Airlines are sounding alarm bells from all corners of the globe, with a full recovery for air travel not expected until 2023. But already, just months into the crisis, questions are emerging as to whether these cries are from wolves in sheep’s clothing, or entities genuinely under threat.
As airlines prepare to scale back, clamp down and reassess travel trends, there’s been no entity more fascinating or duplicitous to watch than International Airline Group (IAG) – the company which owns British Airways, Iberia, AerLingus and Vueling, among others. In less than a week, it’s stated no desire for bailouts, while also receiving more than $1.1 billion of them.
It all centers around Willie Walsh, the tempestuous leader of the group, due to retire in short order. Mr. Walsh has always been known in airline and travel circles as a cut throat leader, known widely for cutting costs at any cost, but also among the very best in the business for creating incredible profit centers for airline shareholders.
In recent weeks, the style has seen multiple media quotes from Walsh stating that government aid for airlines is wrong. His reason for such statements has long been regarded as an attempt to bleed out competition, desperately seeking financial intervention.
IAG has stated in recent financial reports that it’s in a very strong financial position, which is where the duplicity comes in.
News today from Bloomberg of a $1.1 billion state backed Spanish Government loan to IAG is all the more bewildering after boastful financial reports and months of comments opposed to state backed loans. Even more so with the disclosure that all of the money will go to Iberia and Vueling, and none of the money will go to British Airways, which cited needs for 12,000 staff cuts due to current losses.
The untimely news arguably reveals a deeper motive from IAG, centered around long held desires to break up the British Airways workforce, or rather, to streamline it. IAG’s new $1.1 billion loan explicitly states no money will go to British Airways, and for IAG, that’s exactly what they want.
Leaving British Airways in the wind makes it easier for the airline and parent company IAG to push through “join or die” redundancy threats under the veil of a health crisis, where employees have the choice of accepting new inferior contracts, or face effective redundancy.
It’s made IAG’s long held dream of union busting British Airways incredibly easy, citing emergency measures, something it could never do in any other global environment.
How IAG thought it could release a statement to British Airways employees stating that there is no potential for government help in the UK, and cuts were necessary, in the same week it takes $1.1 billion for other airlines in the portfolio, while releasing strong earnings and excellent cash reserves, leaves many questions.
Well BA has been on the slide for a decade and they desperately want it to be as bad as Vueling, Iberia, Aer Lingus because all of these airlines run on a shoestring. BA was desperate to get rid of its highly paid and highly incentivised long term staff in 2015. Now they have an easy route to bring on cheap staff with no free flights or decent pension perks. BA is a pension fund that runs an airline. It was on the ropes before and pulling out of Gatwick is just the beginning. Prepare for fewer daily flights to many destinations that don’t make a profit. Rather than 15 flights a day to say Zurich that will be halved. Flights to obscure places will also be ditched in favour of popular destinations only. They say 12,000 staff to go I actually believe it will be half the workforce in the long term. It’s unsustainable.
Great (if moderate, given Ba’s track record) words, though US spellings ‘center” still grate!
On topic, surely this is just further unveiling of BA being run solely for the benefit of one group of stakeholders at the expense of others ie, shareholders before customers and employees? Certainly that would go a long way to explaining the charge a premium but deliver a low cost experience model… Which I have said from the start about 5years ago is simply unsustainable… There is only so long BA can continue to trade on a brand and reputation that today bear little / no relation to what they actually deliver and appears to be being intentionally burnt for short term returns.
BA doesn’t qualify for the UK Gov business loan scheme.
Iberia and Vueling do qualify for the Spanish business loan scheme.
Loans are unlikely to be able to cover medium/long term reduction in demand leading to companies having to shrink and shed employees in line. Loans help companies survive during COVID-19, less so post COVID-19.
BA does appear to be using this as an opportunity to push through other reforms on top of cutting numbers of employees though.
How do you know they don’t? On what grounds?
Because to be eligible for the Bank of England’s Covid Corporate Financing Facility the company needs to be ‘of investment grade’.
Fitch recently lowered British Airways rating to BB+ , below the eligibility criteria.
That’s the round hole criteria, but “bespoke” packages are available of course, as per the gov. BA’s downgrade doesn’t make them ineligible, it just means more work would need to be done. For BA, they wouldn’t know until they apply, and of course.. they intentionally have not.
Paul,
it is not that simple.
BA was rated at investment grade when the Government response was first announced….wonder why WW ignored the opportunity??? Secondly Fitch are not considered a reliable credit rating company anyway….
I second this message.
Paul, BA have access to exactly the same options as EZ and Wizz, *their management* have chosen not to apply AND to actively campaign against other airlines receiving support.
This move has everything to do with profteering from shifting their staff onto salaries below a living wage fro the SE of UK and has nothing to do with CoVid19 except as a convenient mask to a move they have been trying unsuccessfully to make since 2010. I would argue that profiteering (as distinct from earning a healthy profit through delivery of quality services) on really cut in in 2016.
For BA this is finally a way to get rid of Worldwide contracts and crew, in a time when they will struggle, it makes sense to cut the more expensive parts of the operation
The realisrix living wage parts?
Great article! If I were a BA employee, I would sign the petition to “Support the British aviation industry during the COVID-19 outbreak” and get Parliament involved. They are close to the 100,000 signatures needed. I would also “Report a business behaving unfairly during the Coronavirus (COVID-19) outbreak” to the UK government. The lowlife scum bag leaders at IAG are DEF using this an opportunity to implement their plans to exploit the BA workers.
https://petition.parliament.uk/petitions/303081?fbclid=IwAR3y77BCSdNMfqCGP8e8QPOMwtdAo-Z1v6RWZDIrZTRPRksPTVrcLWY0ufI
https://www.coronavirus-business-complaint.service.gov.uk/?fbclid=IwAR3Di6SKMbFdKSyJ5AJwFgdX8a2jqbJAYx0bBq2hjYTUxVVJtWq-VxR7r3E