British Airways plans to cut more than a quarter of its jobs in response to the coronavirus crisis, parent company IAG (ICAG.L) 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 ($580 million), compared with a profit of 135 million a year ago.
Revenue dropped 13% to 4.6 billion euros. IAG said it expected its losses to be significantly worse in the second quarter, when it is hit by the full extent of travel lockdowns imposed during the pandemic.
In a statement it outlined plans for a sweeping restructuring at BA.
“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,” the group said. BA has 45,000 employees, including 16,500 cabin crew and 3,900 pilots, according to its website.
BA Chief Executive Alex Cruz told staff the airline was taking every possible action to conserve cash to weather the storm in the short term, including renegotiating contracts and looking at options for its fleet, but it would not be enough.
“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.”
BA had used Britian’s COVID-19 jobs retention scheme to furlough 22,626 employees earlier this month. 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.
Echoing comments from rivals such as Lufthansa (LHAG.DE), IAG said it would take several years for passenger demand to return to 2019 levels.
Operating losses in the second quarter would be significantly worse than in the first given the decline in passenger capacity and traffic, despite some relief from government job retention and wage support schemes, it said. It did not give 2020 profit guidance.
It said it had taken an exceptional charge of 1.3 billion euros at the end of the quarter on over-hedging on fuel and foreign currency for the rest of the year.
The measures come after IAG boss, Willie Walsh, a dealmaker who made his name standing up to unions and cutting costs, last month put off plans to retire to deal with the industry’s worst crisis.
Highlighting the speed of the damage as governments imposed lockdowns to contain the pandemic, IAG said all the decline in operating profit in the first quarter came in March.