2022 as a whole.
Mr Gallego is facing a shareholder pay revolt of an “excessive” increase in share awards to executives after racking up record losses during the pandemic.
Glass Lewis, an influential proxy adviser, told its clients that IAG’s plans to increase Mr Gallego’s share awards from 100pc to 150pc of his salary was "misaligned with the stakeholder experience".
Pilots argue that the company should end the pandemic-era salary sacrifice scheme as a cost of living crisis leads to a growing number of workers demanding double-digit pay rises across the economy.
One said: “The vast majority of pilots are not willing to accept any compromise — we need cost of living pay rises, as well as taking away the delta.”
Martin Chalk, general secretary of pilots union Balpa said: "As executives and shareholders consider tucking in their napkins prior to dipping their snouts back into the bonus and dividend troughs, pilots warn that they will, through their union Balpa, insist full salaries and conditions are reinstated and their sacrifices are properly recognised."
British Airways said it remained “committed to open and honest pay talks with our trade unions”.
But the airline is bracing for tough talks with its pilots. Last week BA created a new role entitled "director of industrial relations", hiring veteran Tom Keeney, who previously spent 20 years leading talks with unions at telecoms giant BT.
In response to the Glass Lewis assessment, a spokesman for IAG said Mr Gallego had “seen a significant remuneration reduction in the last two years” and foregone bonuses.
They said: “IAG´s chief executive current pay ratio to employee is one of the lowest among the FTSE 100.
“The proposed amendment to his [Mr Gallego’s] long term incentive plan, where shares vest in three years time plus two years holding period, makes his award opportunity more competitive and aligns it with other IAG senior management.”
Like many of its competitors, BA was forced to cut costs dramatically during the pandemic after Covid-related travel restrictions grounded all but a handful of flights.
More than 1,200 pilots were initially earmarked for redundancy. But the salary sacrifice scheme, agreed in July 2020, meant that just 270 were ultimately laid off.
The agreement was initially open-ended — meaning that pilots could be forced to continue sacrificing part of their salary for years if not decades to come.