Unfortunately we’ve gotten to the point where just about any bad news in the airline industry doesn’t come as a surprise. The latest bad news is that it appears a lot of British Airways employees will be without jobs soon…
In this post:
IAG’s reports first quarter loss
IAG, the parent company of British Airways, Iberia, Aer Lingus, and Vueling, has today revealed some preliminary first quarter results:
- Before exceptional items, the airline group lost €535 million, compared to a €135 million profit for the same period last year
- Total revenue declined by 13%, to €4.6 billion
- IAG faced an exceptional charge of €1.3 billion resulting from unfavorable fuel and foreign currency hedges
- Passenger capacity, measured by available seat kilometers, declined by 10.5%
- Passenger revenue declined by 15.2%
- Seat load factor declined by 4.3%, to 76.4%
- IAG has reduced capacity in April and May by 94%
IAG announced significant losses for the first quarter
British Airways will make up to 12,000 employees redundant
Based on British Airways’ expectation that a passenger demand recovery will take several years, British Airways is formally notifying trade unions about a proposed restructuring and redundancy program.
Proposals remain subject to consultation, but it is likely that we’ll see up to 12,000 British Airways employees become redundant. For context, British Airways employs about 45,000 people.
This follows British Airways using the UK’s COVID-19 Job Retention Scheme, which has seen them furlough nearly 23,000 employees in early.
British Airways will lay off up to 12,000 employees
British Airways’ letter to employees
British Airways CEO Alex Cruz has written a letter to employees with the subject “Preparing For A Different Future,” and in it he outlines what we should expect at the airline in the future. I think the letter is worth sharing in its entirety:
Yesterday, 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.
British Airways expects it will take years for demand to recover
Bottom line
It’s so sad to see that 12,000 people will likely be losing their jobs at British Airways. Over the past several weeks it has become apparent that most downsizing at airlines will become permanent, as the industry expects it will take years for demand to recover.
I’ll be curious to see how British Airways goes about layoffs, especially with the controversy surrounding their “mixed fleet” crews.
My thoughts are with those at BA — and in the industry in general — during these tough times.
BA apparently now considering not restarting services from LGW after lockdown restrictions are lifted.
@Kerry
I do worry, now that Lufthansa and AF-KLM have both been bailed out to the tune of €10 billion, that there will not be a level playing field for IAG to compete on when the market returns though…
Michel Barnier and his "level playing field" negotiations with the UK on EU relations, please note.
@The nice Paul
"Individuals are meant to manage their finances prudently and to save for a rainy day."
I believe the UK has similar things as the US.
In the US, we have food stamps, unemployment benefits, shelter, and food banks. Sometimes we get an extra bonus $1200 for a new TV or iPhone when outside rains heavy.
So there you go.
Either you understand private enterprise or you don’t. Sadly, the ideal private enterprise IS privatized profits and socialized losses.
@ The Nice Paul - thanks for your spot on remarks as always!
@Andy
"Two wrongs don't make a right".
I am staggered by the enthusiasm with which people are clamouring for tax-payer money to go to vast corporations.
Individuals are meant to manage their finances prudently and to save for a rainy day. Why should corporations be any different?
If we constantly bail out failed corporations, there is no incentive for any of them to operate prudently.
The UK is at the heart of one of...
@Andy
"Two wrongs don't make a right".
I am staggered by the enthusiasm with which people are clamouring for tax-payer money to go to vast corporations.
Individuals are meant to manage their finances prudently and to save for a rainy day. Why should corporations be any different?
If we constantly bail out failed corporations, there is no incentive for any of them to operate prudently.
The UK is at the heart of one of the world's most lucrative aviation markets (BA's stranglehold over LHR slots is what generates their huge profits). The fact that airlines in normal times are willing to bid *tens of millions* for just a single slot-pair at LHR tells you how much money can be made in that market.
So why on earth do we think that competitors and new entrants won't be hammering on the doors of LHR, if BA is allowed to fail (assuming it does: IAG is sitting on one of the biggest cash piles of any major airline, anywhere in the world -- cash assets dwarfing the much-bigger US3)?
And how do we know that those new entrants might not be innovative, and customer-focussed? I would rather *every* BA route was replaced by a Qatar plane with Qsuites.
And it's not as if competition would necessarily be very damaged. Pretty much every BA longhaul and European route has at least one competitor, even if some of those competitors are pretty crappy (hello, Aerolineas Argentinas!).
Either you believe in private enterprise or you don't. But the current calls for bail-outs would give us the worst of all worlds -- privatised profits and socialised losses.
Dear Tim,
Glad to read that you too are a Bill Maher fan with your "Panic porn" comment.
What else to say? When I read that up to 64,000 people in the US may have died from this last flu season, and all the attendant nonsense being spouted who knows how this all ends up? Some people are clearly making gonzo money out of all of this.
While I praise IAG/BA for not asking for government aid as quickly as some others, I think it has come to a point where it is necessary. Not least to provide equal opportunities with the two other big airline groups in Europe, which both receive billions ...
@grizzly panic porn has given all these Debbie Downers sore wrists due to masturbating over fear. I never realized how many nervous nellies there are until this Wuhan corona virus began.
Seconded what Kerry said. Dozens of airlines also got stung with 1B+ write downs when their fuel hedges went the wrong way in 2014/2015 when the price crashed. Oil going to zero is not something anyone considered possible.
Called to get $1,300 in fees related to award travel 10 days ago on a cancelled flight. Miles have been redeposited, but still awaiting the credit to my card. Pathetic
I don't know why the "ugh". This blog has been reinforcing the hysteria for weeks. What else do you expect? Even if it were safe to fly tomorrow, the average traveler has been bombarded with countless "sky is falling" messages about masks, sanitizing surfaces, dirty hotels. I hope a major outcome of this crisis is fewer entitled travel bloggers. Maybe get off the soap box and try an actual job?
Before the pandemic took place, it was clear that the jumbo sized planes retiring will vastly reduce the amount of economy seating. And if carriers such as Norwegian do not return, then nothing will keep the bigger airlines from inflating economy pricing. I kept saying we are leaving the golden age of travel for the masses, where it was affordable for the western world lower middle class family to travel intercontinental.
I am not...
Before the pandemic took place, it was clear that the jumbo sized planes retiring will vastly reduce the amount of economy seating. And if carriers such as Norwegian do not return, then nothing will keep the bigger airlines from inflating economy pricing. I kept saying we are leaving the golden age of travel for the masses, where it was affordable for the western world lower middle class family to travel intercontinental.
I am not sure these days will return, if only the legacy carriers survive, only a relatively small part of their seating is economy class on the new widebody jets. The capacity and competition won’t be there next year for affordable fares again.
@Geoff a £1.3 billion writedown on their fuel hedges is not that bad, given that they were likely hedged at the prices we saw headed into the start of the year and oil has collapsed by ~80pct since then. To put it in perspective Cathay, a smaller airline, lost 2-3x that amount the other year (in a ‘normal’ year) simply by betting the wrong way with their hedges.
Once again we see that, despite...
@Geoff a £1.3 billion writedown on their fuel hedges is not that bad, given that they were likely hedged at the prices we saw headed into the start of the year and oil has collapsed by ~80pct since then. To put it in perspective Cathay, a smaller airline, lost 2-3x that amount the other year (in a ‘normal’ year) simply by betting the wrong way with their hedges.
Once again we see that, despite all the complaints about them, from a business perspective BA/IAG are by far the best-run airline group in Europe. There is certainly opportunism here - what will likely survive of Virgin after a bailout/cash infusion will be a handful of leisure routes, and Norwegian will not likely survive at all in their current form, so BA can gain a near-monopoly simply by not being seen to ask for a bailout then why not? A bailout of any sort would likely entail a restructuring and job losses anyway.
I do worry, now that Lufthansa and AF-KLM have both been bailed out to the tune of €10 billion, that there will not be a level playing field for IAG to compete on when the market returns though...
Stuart you are probably correct. I would like it to be more piano bars and business men in suits but that would be Japan not 3rd world America. In the end it will probably be a LOT LESS flying as the fear mongers have won and most people will just stay home ( some pros and cons to that)
@Mayank. Keep dreaming. If we return to the 1980's (and I think you meant more 1970's) you can thus say goodbye to elite programs. You honestly think this will mean piano bars on the upper deck and only cigar smoking businessmen in the lounge?
It's not going to happen. What will happen are even cheaper fares, further downgrading of services, and elimination of Frequent flyer programs.
This crisis is not going to return us...
@Mayank. Keep dreaming. If we return to the 1980's (and I think you meant more 1970's) you can thus say goodbye to elite programs. You honestly think this will mean piano bars on the upper deck and only cigar smoking businessmen in the lounge?
It's not going to happen. What will happen are even cheaper fares, further downgrading of services, and elimination of Frequent flyer programs.
This crisis is not going to return us to the "old days." It's going to be about building a whole new future that involves mass movement and nothing in return but a ride. Just like 9/11 changed how we move in airports and the idea of what to expect, this will result in fewer airlines that in three years will be back to pre-Covid19 levels and using it as an excuse for an entire generation in saying that an airplane ride is from here to there and it's uncomfortable. Deal and be grateful you are able to do it and expect nothing in return. People will accept it, eventually, just like they did when having to practically strip naked at security lines and endure snaking lines for hours.
You don't go back. You go forward after times like these. And forward here is the end of flying as we have come to know.
I think what we’ll see is that these major airlines will be severely humbled by this pandemic and gone are the days where they could get away with their nonsensical shenanigans and heavy devaluation of their elite programs. This may also mean the temporary end of low cost flying to a more 1980s feel of higher prices with an all inclusive baggage & meal experience
I'm surprised IAG didn't lose more money. It really shows that despite all the criticism IAG is extremely well run. Unfortunately tough decisions have to be made everywhere. IAG are one of the first to announce their redundancy plans but they will definitely not be the last. They'll be demonised in the British press as they always are but British Airways is always attacked even when they do something good. IAG are also reconsidering the...
I'm surprised IAG didn't lose more money. It really shows that despite all the criticism IAG is extremely well run. Unfortunately tough decisions have to be made everywhere. IAG are one of the first to announce their redundancy plans but they will definitely not be the last. They'll be demonised in the British press as they always are but British Airways is always attacked even when they do something good. IAG are also reconsidering the Air Europa acquisition. They are looking for a price reduction however they could simply exit the deal altogether but Air Europa will most likely accept a reduced price. Their shareholders will still get a payout (which is rare in these times) and also allow them to avoid much of this crisis by handing responsibility to another group.
@The nice Paul - BA has specifically eschewed government aid so that Norwegian and Virgin will die and BA goes from being wildly dominant to a true monopoly. GSTP did a nice post on it today.
TheNicePaul - because IAG is an umbrella company based in Spain. However - It's biggest (y far) operating company is BA which is based in the UK employing 30,000+ staff in the UK, with its hub in the UK capital.
You may have read in my post that the UK govt today agreed to give financial aid to Wizz Air via a £300m loan at low interest. Where is Wizz based? Hungary. But, the UK...
TheNicePaul - because IAG is an umbrella company based in Spain. However - It's biggest (y far) operating company is BA which is based in the UK employing 30,000+ staff in the UK, with its hub in the UK capital.
You may have read in my post that the UK govt today agreed to give financial aid to Wizz Air via a £300m loan at low interest. Where is Wizz based? Hungary. But, the UK government knows the value to the UK economy and jobs Wizz contributes. Compare Wizz to BA and the numbers are pretty obvious.
Don’t be cynical... Your thoughts are in winning money and travel in luxury... You don’t care if an individual is laid off or if 12.000 are laid off... Go back to the blimp where you live
The Govt. aid for IAG would be that the British taxpayers do not provide it to Virgin Atlantic. That right there would be one of the most significant aid packages handed to an airline yet.
@ Duck Ling
Why would UK tax-payers bail-out Spanish-based IAG?
The UK airline market is open and based on competition. If one airline fails, others will jump in.
@creditcrunch/Stuart I definitely agree there is likely some opportunism in the announcement also. BA have been trying to get their legacy staff onto cheaper T&C's for decades. This is the perfect opportunity. Firstly, start talking about 12K job losses. Puts the fear of god into legacy staff and unions who will more than likely agree to substantial changes in order to keep their jobs.
There are some interesting parts I find in Alex Cruz'...
@creditcrunch/Stuart I definitely agree there is likely some opportunism in the announcement also. BA have been trying to get their legacy staff onto cheaper T&C's for decades. This is the perfect opportunity. Firstly, start talking about 12K job losses. Puts the fear of god into legacy staff and unions who will more than likely agree to substantial changes in order to keep their jobs.
There are some interesting parts I find in Alex Cruz' letter. Firstly, there is an obvious reference to 'long term' structural changes. Secondly the bit where he mentions there is no help from the UK government. How does he know? Has BA asked? Didn't UkGovPlc just hand over £600m to Easyjet and £300m to Wizz? He also mentions that short term loans are not beneficial either. Why not? Does BA not plan of coming out of this at SOME point?
But most pointedly - BA (well IAG) have not cancelled their intended purchase of Air Europe? If IAG are scarping together ever last cent in order to survive wouldn't the very first thing anyone responsible would do to walk away from a one billion euro purchase?
@Christian
What government aid?
You gotta love how BA chooses to “pay tribute” to thousands of loyal employees by giving them a pink slip rather than accepting government aid.
@Creditcrunch. I was thinking the exact same thing. Or that this is just posturing so as to pressure the unions to accept significant pay cuts to legacy employees.
The cynic in me thinks this is part of a planned PR exercise to poor water over any hope that potential investors for the struggling Virgin Atlantic will think twice before parting with money. It’s a shame that BA have chosen this moment and I feel for the people who will be made redundant.
Very sad. The furlough system in the uk will only last till 30/6 and then it’s going to be a big change across the board unfortunately
I have an award tix with them in mid July. At this point, the likelihood of me taking that flight is slim so my guess is I’ll have to call them in July unless they move the cancellation operation online. Hopefully by July there is some resemblance of “normalcy” in the world.
Assuming most of their employees live in UK, at least the government there will give you 80% of your salary while you...
I have an award tix with them in mid July. At this point, the likelihood of me taking that flight is slim so my guess is I’ll have to call them in July unless they move the cancellation operation online. Hopefully by July there is some resemblance of “normalcy” in the world.
Assuming most of their employees live in UK, at least the government there will give you 80% of your salary while you look for next job. Can’t say that about US.....
It’ll be a no brainer that they will try to cut higher cost employees first (except the C suites ones of course).
The number of airlines in the world will be a bit smaller, the number of planes flying will be less. But near-term, i.e. 8 months from now, most of the aircraft will be back in the skies. People are more than ready to get back onto the stage of life, to shirk the bonds of isolation and fear. But at the same time doing so with care.
This pandemic is not a forever problem....
The number of airlines in the world will be a bit smaller, the number of planes flying will be less. But near-term, i.e. 8 months from now, most of the aircraft will be back in the skies. People are more than ready to get back onto the stage of life, to shirk the bonds of isolation and fear. But at the same time doing so with care.
This pandemic is not a forever problem. World Wars One and Two came and went. The Spanish Flu came and went. The Black (Bubonic) Plague came and went and came again several times in Europe. But the key lesson is that life went on, business came back. Social, political and economic changes came about as a result of these natural and man made calamities.
To paraphrase a song from the Great Depression era: 'Happy days will be here again. The skies above will be busy again. And recall this: Tomorrow! Tomorrow! I love ya Tomorrow! You're always A day A way
From the Great Depression came the Silent Generation, the Greatest Generation. Take heart, look to the past as a guide to the future. The character of Americans back then was strong, determined. We must dump the harmful anti-America, Marxist-oriented social engineering imposed upon us over the past 55 years to come close to what the resilience and fiber of Americans once was.
The worst is now over for the U.S., Europe and most of Asia. Africa, Latin America, the Middle East and South Asia are in question as to the ability of countries there to deal with the disease. But it is Europe, North America and Asia that counts when talking about recovery. It's happening now. I see the sun.
Ben you are right, will be interesting indeed to see how the job losses will go.
Mixed Fleet crew have a clause in their contract of employment that basically says BA can give them a weeks notice to be 'stood down without pay' if the conditions require this. Legacy crew do not. But, on the flipside, legacy crew are obviously a lot more expensive.
I'd imagine BA will launch a voluntary redundancy program first....
Ben you are right, will be interesting indeed to see how the job losses will go.
Mixed Fleet crew have a clause in their contract of employment that basically says BA can give them a weeks notice to be 'stood down without pay' if the conditions require this. Legacy crew do not. But, on the flipside, legacy crew are obviously a lot more expensive.
I'd imagine BA will launch a voluntary redundancy program first. There will likely be a decent uptake of this for two main reasons. 1) the 'average' age of legacy crew at BA is 47. Those at the older end of the scale and close to retirement may feel it beneficial to take VR. 2) For the legacy crew that do stay on it will likely be on far reduced T&C's. For many legacy crew they'd rather take the money and leave.
I think any remaining BA legacy crews will negotiate to accept terms and conditions similar to MF, possible with a 'golden handshake' possibly without.
If cabin crew numbers then are still above what is needed the easiest route for BA would be to enact the clause that exists in the MF contracts and lay the required number off.
IAG faced an exceptional charge of €1.3 billion resulting from unfavorable fuel and foreign currency hedges.
Egads. Who's running this airline or is this normal?
Sadly, 12,000 is likely only a start for BA.
Depressing times, to be sure.
I canceled an award ticket in Korean online and was done in 60 seconds. The BA award ticket required me to call them. But when you did the message I got was call volume is so large we cannot take your call right now and they would hang up! After a couple of weeks of this I finally resorted to twitter. And after a few days of back and forth (and radio diligence for some...
I canceled an award ticket in Korean online and was done in 60 seconds. The BA award ticket required me to call them. But when you did the message I got was call volume is so large we cannot take your call right now and they would hang up! After a couple of weeks of this I finally resorted to twitter. And after a few days of back and forth (and radio diligence for some days) I finally did accomplish my task. It seems to me BA could do a lot more online and reduce workload of their staff