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IAG, BA’s parent, to cut flights across the group by 75% in April and May

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IAG, the parent company of British Airways, Iberia and Aer Lingus amongst other airlines, put out a Stock Market announcement this morning.

The group is to cut capacity – in terms of miles flown – by 75% in April and May.  It is not yet clear how this will be spread across the different airlines in the group.

For reference, Finnair announced this morning that it is cutting 90% of its capacity from 1st April.  Only 20 routes will remain, primarily domestic flights.  LOT, Austrian and airbaltic have closed entirely.  Scandinavian is running a skeleton service.

There are two other points to note:

Willie Walsh is delaying his retirement as IAG Chief Executive

IAG has €9.3bn of cash, cash equivalents and undrawn loan facilities it can tap

We will update when we get a separate statement from British Airways on what it will be cutting.

Here is the full statement:

IAG’s actions to address COVID-19’s financial impact

The rapid spread of COVID-19, and associated government travel restrictions and advisories are having a significant and increasingly negative impact on the demand for global air traffic on almost all routes operated by IAG’s airlines.

To date IAG has suspended flights to China, reduced capacity on Asian routes, cancelled all flights to, from and within Italy and made various changes to our network.

The US Presidential announcement to restrict entry of foreign nationals who have been in countries in the Schengen Area, the UK and Ireland has added to the uncertainty on North Atlantic routes. In addition, many other countries have banned or are restricting inward travel including Argentina, Chile, India and Peru. Spain has also been the subject of travel advisories, for example by the UK Foreign and Commonwealth Office (FCO).

IAG is implementing further initiatives in response to this challenging market environment. Capacity, in terms of available seat kilometres, in the first quarter of 2020 is now expected to be reduced by around 7.5 per cent compared to last year. For April and May, the Group plans to reduce capacity by at least 75 per cent compared to the same period in 2019.

IAG is also taking actions to reduce operating expenses and improve cash flow. These include grounding surplus aircraft, reducing and deferring capital spending, cutting non-essential and non-cyber related IT spend, freezing recruitment and discretionary spending, implementing voluntary leave options, temporarily suspending employment contracts and reducing working hours.

Given the continued uncertainty on the potential impact and duration of COVID-19, it is still not possible to give accurate profit guidance for the full year 2020.

The Group has strong liquidity with cash, cash equivalents and interest-bearing deposits of €7.35 billion as at 12 March. In addition, undrawn general and committed aircraft backed financing facilities amount to €1.9 billion, resulting in total liquidity of €9.3 billion.

Willie Walsh, IAG’s chief executive, said: “We have seen a substantial decline in bookings across our airlines and global network over the past few weeks and we expect demand to remain weak until well into the summer. We are therefore making significant reductions to our flying schedules. We will continue to monitor demand levels and we have the flexibility to make further cuts if necessary. We are also taking actions to reduce operating expenses and improve cash flow at each of our airlines. IAG is resilient with a strong balance sheet and substantial cash liquidity.”

In light of the exceptional circumstances facing the aviation industry due to COVID-19, and in particular the developing situation in Spain, it has been decided that Luis Gallego will continue in his role as Iberia chief executive for the next few months to lead the response in Spain. In the meantime, Willie Walsh will continue to act as Group chief executive and Javier Sanchez will remain in place as Vueling chief executive.

Antonio Vázquez, IAG´s chairman, said: “As we respond to COVID-19, Willie, Luis and the board of IAG have decided that management stability across the Group should be a priority in the near term. We are grateful that Willie has agreed to delay his retirement for a short period at this challenging time.”

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Comments (123)

  • Ian says:

    This is so terrifying to watch.

    Airlines are going to go under fast without huge government intervention.

    • ChrisBCN says:

      Some might, but some have enough cash/finance to survive for several months

  • Neil Donoghue says:

    Wow – This really is brutal! I guess we wait and see what’s been cancelled now…I have several flights over Easter & both May bank holidays.

  • TGLoyalty says:

    No surprise really.

    So many restrictions on UK/EU travellers and sheer lack of demand even when there wasn’t.

    Lack of cashflow will destroy a lot of businesses/lives worldwide

  • AJA says:

    This will also affect BA’s suppliers. It must be having a brutal effect on the catering companies too since they only get paid if a flight operates. Wouldn’t want to be working for Do&Co, Gate Gourmet, AlphaLSG or the flight catering arm of DHL Probably pretty brutal for M&S too, since they supply BoB

    • Rob says:

      I reckon the M&S in Heathrow T5 arrivals takes more money than the M&S items sold via BOB!

      • AJA says:

        Yes perhaps. The M&S in T5 Arrivals does do rather well but if no one is flying then footfall must also be dropping significantly

    • Paul Pogba says:

      Also reducing freight capacity, increasing rates and creating another supply chain bottle neck.

  • Covid-19 says:

    Airlines are a highly visible economic victim of this virus. But all businesses are suffering.

    We need a co-ordinated response to this from a global perspective but we live in a “free market” so countries will do what they want.


  • VTM says:

    It’s not just airlines, try being a freelancer in the music industry at the moment… We have all just had our employment cancelled for the forseeable future.

    • G-bit says:

      And restaurant and tourism businesses. We will run out of cash within a month at this rate. Hoping to be shut down officially as insurance should kick in then (assuming insurers survive!).

      • Stagger Lee says:

        Lots of businesses will suffer the knock on effect. I cancelled my cattery booking and the guy was very concerned that he will be able to survive.

      • Lady London says:

        Insurers will mostly survive. Lloyds Names may be beginning to see this isn’t going to be as easy as they thought it was though 🙂

    • marcw says:

      or travel blogs… i guess Robs income has fallen sharply in the last week.

      • Alex M says:

        I think number of views of this blog tripled in last few days therefore ads income should have gone up, I would think.

        • marcw says:

          Google Ads are rock bottoming now – and he said all airlines and hotel chains have pulled ads. I bet the biggest % of income is affiliate marketing.

        • Also says:

          The travel advertisers will have pulled most of their ads. Any direct buys or PMPs for HfP will mean direct lost revenue for Rob. Any decrease in competition for auction based buys will mean average CPMs will be cheaper and thus Rob’s percentage will equate to a smaller value, even with the increased search volume.

          Most of the display ads I’m getting on HfP are neither relevant to the site or to me, suggesting that there is little competition for the placements at the moment.

          • Rob says:

            Totally correct.

            Page views are up about 50%, ad revenue per page is down about 33%. This means we just about net out on Google ads.

            However … the ads we sell ourselves are for many multiples of what Google pays us and those have all been pulled.

        • Spursdebs says:

          Didn’t Rob say views were up but advertisers had pulled a lot of ads?

    • ChrisBCN says:

      And yet, some commenters here continue to treat the situation as a joke. Real world consequences happening due to this cat-astrophe.

    • Lady London says:

      You are not the only ones 🙁

  • rob(staaaar) says:

    I guess that’s why there’s a run on bog roll…

  • Clive says:

    OT – Parent of Travelex has been suspended on the Stock Exchange.

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