BA calls on buyers to save £300m and cut supplies

27 March 2003
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27 March 2003 | Robin Parker

British Airways purchasers have been asked to deliver two-thirds of a £450 million savings target over two years as the airline navigates a worsening travel market and rising fuel costs.

The procurement team, which has been cut by a third to 200 in the past 18 months, is also to more than halve its UK supplier base to 2,000.

BA suspended all flights to and from Kuwait and Israel ahead of last week's declaration of war against Iraq.

Several Asia-Pacific airlines are reported to have announced service cutbacks in response to the conflict, and Australian-based Qantas is forcing 1,000 staff to take temporary leave.

BA said revenues over the next 12 months would be flat, with higher fuel costs set to cost a predicted £100 million extra.

Its 2005 procurement target represents 10 per cent of its purchasing spend.

The airline has reached a target of saving £55 million in the first two-year stage of a wide-ranging effort to improve procurement, in which it has also slashed its supply base from 14,000 to 5,000.

A review in 2001 identified four categories of supplier: strategic, collaborative, opportunistic and transactional. Having met its targets for the top three, BA will remove 3,000 from the lowest category by 2005.

Jonathon Counsell, head of procurement strategy and performance, said key suppliers were, in effect, taking over much of the supplier management further down the supply chain.

"We have a long-term interest in each other's operations, as some suppliers will be the source of ideas that will help us in the future," he said.

"In the current climate, the more we can understand about their cost base, and the more they can help us to manage a large supply base, the better."

SMmar2003

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