British Airways has proposed a shake-up of employee pay and conditions in a move that could lead to substantial cuts in remuneration and holidays for its 13,500 cabin crew.

The proposals are believed to be at the forefront of a cost-cutting drive under which BA wants to reduce its in-flight budget of £567.9 million by £82 million. Cabin crew are regarded internally at BA as having the best compensation package.

The airline, which says that it needs to save money because of the downturn in the aviation sector, has issued staff with 32 money-saving proposals. These include cutting annual leave from 36 days to 34, a two-year pay freeze and a reduction in bonuses for working on long-haul routes.

More than 1,500 cabin crew met on Monday to discuss the proposals and unanimously rejected permanent changes to their terms and conditions. It is understood that they told BA they were willing to discuss “temporary solutions to a temporary downturn” and said that any attempt to make these permanent could lead to strike action.

BA has also proposed that new employees should have different terms and conditions with almost none of the benefits enjoyed by present cabin crew. Under these proposals, more than 2,000 crew could be taken on in the next two years, possibly employed by a separate entity modelled on low-cost carriers such as Ryanair.

The airline is in discussions with all 45,000 employees about pay and conditions in an attempt to reduce its overheads. BA has predicted that it will slump to a £150 million operating loss this year after a £900 million profit last year. The airline is struggling with falling demand from passengers and higher costs due to exchange rates.

Cabin crew have traditionally been the most militant part of BA's workforce and there are fears that a showdown between management and staff could lead to industrial action.

BA and Unite, the union that represents cabin crew, were at pains to play down any possible conflict with both sides saying that discussions were continuing. The airline said that the 32 proposals were ideas for discussion with staff and no decisions had been made about their implementation.

But analysts believe that this is the showdown that Willie Walsh, the chief executive, has been spoiling for and that BA wants to use the economic crisis as a once-in-a-lifetime opportunity to restructure its employee contracts.

BA said on Monday: “Like all airlines, we have been hit by a worsening economic crisis and to respond to this we need to improve productivity and performance across the airline. Rather than present any firm proposals we have put together a list of ideas and opportunities on how we could reduce cabin crew costs.”

Flight path

Proposed changes for new employees include:

— Fewer pay grades and promotion based on merit not seniority

— Pay at a fixed hourly rate with increases based on merit not seniority

— No extra payments for long-haul trips or making back-to-back long-haul flights

Proposed changes for existing employees include:

— Cutting the layover in foreign cities. The layover in Los Angeles, for example, would be reduced from two nights to one

— Reduce crew numbers on 777 aircraft by one

— All additional payments for flying to certain destinations such as Madras, Beijing and Calcutta could be removed

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