Secondary action costs BA millions in catering dispute

Outgoing British Airways chief executive Sir Rod Eddington last week described the wildcat strike by ground staff - which crippled its operations at Heathrow and left thousands of travellers stranded - as "a body blow that defies belief".

It's quite possible that the repercussions of the strike by baggage handlers, bus drivers and cargo workers, in support of 670 employees sacked by BA contractor Gate Gourmet, may prove fatal to the airline catering giant. Whether it was an incident that defied belief - or even that it was unexpected, given the ever more constrained financial landscape in which airlines and their contract caterers work - is more debateable.

Gate Gourmet's BA contract is worth 130m a year and it expires in 2006. Unsurprisingly, speculation is growing about whether it is likely to be renewed.

BA has made a point of blaming Gate Gourmet for the dispute. Spokesman Jay Merritt insisted that the airline was very much the injured party. "We are not doing our talking to the media, but to Gate Gourmet," he said. "But nothing went wrong between BA and Gate Gourmet - it was between Gate Gourmet and its staff."

He added: "People have criticised us for selling off the catering leg in 1997, but we are an airline, not a catering company."

Basic service Countering this, in an interview in last week's Sunday Telegraph, Gate Gourmet chairman David Siegel put the blame squarely on BA, arguing that, if it hadn't been for the secondary strike by some BA employees, the caterer would have been able to maintain a basic service to BA and so keep its aircraft flying.

Whoever is to blame, the strike has taken a heavy toll on both sides. City analysts estimate that the strike is likely to have cost BA alone 10m a day.

The extent of the damage done to the image of the airline contract catering industry, and to Gate Gourmet in particular, will become apparent only with time.

The T&G union, which represents the sacked Gate Gourmet workers, has been scathing about the attitude of the catering giant, owned by US venture capitalists but based in Switzerland.

T&G general secretary Tony Woodley branded the caterer a "bandit employer", accused the firm of sacking staff by megaphone, and said that it had deliberately provoked the strike in order to get rid of current employees without the costs of redundancy payments, leaving it free to hire cheaper workers.

Workers have also complained of being bullied, over-worked, and barred from taking breaks or even going to the toilet, and of an aggressive attitude on the part of managers.

With Gate Gourmet said to be losing 25m a year on its Heathrow operations, the company should now ask itself whether the BA contract is, or ever was, sustainable, suggested Chris Stern of Stern Consultancy.

He said: "I don't know if what they were asking their staff to do was unreasonable or not but, clearly, there was something very wrong in the relationship and they have continued to mismanage it." He cited the "megaphone sackings" as a case in point.

Single employer One of the problems for BA, argued Kevin Barrow, outsourcing and recruitment partner at law firm Tarlo Lyons, is that the residential areas around Heathrow - Hounslow and Slough - are by and large single-employer towns, and that employer, directly or indirectly, is BA.

So when the Gate Gourmet workers were sacked, news spread quickly to relatives and friends working at BA, lighting the spark for the secondary action.

However, BA also needs to ask itself some serious questions. Is it squeezing its suppliers too hard? And does it even need to be offering the current quantity and type of meals, especially on short-haul domestic flights?

Thanks to the rise of budget airlines, travellers have become more accustomed to the idea of going without a free meal on a short-haul flight. Many airlines, such as BMI, now offer only sandwiches and snacks on shorter journeys.

At the same time, the food on offer at airports has improved, making passengers more inclined to fuel up before they even leave the ground. "BA is already doing fewer and fewer hot meals, and that is a trend that is going to continue," Stern said.

BA has stressed, however, that it has no plans to cut back or cut out in-flight meals, even on short-haul flights. Merritt insisted: "Our feedback from customers is that they do enjoy them. Our aim is to keep in-flight meals."

Moreover, as Barrow points out, BA may not find it that easy to wash its hands of its current problems, even if it wants to. If the airline drops Gate Gourmet when the contract comes up for renewal, TUPE regulations dictate that the existing workers, and any claims against their employer, would transfer to the new contractor. Hardly an attractive proposition.

Outsourcing tips

• Weigh the potential benefits in terms of reduced ocosts and increased flexibility against the downside of losing control of your supplier.

• Ask whether the figures stack up realistically; make sure the contractor is able to do what it says, and is financially viable.

• Don't put all your eggs in one basket so that, if one contractor runs into difficulty, you do at least have an alternative supplier.

• Make sure there is effective management of the "soft" side of the operation (the workers) as well as close control of costs and quality.