International Airlines Group (IAG) chief executive Willie
Walsh told MPs today that British Airways is launching a consultation on up to
12,000 redundancies purely to ensure its survival in the face of what he called
“the greatest crisis the industry has ever faced”.
Defending the airline’s decision to enter negotiations with elected
employee representatives despite not seeking further support from the UK government,
Walsh told the Transport Select Committee that the carrier had actually taken
advantage of all the schemes available to it. When questioned about the
decision to agree a €1 billion loan for Iberia and Vueling with the Spanish
government, Walsh said: “This is a commercial loan and debt that Iberia will
have to repay; should they not repay, the Spanish government will step in and
guarantee up to 70 per cent of the loan. That facility is not available in the
UK or Ireland.” He also pointed out that BA has secured £300 million through
the issue of commercial paper bought by the Bank of England.
He added: “We’re conscious of what the chancellor said in
his letter [to airline bosses in March] – that he would expect all companies to
avail of all other facilities before approaching the Exchequer – so it was
clear that he expected us to do everything we could on our own part, including
exploring commercial facilities and seeking extra funding from shareholders. Having
exhausted all of those facilities, and only at that stage, should airlines
approach the Exchequer for a bespoke package. We’re not in that position yet,
and we’ll only do what’s right for the business. This will be up to BA and its
board in the same way that the Spanish facilities were taken up by Iberia and
Vueling, not by IAG.”
Addressing MPs’ concerns about BA’s decision to announce up
to 12,000 job cuts while many of its staff are on the UK’s coronavirus job
retention scheme, Walsh said: “We’re not doing anything that we don’t think is
absolutely necessary to secure the survival of BA and we’re doing exactly the
same with other airlines in the group.”
He added that restructuring the business will be needed to
ensure BA can survive the long-term impact of the coronavirus, saying he
predicts passenger demand will not recover to 2019 levels until 2023 or 2024. “Some
analysts have even predicted it could be as late as 2026,” he said.
“This is an incredibly worrying time for everyone in the aviation
industry. I expect BA to listen to all of the options put forward by their
employee representatives in good faith and with the intention of mitigating the
impact of any restructuring.
“Anybody who believes this is going to be easy is dreaming.
This is the greatest crisis we have ever faced. The liquidity we have is
reducing. We’ve probably exhausted every avenue I can think of to shore up our
liquidity. Given that it’s unlikely we will see any significant return to
flying until July – and perhaps even later following [the prime minister’s
announcement of a 14-day quarantine for international travellers arriving by
air] – we have got to be clear that we have sufficient cash to be able to
survive through that period, and we’re not taking in any revenue at the moment.
“The industry has changed. Anybody who believes we’ll go
back to the way things were in 2019 misunderstands the scale of the challenge
that is being faced by the industry,” he said, adding that the restructure at
BA was necessary to be able to operate in a changed aviation environment.
When asked about rumours that BA might not return to its operation
at Gatwick, Walsh said he does see a future for the airline at the airport. “I think
Gatwick is a better airport than Heathrow in many ways. I think it’s better run
and the management team are more commercial. I think the customer base is one
that we would want to serve. The challenge we face is that we have to do what
is right in the environment that exists.”
Asked the same question about London City airport, he said
it is something that will have to be discussed in the restructuring
consultation and pointed out the hub has faced the greatest challenge as the
coronavirus impact took hold, as it was one of the first in Europe to
physically close. “I think that clearly points to the specific customer segment
that supports London City airport. Our future there is something we’ll consider
in our consultation.”
IAG last week reported a €535 million loss, mainly due to the sharp downturn in traffic and capacity in March.