British Airways plans to cup up to 12,000 jobs due to the drop in air travel

IAG, the parent of British Airways, reported its first quarter results:

International Airlines Group (IAG) has announced its preliminary results for the first quarter of 2020 and continues to assess further cost reduction and cash flow initiatives across the entire Group. British Airways is to consult over redundancy and restructuring proposals with its trade unions.

First quarter results

Total revenue declined by 13 percent to €4.6 billion compared to €5.3 billion in the prior year period. Operating result before exceptional items was a loss of €535 million compared to a profit of €135 million last year. In addition, IAG’s pre-tax profit was impacted by an exceptional charge of €1.3 billion resulting from the ineffectiveness of its fuel and foreign currency hedges for the rest of 2020 due to over-hedging. This exceptional charge is measured as at the quarter end date. Detailed results for the first quarter will be released as planned on 7 May, accompanied by a presentation and conference call for analysts and investors.

The operating result in the first two months of 2020 was similar to that of last year, despite the suspension of flights to China due to COVID-19 from the end of January. All of the reduction in the operating result in the quarter compared to last year came in March. The majority of the reduction in IAG’s operating result was incurred by British Airways, followed by Iberia and Aer Lingus, while Vueling experienced a modest increase in operating loss.

Capacity

Passenger capacity, expressed in terms of available seat kilometres, declined by 10.5 percent in the quarter. Passenger traffic in terms of revenue passenger kilometres declined by 15.2 percent in the quarter. Seat load factor for the quarter declined by 4.3 points to 76.4 per cent.

IAG has reduced passenger capacity in April and May by 94 percent compared to last year, only operating flights for essential travel and repatriation. Between March 22 and April 26 IAG Cargo undertook around 350 additional cargo only return flights, primarily on long-haul routes with passenger wide body aircraft. Passenger capacity from June will depend on the timing of the easing of lockdowns and travel restrictions by governments around the world.

British Airways redundancy consultation

In light of the impact of COVID-19 on current operations and the expectation that the recovery of passenger demand to 2019 levels will take several years, British Airways is formally notifying its trade unions about a proposed restructuring and redundancy program. The proposals remain subject to consultation but it is likely that they will affect most of British Airways’ employees and may result in the redundancy of up to 12,000 of them.

As previously announced, British Airways has availed itself of the UK’s COVID-19 Job Retention Scheme and furloughed 22,626 employees in April.

Outlook

As announced on 28 February 2020, given the uncertainty on the impact and duration of COVID-19, IAG is not currently providing profit guidance for 2020. However, the Group expects its operating loss in the second quarter to be significantly worse than in the first quarter, given the substantial decline in passenger capacity and traffic and despite some relief on employee costs from government job retention and wage support schemes.

Total cash and undrawn general and committed aircraft finance facilities amounted to €9.5 billion at the end of March, including €6.95 billion of cash, cash equivalents and interest-bearing deposits.

Recovery to the level of passenger demand in 2019 is expected to take several years, necessitating Group-wide restructuring measures.

British Airways also made this announcement:

Letter to colleagues from Alex Cruz, Chairman and CEO at British Airways

On April 27, British Airways flew just a handful of aircraft out of Heathrow. On a normal day we would fly more than 300. What we are facing as an airline, like so many other businesses up and down the country, is that there is no ‘normal’ any longer.

The global aviation body, IATA, has said that the industry has never seen a downturn this deep before, and that full year industry passenger revenues could plummet 55% compared to 2019, while traffic falls 48%.  Many airlines have grounded all of their planes. Sadly, we will see some airlines go out of business with the resulting job losses.

Our very limited flying schedule means that revenues are not coming into our business. We are taking every possible action to conserve cash, which will help us to weather the storm in the short-term. We are working closely with partners and suppliers to discuss repayment terms; we are re-negotiating contracts where possible; and we are considering all the options for our current and future aircraft fleet. All of these actions alone are not enough.

In the last few weeks, the outlook for the aviation industry has worsened further and we must take action now. We are a strong, well-managed business that has faced into, and overcome, many crises in our hundred-year history. We must overcome this crisis ourselves, too.

There  is no Government bailout standing by for BA and we cannot expect the taxpayer to offset salaries indefinitely. Any money we borrow now will only be short-term and will not address the longer-term challenges we will face.

We do not know when countries will reopen their borders or when the lockdowns will lift, and so we have to reimagine and reshape our airline and create a new future for our people, our customers and the destinations we serve. We have informed the Government and the Trade Unions of our proposals to consult over a number of changes, including possible reductions in headcount. We will begin a period of consultation, during which we will work with the Trade Unions to protect as many jobs as possible. Your views matter and we will listen to all practical proposals.

The scale of this challenge requires substantial change so we are in a competitive and resilient position, not just to address the immediate Covid-19 pandemic, but also to withstand any longer-term reductions in customer demand, economic shocks or other events that could affect us. However challenging this is, the longer we delay difficult decisions, the fewer options will be open to us.

I want to pay tribute to the thousands of British Airways colleagues who are playing a vital role in the global response to the Covid-19 crisis. Whether you are supporting our repatriation flights or the transport of essential cargo; or one of the hundreds of colleagues volunteering with organisations such as the NHS, you have my sincere respect and thanks.

This has been a difficult message to write and one I never thought I would need to send. I know how tight-knit the BA family is, and how concerned you will be, not just for yourself but for your colleagues, too. We must act decisively now to ensure that British Airways has a strong future and continues connecting Britain with the world, and the world with Britain.

Thank you.

Alex

BALPA had this reaction:

BALPA General Secretary, Brian Strutton said:

“BA pilots and all staff are devastated by the announcement of up to 12,000 possible job losses in British Airways.

“This has come as a bolt out of the blue from an airline that said it was wealthy enough to weather the COVID storm and declined any Government support.

“BALPA does not accept that a case has been made for these job losses and we will be fighting to save every single one.”
More from the BBC.

British Airways aircraft photo gallery (Airbus):