While there’s been a lot of commentary on the British Airways strikes, the analysis (whether pro-company or pro-union) tends to miss two major points.
The business model is unsustainable – but that’s the management’s fault, not the unions’
BA’s model before the global financial crisis was to charge a fortune for excellent service in Club World and First, while matching its competitors’ prices and service levels in World Traveller. Together with BA’s massive global coverage and its excellent connections between the financial boom centres of London, New York and Singapore, this business model allowed BA to attract a lot of passengers and make a lot of money.
This was lucky, as BA’s cost base is and remains far higher than that of its competitors. Not on planes, or marketing, or even management – but on staffing. At the time, the money that bankers were willing to pay to fly to Singapore in a bed whilst being served champers by reassuringly camp gentlemen was so vast that BA could get away with paying long-serving cabin staff double the national median wage.
However, this wasn’t a sustainable business model unless you believed the boom times would never end. BA should have taken advantage of the good times to stuff its current crews’ mouths with gold (pay rises, massive early retirement packages, one-off bonuses), in exchange for permission to hire new recruits under less generous contracts so that the long-term cost base was more sensible. Virgin Atlantic pays new recruits gbp15,000 ranging up to about gbp30,000 for senior crew, and anyone who’s flown on Virgin will confirm that this is enough to attract motivated people who provide excellent customer service.
Unfortunately, BA’s CEO for most of the boom – Rod Eddington – had approximately no aptitude for long-term strategic thinking, so kept with the status quo for an easy life (my assessment of his aptitude is supported by his report on UK transport policy two years ago, which managed to miss out high-speed rail completely. I’ve only just discovered via Google that he’s done much the same half-arsed job in Melbourne). Willie Walsh has a better track record, but by the time he’d taken over and settled in, the recession was already imminent. Now, BA has to cut costs for long-term survival, but doesn’t have the money to bribe its staff to accept the cuts.
The unions are in a far stronger position than most commentators realise
BA’s enterprise value – the amount that its assets plus goodwill are worth, before taking into account its financial liabilities – is something like GBP7bn. The reason its market cap is only GBP3bn is because it also has a GBP4bn pension deficit. In other words, money that BA owes to its workers and former workers accounts for more than half of the company’s total value.
This has two policy implications.
One is that Red Tory Philip Blond’s suggestion that the government should mutualise BA isn’t quite as insane as it looks – more than half the company is already owned by the workers, and if things were to get worse then the pension fund has priority over the shareholders as a creditor. A deal like the one the US government brokered for GM, leaving the workers as majority shareholders, isn’t totally implausible.
The other consequence of this ownership pattern is something which should make BA shareholders rather nervous.
If the industrial action were to turn into a major, long-term dispute that drove down passenger numbers and revenues to such a severe extent that BA had to go into administration, then the pension fund would have priority over BA’s assets (including not only its physical assets, but also its brands, goodwill, systems, etc). It’d be hard work to rebuild BA as a global brand after that kind of collapse, but it wouldn’t be impossible – particularly with worker ownership ending the company’s labour crisis overnight. The shareholders, however, would lose everything.
So while the “nobody backs down” outcome isn’t good for either side (as the workers lose salary in the short term, and in the long term their pensions end up secured on a much less valuable asset), it’s a lot more optimal for the workers than it is for the shareholders. This makes negotiations, erm, challenging.
Conclusions? None really, except that I wouldn’t want Willie Walsh’s job, and Rod Eddington shouldn’t be put in charge of the strategic direction of a whelk stall (although he’s probably competent to administer one day-to-day).
Update: another conclusion is that if you blame the strikes on Gordon Brown’s ‘weakness’, you’re so utterly clueless that you shouldn’t even be allowed to assist Rod Eddington at his whelk stall…
Update 2: Jim notes that BA’s business model is also unsustainable in the sense that the oil’s going to run out. This is true, and worth a read (I’m not yet totally sold on Jim’s view on precisely when the oil’s going to run out, but that’s mostly based on sheer incredulity that if the oil’s really going to start running seriously short by 2015, governments and large companies haven’t done more to mitigate that. The GFC highlights that this may be over-trusting of me…).
- #ebz waiting for my new phone to be delivered requires a certain degree of timewasting, hence http://fallenlondon.com/c/38970 #
- Self-professed 'libertarian' argues for increased public spending on people living abroad: http://bit.ly/bpJCHU #
- Boo! The hitherto excellent Daily Mash channels Richard bloody Littlejohn with rubbish "PC gorn mad" nursery rhymes: http://bit.ly/d1a4zI #
- Alex Massie is ace. I hope someone less crazy than the Speccie will offer him a job shortly: http://bit.ly/c3RxLb #
- And healthcare is duly reformed. Hurrah! #hcr – wonder if this will help the president's popularity ratings? #
- W00t – @Captain_Deltic is now Tweeting #transportgeekery #ifyoudontknowyouwontbeinterested #
- Anyone recommend a Twitter client for a #Nokia #N97 ? #
- #ebz It's cloudy today, so I'm not all that inclined to get up in a hurry http://fallenlondon.com/c/39984 #
- It strikes me as utterly insane that alcohol tax isn't a simple "10p per 10ml of pure alcohol whatever the drink" #
- #budget2010, #verybadsituation and #itsreallyannoying are trending together. TWITTER WIN. #
- Least appealing offer ever -> RT @DuncanStott watch @Nick_Clegg's response live: http://bit.ly/aQ4szR #budget #
- Another day, another #ebz tweet http://fallenlondon.com/c/40534 #
- Bah. I finally get around to updating my website *exactly* as my host takes their server down for 2 hours… #
- Right. http://www.johnband.org now looks like it came from a half-capable designer 3 years ago, instead of a lazy blind designer in 1997 #
- Glad I've left the UK just as the union movement decides to fuck the few bits of the country left unfucked by the bankers #
- BA is bust because its salaries are high; the railways cost too much. If you disagree with either of those facts, you have no clue #
- Yes, tho' not as much as the bankers -> RT @manipillai The irony is the unions are doing a great job in ensuring Lab doesnt get re-elected. #
- V interesting post from Jamie – http://bit.ly/9Fyzyi – if the trend continues, I may withdraw my grudging support for democracy… #
- Back from a reasonably successful driven lesson, time for more #ebz http://fallenlondon.com/c/41127 #
- Excellent visual response to people who think Labour have done nothing to alleviate poverty and redistribute income: http://bit.ly/9qYntb #
- Conservative government in "opposed to human rights" shock: http://tinyurl.com/ylhql4y – seriously, did anyone expect this not to happen? #
- Meanwhile, Iceland channels Saudi Arabia http://bit.ly/cgMGbi – Mad Julie approves… #
- The most pretentious drivel you'll read all week, GUARANTEED: http://bit.ly/8XAaSY #
- Heh, I'd missed Hamilton falling afoul of Australia's dedicated anti-hooning laws: http://bit.ly/9CcYgR #
- I just plugged #ebz on my blog as well, I wonder if that gets me extra credit? http://fallenlondon.com/c/41743 #
- http://bit.ly/bznngP = "exactly the kind of offence right-wingers believe can't get dealt with like this any more due to evil PC brigade" #
- Sorry the last link wasn't all that interesting, partly I'm testing my PHP script… #
- My PHP script works, following much wailing and gnashing. New personal homepage ALL MY OWN WORK: http://www.johnband.org/ #
- If you've not seen this movie, you need to: http://www.imdb.com/title/tt0068173/ #aussiewithnail #
- CROWDSOURCING: what song should I put on next? Bear in mind that it's 2AM and I'm drunk #
- .@brettsr to be honest, any government initiative to diminish Peter Gabriel has my vote #
- I was actually counting down the days from seeing this ad to seeing a grumpy UberFeminist appraisal of this ad: http://bit.ly/af5JNa #
- Also, the 'this ad is evil because HAIRSHIRTS! DWORKIN!' post below wins points for actually saying "I am not lacking a sense of humour" #
- If you say "I'm not a racist but" or "not a misogynist but", you are. Lacking a sense of humour isn't as bad, but the same rules apply #
- This is the finest thing ever to have happened on this earth: http://www.youtube.com/watch?v=bXKwBvhd-ww (indirectly via @anattendantlord) #
- Another piece of awesomeness: http://www.youtube.com/watch?v=_NljLKfcwOc – bastarding YouTube doesn't have Mini Correct or Poppy #
- They do have this though: http://www.youtube.com/watch?v=e-aWjD5gea4 – everyone has and loves, or possibly is, this friend #
- …and the nonsense goes viral. RETURN TO REAL LIFE, PEOPLE -> RT @LDN Is the new Pepsi Max ad 'a bit rapey'? http://bit.ly/dr2luL #
- For anyone who's gone to drinks and regretted the company, but not the drinks: http://www.youtube.com/watch?v=vbWP8VWqGn0 #
- Happy summer, UK tweeps… #
- Shortly, to lunch and to the beach. First, #ebz http://fallenlondon.com/c/42308 #
- Dulux aside, the 2 main brands of paint in .au seem to be Nippon Paint & British Paint. Wld be interesting to plot market share over time… #
- A flame-war in CiF comments – nothing new, but the commenters are Toby Young and Jay Rayner: http://twitpic.com/1bhxt6 #
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A: this is the right thing for a Saturday evening:
When I grow up, I wouldn’t object to being an incredibly rich, disgraced, highly influential, not-proven-guilty-of-fraud Wall Street figure and would-be press baron.
However, unlike Henry Blodget, I don’t think I’d devote a day’s worth of output to slating other financial commentators for being insufficiently productive, hard-working, etc. Worrying about the productivity of people who actually work for you is stressful enough – and besides, I’d want to leave at least eight waking hours a day outside of work to enjoy my enormous pile of ill-gotten gains.
(I am, however, also a little jealous of Felix Salmon. If any multinational news organisations want to pay me a decent-ish New York salary to tweet and blog about finance and the economy all day, then you know where to find me…)
Someone found the blog yesterday by Googling for “my right testicle is as big as a kiwi”. I hope the story they read had the desired effect – but just to reiterate, if your right testicle is as big as a kiwi, then go see a goddamn doctor RIGHT NOW. Indeed, even if it’s only as big as a kiwi fruit, go see a goddamn doctor right now.
In other news, Sydney remains excellent. The drive to attract freelance work continues, and I’ve poshed up my personal site as part of the hunting process. Which has taught me that CSS is fun when you get to know it (this is the first website I’ve built without using tables, which makes me geekily happy), and that PHP was invented by the Devil (possibly as a way of making ASP seem fun, sensible and intuitive by comparison).
Incidentally, if you want to waste time on online things that are more interesting and less frustrating than PHP, then I’d thoroughly recommend Only Connect and Echo Bazaar. The former will steal your lunchtime; the latter will steal your life.
In explaining how he avoided falling into the common liberal trap of supporting the Iraq war, Dan Davies listed the maxim “Good ideas do not need lots of lies told about them in order to gain public acceptance“. The fact that all the main proponents of the Iraq war were lying like rugs about WMDs inherently casts doubt on the case for war, even if you believe that a war for regime change would have been justifiable in its own right.
I was reminded of this when looking at the website for the Robin Hood Tax campaign (the Robin Hood Tax is the new, nauseatingly cute, name for the Tobin Tax on financial transactions):
The Robin Hood Tax will not impact on personal banking or on retail banking. That’s because it targets a distinct area of bank operations – high-frequency large-volume trading, undertaken by financial institutions in the ‘casino economy’. If you change money to go on holiday, send remittances abroad, invest in a pension fund or take out a mortgage, you will not be affected by this tiny tax.
The Robin Hood Tax consists of a levy on:
financial assets such as stocks, bonds and foreign exchange, traded both physically and as derivatives (options, forwards, futures and swaps).
Hence, any money you change (whether for a holiday or for remittances) and any investments that your pension fund makes will, very obviously, be taxed under it. The tax will, definitely have a negative impact on ‘good’, non-casino-y transactions like people buying shares in companies to generate income for their retirement, or companies converting euros from their export sales into pounds.
This doesn’t, in and of itself, make the Robin Hood Tax a bad idea. That negative impact could well be outweighed by the benefits of the revenue raised and of dampening the speculative excesses of the global financial system (I’m sceptical of the latter: we all know with each successive crisis the speculative excesses of the GFS turn out to be concentrated in areas that aren’t regulated or taxed or indeed understood. But that’s for another day).
But the tax’s proponents are simply lying that the negative consequences for the real economy simply don’t exist, rather than acknowledging them and saying that the benefits are larger. And that definitely triggers my Iraq filter.
- Sarcasm aside, seems fair skills-wise -> RT @davecoleDOTorg
Salary for Palace of Westminster lift attendant: £17277 Salary for MP: £64766 #
- Sitting on world's most excellent view-featuring balcony. Shortly off to remote island for camel rides. Later will fish for oysters. Oh yeah #
- Any occasion that involves A. Gilligan being roundly told to get lost is delightful. Hence, this is delightful: http://bit.ly/9kR61i #
- This I like: http://twitpic.com/18t8xh #
- Great and sad news – the Koala is moving on: http://goodaftermornings.blogspot.com/ #
- RT @bloggerheads: David Cameron's head on a stick http://bit.ly/9ihbJd now charting. Please 'favourite' or rate it now to kick it up further #
- Tasmania is beautiful. Like Wales, but with sunshine. Quick #ebz before bed, then another day of outdoors http://fallenlondon.com/c/35803 #
- RT @timoreilly the end of publishing as we know it. http://bit.ly/atqhR9 Watch to the end (via @bengoldacre) #
- Superb piece from @Heresy_Corner on His Holiness The Pope (spoiler: she's not a big fan) – http://bit.ly/aKOQt0 #
- This is ace. If you had any spare time, you now don't: http://www.bbc.co.uk/onlyconnect/quiz/ #
- What % of people opposing lack of MP scrutiny of copyright bill were also outraged by Tories forcing MP scrutiny of 3rd world debt bill…? #
- (I support anti-vulture plans and oppose copyright plans, but that shouldn't affect one's views on procedure…) #
- We found this chap's card in a café in Cygnet, TA – he's perhaps the most promising new author of a generation: http://bit.ly/c7R6WD #
- This is not my country, but The Editors are right: http://bit.ly/avd6ki – see also, Anyone Who Doesn't Think Keeping The Tories Out Matters #
- Actually, I'd go further than that. Anyone who publicly criticises Labour or the LDs over the next 3 months is pro-Tory, and can piss off #
- I'm not a Labour supporter, but we have an FPTP election pending, and in a Lab/Tory marginal anyone with a soul should vote Lab. #
- In other consituencies vote for meh, whoever, but anyone who's even slightly progressive/not evil should fucking do this shit #
- Task for next week: work out which crook is paying these crooks to publish this bullshit – http://bit.ly/azgot9 – reads rather like Spiked #
- Much as I love the Tube and hate the Tories, closing pointless ticket offices now that everyone has Oyster is actually Not All That Bad… #
- …alternative is cutting services, cutting refurbs, cutting new trains, raising fares, all of which are rather worse. #
- For any halfwits thinking of voting Tory because of Labour illiberalism – http://bit.ly/cXoGBv – send-14-year-olds-to-jail-for-shagging-w00t #
- #ebz Back from Tassie's wild west coast, into the worlds of Internet reception http://fallenlondon.com/c/37559 #
- is hung over. Yes, I know it's 7:20pm here. This doesn't make me happy either. #
- Linkous and now Chilton: Not a good month for depressive substance-fond jangly indie types. Hope someone's keeping an eye on Bobby Gillespie #
- I wonder how much "we won't hang your guys" affected the price RTZ paid…? http://news.bbc.co.uk/2/hi/business/8575737.stm #
- Paralympic Cricket Joke: "was that an LBW?" "Well, not technically, but it did hit the stumps…" #
- All iPhone apps are gay, so not sure what the issue is here -> RT @MayorWatch New article: Tourism bosses unveil Gay London iPhone app #
- RT @slideshowbrain
I'll follow @Patrick_Myles FF's because I trust his brain – Hello @PeterDixie @lilmamisayo @timabrahams @Dion_Star #
- Steve Hodder-Watt is an arse; whilst I love my new adopted country, its willingness to appease his kind is distressing: http://bit.ly/9DK7Xm #
- ("his kind" refers to litigious, humourless pro-censorship gits of any race, religion or creed, obviously) #
- This is good, from young Mr Hari – http://bit.ly/d1HH3D – also applies to my Enyclopedia Dramatica comment from earlier #
- This doctor deserves 10,000 medals for EXCELLENT SKILLS: http://bit.ly/9lCW11 #
- #ebz Back in civilisation, & my wireless modem works. Well, Hobart Airport, which is almost civilisation http://fallenlondon.com/c/38131 #
- Hurrah for juries: http://bit.ly/bQ1qg0 #
- Christing hell, in a normal banana republic, media sucks balls of the government, not the assholes trying to take over: http://bit.ly/bwBWBv #
- Venezuela = obvious exception – 1 of the things which makes anyone w/any decency feel some affection for maniac-in-charge #obviousparallels #
- I love reading @diamondgeezer, but I hate (not solely related to him) this kind of paranoid lunacy http://bit.ly/dBdUYQ #
- Yes, of course someone who gives a shit can steal your medical records. But unless you're actually Michael Jackson, nobody does. #
- I think this is supposed to be funny and on S Singh's side, but both are purely based on contextual clues not the text: http://bit.ly/9wCGQ4 #
- This isn't like my last Clarkson link – most of piece is nonsense – but final para 100% accurate: http://bit.ly/aG4tOF #campBAcabincrewrule #
- Safari really is the most annoying browser ever. So glad I've got Chrome for day-to-day and Firefox for anything else. Would rather use IE7 #
- If your name's Slaughter, probably best not get involved in the healthcare debate. The Slaughter Solution is a bit of a branding fail… #
- Why's the BBC running a non-story about petty vandalism on its international news front page? http://bit.ly/91A5ZA #
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…but I’m told this is the unofficial Aussie national anthem:
In line with the whole “theme song for your blog” meme, I’ve come up with two. One for excellence’s sake:
…and for old times’ sake:
- Halifax UK are the most annoying bank, out of all banks. "Try to transfer money to another UK account from abroad -> suspend account" – garr #
- Delighted that the best film I've seen in the cinema in about five years won at the Hoscars, much as that reflects my cinema-going #
- Coke Zero is following me. Yes, I like Coke Zero. Indeed, I drank it with lunch today. No, I'm not interested in Coke Zero's marketing feed. #
- (yeah, as if there's anyone following me who doesn't already follow @chickyog – BTW, if there is, do) #
- Eurostar's Facebook says "This year has seen the best snow on the alps for the last 10 years, why not take the ski train" *puts hand up* #
- Steve Bell genius, as always: http://bit.ly/9i9cOQ (via @BeauBodOr) #
- CROWDSOURCING: I'm considering flying to Singapore for cut-price laser eye surgery. Is this a really bad idea? #
- This is excellent; I love the PIA/Switzerland poster -> RT @Patrick_Myles Graphic design blog and vintage archive http://grainedit.com/ #
- #ebz A healthy, balanced day: beach, erudite debate, *and* buggering about on the Internet http://fallenlondon.com/c/32097 #
- As far as characters to lead the UK to recovery go, how about http://bit.ly/9vs1Hl ? #
- "It must be a middle class recession – the Job Centre have just launched an iPhone app." http://bit.ly/dCkFe7 (via @touchstoneblog) #
- Even if you *actually see someone carrying a bomb*, you're still a despicable bastard if you call this Stasi-line: http://bit.ly/bftxia #
- Up far too late, #ebz -ing myself to sleep http://fallenlondon.com/c/32774 #
- This crazy screed highlights why many women refuse to identify as feminists: not the philosophy, but the company http://bit.ly/cQwqox #
- The piece being attacked is badly written sub-hipster, but its basic message is Don't Treat Women Like Shit. Taking offence proves insanity #
- I'm not normally on big corporations' side in libel suits, but I hope Facebook CRUSHES THE DAILY MAIL'S LYING ARSE: http://bit.ly/ciw1Fz #
- RT @malbonster New post by me on the moral outrage/panic caused by Chatroulette http://bit.ly/cBZNKX (via @nathanmcdonald) #
- #ebz Christ, I'm hungover. No dinner always a mistake. http://fallenlondon.com/c/33482 #
- This is rubbish: http://bit.ly/9OWROZ – Griffin an odious cunt, but also a major political figure & interviewing him the right thing to do #
- This, on the other hand, is excellent: http://bit.ly/apuHSE #
- I was feeling a bit down (no reason, just late-night-meh); now I'm feeling thoroughly happy: http://www.b3ta.com/links/Boobies_Kittens #
- This is rather delightful: http://www.howdoeshomeopathywork.com/ #
- Advertising policy duly updated, to reflect the fact that @JamesonCultFilmClub is in no way responsible for spamming DG. #
- Stupidest film review EVAH: http://bit.ly/cUqZMJ – claims Hurt Locker a movie which ignores harm Iraq war has unleashed on civilians… #
- Halfwit New York legislator plans to ban the sale of *all food*: http://bit.ly/diNinH #
- I wonder if Mr E really believes the press should face no sanctions at all for lying – http://bit.ly/bQZMnV – or just lying about H Chavez? #
- The only thing that annoys me more than libel law is its idiot defenders. "What if someone called you a paedo" – well, I'd ignore them, duh #
- #ebz The manager of the Hotel offers free rooms to guests of particular note or interest. He irritably… http://fallenlondon.com/c/34008 #
- Not very impressed by @leftfootfwd's report attacking LD plans to raise tax allowance – see my comment at http://bit.ly/bCo4V4 #
- Weird fact: Zimbabwe and Nigeria both have higher Internet penetration than South Africa: http://news.bbc.co.uk/2/hi/technology/8552410.stm #
- Distasteful sure, but harm done? Really? http://news.bbc.co.uk/2/hi/uk_news/wales/8564954.stm #
- Quality, from M Tucker: http://bit.ly/brdNDN #
- #2022 #FindPeopleInMyPostcode (was #N19 until January…) #
- #oddquestions I wonder if you can't hashtag a number or whether you can't hashtag at the beginning of a tweet #2022 #
- I no longer wonder. #
- I hate RTing @iaindale, but this is fair -> Will @denismacshane and leftist bloggers now boycott the Guardian too? http://bit.ly/aXSDYt #
- I guess "only ppl who're cleverer than Nick Griffin shld be allowed to interview Nick Griffin" is a coherent principle that could save us… #
- Semi-literate hipster tool from the other day shows up and makes reasonable points; DMHFHF miss them: http://tinyurl.com/ #
- (when creepy right-wing old men refer to men as "men" and women as "girls", it's bad; Foster v clearly someone who'd refer to men as "boys") #
- Terry & Julie utterly screwed. Well, unless they have watches and/or mobiles: http://tweetphoto.com/14237447 (via @tellingtales) #
- I ought to make clear, I strongly believe Iain Dale's a nasty piece of work. But also that Griffin is legit figure to interview for any mag #
- Good that Toyota US not based in Michigan: in CA there's *some* chance they'll escape crucified for trumped-up charges http://bit.ly/csxQ3T #
- "If Labour won again, bond yields are likely to rise quite quickly by about 0.5% to 1%" http://is.gd/atPag #insaneTorybeliefs #
- Bedtime. Person of the day: Charles Todd – without him, you (non-Aus people) wouldn't be reading this rubbish: http://bit.ly/9SHNYn #
- Time for 1 link: nasty combo of upper-caste Indian puritanism & bien-pensant BBC puritanism, vs India's funnest state: http://bit.ly/baTWJi #
- Just in case you'd forgotten the Tories are a nasty bunch of bastards: http://bit.ly/dA9SCg #
- #ebz or shopping? Hmm, tough one… http://fallenlondon.com/c/34546 #
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