Loss-making BA slashes IT supplier spend by £24 million

British Airways has dramatically cut £24 million from its annual expenditure on IT suppliers, as it plunged to a record financial loss.

The airline, which today reported first half losses of £292 million, also announced 3,000 job cuts focused around ground staff and cabin crew - though an undisclosed smaller number are non-UK employees, and could involve back office staff.

Technology costswere cut far more than in any other supplier area at BA. Supplier cuts across the business totalled £79 million, and included £12 million in ground operations and £9 million in fuel.

BA could not immediately comment on exactly where it made the IT cost cuts. But it said the half-year costs of technology, accommodation and ground equipment had been cut by 10 percent year-on-year, to £271 million. Group wide total operational costs were reduced by £400 million from the same period a year earlier.

The company also said it would cut 3,000 of its 39,000 staff across the business, by March next year. The job losses will affect all areas of the business, but mainly focus on 1,700 cabin crew cuts. The remaining 1,300 employees affected will primarily be ground staff and non-UK employees.

BA did not disclose how extensively back office staff, including IT, will be affected. A spokesperson said the staffing cuts were expected to be met through redundancies, natural wastage and some staff moving into part time roles.

The airline said to investors in a statement today that the structural changes were “necessary to secure long term profitability”. Chief executive Willie Walsh told the Today programme on BBC Radio 4: “All airlines are facing the same pressure. Operational changes at British Airways are absolutely necessary to improve the performance of the business.”

It was “imperative” that BA continued to cut its costs, Walsh said. He added that the company was making "permanent changes to the way we run our business”.

BA is standardising its IT development on Lean and Agile methodologies, in an attempt to aid with this and to speed change.

Copyright © 2009 IDG Communications, Inc.

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