International Consolidated Airlines’ (GB:IAG) unit, British Airways, and its workers have mutually agreed on a deal which removes the hanging sword of strikes from the airline’s head. The workers have accepted the pay hike and other benefits, which comprise a combined 13% salary increase this year.
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The deal has averted the planned strike on the Heathrow airport. This move came as a relief for the passengers who are currently facing chaos at Heathrow airport.
Recently, due to a lack of staff and increased cancellations, Heathrow airport advised airlines, including BA, to cut down on their summer flights.
Other airlines, such as Wizz Air (GB:WIZZ) and EasyJet (GB:EZJ) are trying to negotiate similarly with their staff to avoid further cancellations of their flights.
No wonder the airline industry stocks are touching ground. The stocks have not rebounded since the pandemic hit the airline industry hard. IAG’s stock is down by 27% since the beginning of this year. Among BA’s competitors, Wizz is down by almost 60% and EasyJet is down by 37% YTD.
The new deal
In a summer full of fights cancellations and airport chaos, BA really wanted to restore its customer confidence. After multiple rounds of talks, the airline and union agreed on this much-improved offer. The new deal includes an 8% pay rise and a temporary bonus. The workers will also get extra pay for irregular shifts. The new offer was very well supported by almost 75% of the workers. The deal was led by the Unite and GMB unions on behalf of the workers.
Prior to this deal, the workers had been unhappy as their 10% pay cut during the pandemic was not reinstated.
Nadine Houghton, GMB national officer, said, “No one wanted a summer strike at Heathrow, but our members had to fight for what was right.”
Sharon Graham, Unite general secretary, said, “We welcome that BA has finally listened to the voice of its check-in staff. Unite has repeatedly warned that pay disputes at BA were inevitable unless the company took our members’ legitimate grievances seriously.”
BA has cancelled around 30,000 flights during the period of April and October this year. With this agreement, the analyst and shareholders are hoping that the airline will be in a better position to address the surging demand.
View from the city
According to TipRanks’ analyst rating consensus, International Consolidated Airlines’ stock is a Moderate Buy. This is based on ratings from 11 analysts, out of which five are Buy and six are Hold ratings.
The average price target is 152p, which implies upside potential of 31.5%. The analyst price target has a high and low forecast of 200p and 106.4p, respectively.
Conclusion
BA continues to face headwinds, with thousands of flight cancellations.
Issues such as rising jet fuel prices, staff shortages, and the cost-of-living crisis will continue for some time and impact the company’s recovery.
However, passenger demand is getting back to pre-pandemic levels, which will boost revenues for BA. The airline has made a step in the right direction to bring its operations back on track.
