British Airways plans to cut more than a quarter of its jobs because of the coronavirus crisis, parent company IAG said on Tuesday, forecasting that passenger numbers will take years to recover.
International Consolidated Airlines Group SA (IAG), which also owns Iberia, Aer Lingus and Vueling, reported a first-quarter operating loss before exceptional items of 535 million euros ($811 million Cdn), swinging from a profit of 135 million euros a year ago.
Revenue dropped 13 per cent to 4.6 billion euros ($6.97 billion Cdn). IAG said it expected significantly worse losses in the second quarter, reflecting the full extent of travel lockdowns during the pandemic.
In a statement, it said the sweeping restructuring at BA will probably “affect most of British Airways’ employees and may result in the redundancy of up to 12,000 of them.” Union leaders criticized the plans and said the airline should have worked to secure more government aid to avoid cutting jobs.
BA has 45,000 employees, including 16,500 cabin crew and 3,900 pilots, according to its website.
Chief executive officer Alex Cruz told staff that BA was doing everything possible to conserve cash, including renegotiating contracts and looking at options for its fleet, but it would not be enough.
‘We must take action now’
“In the last few weeks, the outlook for the aviation industry has worsened further and we must take action now,” he said in a letter to staff seen by Reuters.
“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.”
The pilots union BALPA said staff were devastated.
“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 general secretary Brian Strutton said.
“BALPA does not accept that a case has been made for these job losses and we will be fighting to save every single one.”
Unite the Union, which also represents BA workers, said it was a “heartless decision and entirely at odds with the course of action followed by our European competitors as they seek a way through the coronavirus crisis.”
Earlier this month, BA used Britain’s COVID-19 jobs retention scheme to furlough 22,626 employees. Under the scheme, the government takes on part of the cost of retaining staff who remain on the payroll while being sent home during the crisis.
Pre-pandemic demand not predicted for years
Echoing comments from rivals such as Lufthansa, IAG said it would take several years for passenger demand to return to 2019 levels.
Governments in Europe and the United States are providing payroll support to airlines while the industry battles its biggest ever crisis.
Estimated global airline losses from the coronavirus pandemic have climbed to $436.6 billion Cdn, the International Air Transport Association said on April 14. More than half the world’s airplanes are in storage.
IAG said its second-quarter operating loss would be significantly worse than the first quarter loss because the decline in passenger capacity and traffic, despite some relief from government job retention and wage support schemes. It did not give 2020 profit guidance.
Gloomy reports from Airbus, Boeing
Meanwhile, Airbus on Wednesday posted a 49 per cent slump in first-quarter core profit and called for an industry-wide campaign to restore confidence in flying after the coronavirus pandemic triggered the “gravest crisis the aerospace industry has ever known.”
Europe’s largest aerospace group also highlighted plans to save cash after gushing 8 billion euros ($12.1 billion Cdn) in the first quarter, including a record 3.6-billion-euro ($5.5-billion Cdn) fine to settle corruption investigations in Britain, France and the United States.
“All nature of costs are now being reviewed,” CEO Guillaume Faury told analysts.
Airbus has been unable to deliver more than a handful of aircraft since Europe-wide lockdowns began in mid-March and Faury said he expected similar difficulties in the second quarter before a clearer picture emerges in around June.
Chief financial officer Dominik Asam told a telephone news conference he expected some recovery in the third quarter before returning “basically to a neutral situation where we don’t use cash anymore” in the fourth.
Airbus expanded furlough schemes on Tuesday by sending home 3,200 workers in Britain after putting 3,000 workers on government-backed partial unemployment schemes in France, and Faury said thousands of German staff could also be affected.
He did not say whether Airbus would carry out forced redundancies but told staff last week to prepare for “more far-reaching measures” to balance the group’s costs to the reduced outlook for aviation in coming years.
It said on Wednesday it does not immediately see a need for further government support.
Airbus this month cut jet production by between one-third and 42 per cent depending on the model.
In the longer term, Airbus remains committed to a new generation of green aircraft and will intensify a focus on onboard passenger health as well as safety, Faury said.
In the U.S., Boeing Co reported a loss for the second straight quarter and said on Wednesday it would cut its workforce by about 10 per cent as the planemaker further reduces 787 Dreamliner production against a slump in global travel demand.
Boeing, which last month drew down its entire $13.8 billion credit line, is working with investment banks on a potential bond deal worth at least $10 billion, Reuters reported on Tuesday.
Demand for Boeing’s bigger and more profitable 787 jet had waned as a result of the U.S.-China trade war. The pandemic has made it more difficult for the company to sustain production of the aircraft, which is its main source of cash at a time when the 737 MAX remains grounded after two crashes that killed over 500 people, including several Canadians.
Boeing said it plans to cut the jet’s production to seven units per month by 2022. In October, it had decided to lower it to 12 per month in late 2020 from 14 and to 10 aircraft per month in early 2021.
Boeing also said it expects to resume 737 MAX production at low rates in 2020, but did not give a timeline.
The company’s adjusted loss stood at $1.70 billion, or $1.70 per share in the first quarter, compared with a profit of $1.99 billion, or $3.16 per share, a year earlier.