15.11.07 - Amadeus IT Group AG - 2 years experience with financial investors

(Nov 2007)

The Madrid-based Amadeus IT Group AG is a global group with some 5000 employees which runs the computer reservation system of the same name for the travel industry.

Founded in 1987 by Air France, Iberia, Lufthansa and SAS as a Global Distribution System for the aviation industry, the Amadeus IT Group AG operates central units in Madrid (group HQ), as well as in Nice (development) and Erding (computer centre). Sales and relations with travel agencies and tour operators are the responsibility of the decentralised Amadeus Commercial Organisations (ACOs) in the individual countries. As well as acting as an ACO, Amadeus Germany in Bad Homburg also handles global tasks, in particular in product development.

In 2005, 52.16% of Amadeus was taken over by the private equity (PE) Fund BC Partners and Cinven. Since then, Air France, Iberia and Lufthansa now hold 45.76%, top managers 2.08% of the shares. At a purchase price of 4.3 billion €, the takeover was the fourth-biggest PE transaction in Europe. The overall costs of the transaction (4.7 billion €) were financed 80% (3.8 billion €) by borrowing by Amadeus. In April 2007, the company’s debt burden was increased in the context of a restructuring operation by a further 0.8 billion €.

The owners' profit expectations can be seen from a bonus programme which was set up in 2006 for the Amadeus employees. All employees below middle management who signed up to the implementation conditions of the programme can receive a bonus. This is financed from the proceeds of the sale, insofar as two threshold values are exceeded. One of these is the original capital invested at an internal interest rate of 25% at the time of the sale, the other double the capital invested. The part of the proceeds from the sale that is in excess of the higher threshold value should be paid out as a bonus up to a limit of 55 million €. In the meantime it is anticipated that the financial investors will want to withdraw again at the end of 2008.

For the years 2006 to 2008, the group management imposed ambitious cost-reduction objectives upon the Amadeus company. By 2006 he consequences for the staff for the French marketing organisation in Paris were already so huge that there was a strike, but it failed to stop staff being shed.

One German subsidiary is Amadeus Germany GmbH, Bad Homburg, with some 500 staff, formerly Start Amadeus GmbH. Cost reductions through the outsourcing of the help-desk and internal sales service and the shedding of further jobs were announced directly after the takeover of the business by the financial investors. These announcements led to uncertainty among the staff, but also to an increased willingness to make a commitment to workers’ interests. The works council election in 2006 brought all-time high levels of active and passive involvement in the voting, and an open letter to the group management and shareholders initiated by the workers’ representation at Amadeus Germany, in which the blind concentration on driving down costs was criticised and job retention was demanded, was signed by many employees. However, another sign of the uncertainty was also increased staff turnover, which was further promoted by the company management by offers of severance packages. Because the volume of work was not dropping to the same extent, the workload in many areas increased, and satisfaction decreased. There was a marked rise in sickness levels. Staff cuts at Amadeus Germany were provisionally halted in 2007. However, natural staff turnover has been used to reduce staff numbers in some areas and compensate by increasing them in other areas via switches, often with only limited-term contracts.

To combat the planned outsourcing of the help-desk and internal sales service, the works council, with outside support and those concerned, organised a working group which developed a counter-proposal to the outsourcing. The employer put up no obstacles, and even embraced the makings of an in-house solution, but it did reject the majority of the proposals by the working group with regard to changes to the organisation of labour, demanding instead some serious encroachments in terms of working times and remuneration in order to achieve the lower costs. In return, a three-year moratorium on outsourcing was offered. The 'offer' and the list of demands by the employer enraged the employees in the help-desk and internal sales service. They nevertheless entrusted the works council with the task of negotiating with the employer on a solution without outsourcing. The works council was supported by ver.di jointly with external experts.

The works council was under huge pressure during the negotiations: from the employer’s side, it was being blackmailed to give up basic positions with the threat of outsourcing at any time; not only would outsourcing bring colleagues even worse working and contractual conditions, but it would subsequently also cost many of them their jobs. The more critical the negotiations got, the greater the pressure put on the works council not to fail by those concerned. Even if some of the employer’s demands could be fended off or at least watered down, the outcome of the negotiations was painful losses and changes for the colleagues, which should become effective and perceptible either immediately or not for another year:

• 40-hour-week for the same basic pay (previously 38.5),

• halving of the variable annual appraisal-related premium; this is equivalent to the loss of approximately 6% of annual pay,

• no pay rises for three years,

• more rigid and less flexible working times,

• more control by EDP-driven performance assessment,

• lower starting pay for new recruits.

Colleagues in the section concerned are describing themselves as second-class employees. Many of them see the three-year no-outsourcing guarantee as a stay of execution which can be used to look for another job. Within one year, in the meantime, one quarter of employees have left the section or the company.

Meanwhile, staff reductions at Amadeus Germany go on. In 2007 the staff complement fell, through the use of natural staff turnover without advertising measures by the employer, by 6% from 496.7 FTE to 460 FTE. According to the employer, no further reductions are planned for 2008, although it must be assumed that vacant positions of at least the 2007 magnitude will not be refilled.

The European Works Council has not got particularly committed in the conflicts, and it must be perceived as a weakness that because of the low level of trade union organisation in the company as a whole, little in the way of solidarity across locations and borders has been in evidence. Collaboration in the EWC has, however, led to good informal contacts with a mutual exchange of information between ver.di works council members at Amadeus Germany and CGT colleagues in Nice.