Neil Darwin and Ed Goodman on wage cuts at Monarch Airlines

cutting_back09:22 Thursday 25th September 2014
BBC Radio Cambridgeshire

PAUL STAINTON: Would you take a pay cut if it meant keeping your job? Well staff at Monarch Airlines have agreed to that. They’re going to take a 30% slice off their pay packet to secure the future of the airline. Well earlier this week the struggling company said it was in talks to secure future funding. It’s Chief Executive warned though there are further hurdles to overcome. Employees voted overwhelmingly in favour of the pay cut. Let’s talk to Ed Goodman. He runs the Cambridge Business Lounge, a business he recently started. And he also mentors startup companies. Ed morning.
ED GOODMAN: Good morning Paul.
PAUL STAINTON: Are there any companies out there you know of that have done similar things?
ED GOODMAN: No there aren’t. I think it’s a very brave decision for the employees to undertake, although in the wake of Monarch announcing 1,000 job cuts only a month ago, I think that probably explains why it was an overwhelming majority that said yes to this. I myself took a pay cut when I moved from one job to another job a few years ago. But the decision was made primarily on two factors, firstly for me that actually the work was one that was going to be more enjoyable, more fulfilling, but most importantly I wouldn’t have done that if I couldn’t have afforded to have done that at the same time.
PAUL STAINTON: Right. OK. So you’ve been in a sort of similar position. Neil Darwin is with us as well. He’s the Director for Enterprise and Skills at the Greater Cambridge Greater Peterborough Enterprise Partnership. You need to get an acronym for that. Morning Neil.
NEIL DARWIN: Morning Paul.
PAUL STAINTON: Have you ever heard of this? Any local companies that you know of that have gone this far? We’ve heard of companies changing terms and conditions, haven’t we, to keep people in jobs.
NEIL DARWIN: Absolutely. Locally no, but I’ve shouted out across the office this morning, and someone said that their brother-in-law’s done it in Ireland. So it does happen.
PAUL STAINTON: Obviously keeping jobs at all costs is the way to go. People need to be in work. But 30%, that’s a large sum, isn’t it, out of your pay packet.

NEIL DARWIN: Without question. Picking up Ed’s point, I think the staff there are in an interesting position. I have a view personally about the state of companies, even if they are doing 30% cuts, which is, what is the long term prognosis, can they actually solve this. So in that sense they’re sticking together. The context for me there is it’s very interesting in the relatively post-union based world we work in, they’re all prepared to stick together.
PAUL STAINTON: So it’s like a union without a union, effectively.
NEIL DARWIN: That’s how I see it. Yes. Very much so.
PAUL STAINTON: It’s kind of nice, isn’t it, working to achieve a common goal, whatever the hardship. But only if you get the money back when the company’s doing well.
NEIL DARWIN: Well that’s always the risk, isn’t it? It’s always the risk. The other thing I’ve picked up reading the paperwork is it suggests it’s only the pilots and the engineers. So whether they’ve picked on certain professions within the airline that can cope with a 30% cut I don’t know. But we will find out in coming days.
PAUL STAINTON: Yes. The particularly well paid. Ed, I thought things were picking up Ed. We listen to David Cameron and everything’s rosy out there.
ED GOODMAN: Well I think that entirely depends on region and industry and experience and a number of factors. And I actually genuinely believe it is picking up, and business is vibrant, none more so than in our region. I think what Monarch had to realise is they were in negotiation with Greybull Capital to invest in the business, to reinvent them as a low-cost airline. And I don’t think they would have achieved that on the current pay structures that they had. So they have the choice of they either force this investment to go through, and that meant cutting back on salaries, or they don’t and the business potentially goes under. As Neil rightly said, the prognosis I think on its own is probably not that bright. So this cut probably means that the business can now be invested, that it can reinvent itself, and its long-term future is more secure. And I suspect that those who even voted yes to the pay cut can’t really afford it. They probably thought it’s better taking 70% of what I have than nothing. But it wouldn’t surprise me if they’re still looking for work elsewhere.
PAUL STAINTON: Yes. And Neil, when we look locally at the businesses around Cambridgeshire, Do we see wages rising yet, or do we still see them stagnant?
NEIL DARWIN: No. Again, Ed’s analysis is right. certain sectors are performing well. Certain sectors have performed extremely well throughout the recession anyway. So it is really geographic sector-basis. We will see further shocks, and quite simply the airline industry is one which will continue to show shocks throughout the next few years.
PAUL STAINTON: Yes. If a company came to you Neil and said look, we’re going to have to make loads and loads of people redundant, we might have to close down, move out of Peterborough, move out of Huntingdon, wherever, would you suggest this as a way forward?
NEIL DARWIN: I think it’s something that’s going to appear increasingly often in the future. I think it’s an option. One thing we don’t know about the question that was asked about Monarch staff was, are you prepared to take a 30% cut or be sacked. So when it’s as stark as that, I think the answer is always going to be yes anyway.
PAUL STAINTON: Yes. And somebody earlier Ed said that Germany did this years ago, and that’s why they’re in a decent state still.
ED GOODMAN: As Neil says, and I think we will see this more and more. It would be interesting to know the part that the union played in securing this deal for the workers. But I think we’re all in agreement that we would prefer to see people in work than not. In the light of stories such as Phones 4U and other redundancies, and other airlines are suffering as well, it’s actually a refreshing story to hear. So I think we will see this more and more, and obviously people therefore need to make the informed choice as to whether they can afford to take that cut or need to look elsewhere. But as we all know, it’s just not that easy to find that work elsewhere at this time.
PAUL STAINTON: No. Ed Goodman from the Cambridge Business Lounge, Neil Darwin, Director for Enterprise and Skills at the Greater Cambridge Greater Peterborough Enterprise Partnership, marvelling at the collective nature, the coming together of the staff on Monarch Airlines, to take that pay cut.