BA's crisis creates a tempting option for UAE airlines

Ah, the unmistakable signs of high summer in Britain, and British Airways staff vote to go on strike.

Ah, the unmistakable signs of high summer in Britain. Strawberries and cream on the lawns of Wimbledon, redtop newspapers screaming variations on that old favourite, "Phew - what a scorcher", and British Airways staff vote to go on strike. It has been like this for almost as long as I can remember. Just as the Great British Public pulls the final zip on the luggage of its summer holiday packing and applies the initial layer of sun cream, the UK's national airline - though many dispute it has any right to that title any more - decides it is time to put a stop to all that fun.

You thought you were heading for two weeks of sun, sea and sand in Spain, did you? Well, how about four days camping out with BA-branded sleeping bags in Terminal Five instead? Appealing prospect isn't it? Observers from the Gulf must be amused but perplexed by this annual ritual. The airline industry here has its faults - overexpansion, overcapacity and overstretched finances being the main ones that spring to mind - but the aviation equivalent of lemming suicide is not one of them.

It is a curse that seems to apply almost uniquely to British Airways. Once the "world's favourite airline" in the 1990s, when it could credibly argue it handled more passengers through Heathrow than any competitor, it has now become an accident-prone shadow of its former self. Sir Rod Eddington, the Australian who presided over many of disasters that struck BA, once said: "I had lots of luck in my time at BA - all of it bad," and that losing streak seems to have stuck to his successor, the chirpy Willie Walsh.

Whether it is due to circumstances beyond the airline's control (industrial action by outsourced catering companies) or masochistically self-imposed (the chaotic and ill-planned opening of a new passenger terminal), BA always seems to hit the richest vein of misfortune possible. This time, trouble has been brewing for a while. BA has been as badly hit by the global recession as the rest of the industry but, even after all that cost cutting and modernisation under the Walsh regime, still appears to have been more badly prepared than virtually any other. The £401 million (Dh 2.39 billion) pre-tax loss in May was the worst in its history.

Then came Mr Walsh's headline grabbing initiative to give up a month of his salary, which appeared to be an admirable example to set the rest of his staff. But then it dawned on them all that Mr Walsh's monthly pay packet was in most cases greater than their annual income, and the move served only to highlight the injustices of the BA pay structure. Now, the airline's unions are in open revolt. Having declined management's offer of a month without pay, they are hitting back with threats of industrial action at the height of the peak summer season. They are worried, too, that radical plans to reshape the airline's workforce to meet the recession threat will lead to big job and salary cuts.

BA's rivals in the UK, mainly Ryanair and Virgin, are openly deriding the BA management and calling for the company to be declared bankrupt and broken up between them. BA's plight has become a microcosm for the fate of the British economy under Gordon Brown: barely surviving, up to its neck in debt, with a business model completely unsuited to the challenges of the post-recession world. The airline's problems can be sourced to all sorts of factors: high fuel charges, too many routes, a sharp decline of premium business-class travellers. But at the root of it all is BA's legacy as a former state-owned company. When it was privatised in the first great wave of government sell-offs in the 1980s, BA inherited a workforce and management ethos that was akin to that of a large government department. Executive inertia mixed with union recalcitrance to produce a structure that was, like the bumblebee, theoretically incapable of flight. With hindsight, that BA ever made it to the "world's favourite airline" slot was a great achievement against all the odds.

Like the rest of the UK, it has also inherited a pension liability that is unsustainable in the harsh realities of the post-crisis world. It is, as one observer recently announced, a "pension fund with wings". Something has to give, and soon. There was a spate of market speculation a couple of years ago that BA might seek a merger or close joint-venture agreement with Emirates Airline. That was firmly denied by both sides at the time. But the situation has changed drastically.

If Emirates, or even its neighbour Etihad Airways, could find a way to make the numbers work, especially with regard to that huge pension liability, they might find BA management, and the British government in the shape of the business secretary, Lord Mandelson, much more amenable to a serious offer. There could be no better opportunity for UAE's airlines to take a quantum leap in the global aviation business. [e-mail]