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British Airways to make 12,000 staff redundant

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British Airways has just announced a restructuring and redundancy program that could put 12,000 staff out of work.

If you thought that everything was going to return to normal once travel restrictions end, think again.

Whilst British Airways has already made use of the UK Government’s job retention scheme and furloughed 22,626 of 45,000 employees, it expects that recovery of passenger demand for air travel will take “several years”.  It is unlikely that the furlough programme will continue beyond the end of June.

This is the wording released to the Stock Exchange this afternoon:

British Airways redundancy consultation

In light of the impact of COVID-19 on current operations and the expectation that the recovery of passenger demand to 2019 levels will take several years, British Airways is formally notifying its trade unions about a proposed restructuring and redundancy programme. 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.

As previously announced, British Airways has availed itself of the UK’s COVID-19 Job Retention Scheme and furloughed 22,626 employees in April.

[…..]

Recovery to the level of passenger demand in 2019 is expected to take several years, necessitating Group-wide restructuring measures.

British Airways to make 12,000 staff redundant

Here are extracts from a letter sent to staff by British Airways CEO Alex Cruz:

We have informed the Government and the Trade Unions of our proposals to consult over a number of changes, including possible reductions in headcount. We will begin a period of consultation, during which we will work with the Trade Unions to protect as many jobs as possible. Your views matter and we will listen to all practical proposals.

The scale of this challenge requires substantial change so we are in a competitive and resilient position, not just to address the immediate Covid-19 pandemic, but also to withstand any longer-term reductions in customer demand, economic shocks or other events that could affect us. However challenging this is, the longer we delay difficult decisions, the fewer options will be open to us.

I want to pay tribute to the thousands of British Airways colleagues who are playing a vital role in the global response to the Covid-19 crisis. Whether you are supporting our repatriation flights or the transport of essential cargo; or one of the hundreds of colleagues volunteering with organisations such as the NHS, you have my sincere respect and thanks.

This has been a difficult message to write and one I never thought I would need to send. I know how tight-knit the BA family is, and how concerned you will be, not just for yourself but for your colleagues, too. We must act decisively now to ensure that British Airways has a strong future and continues connecting Britain with the world, and the world with Britain

The announcement coincided with the early release of IAG’s preliminary first quarter results. As you would expect given the current environment things are looking tough, although it is relatively pointless reading much into them.

The operating result before exceptional items was a loss of €535 million compared to a profit of €135 million last year. Exceptional items include fuel and foreign currency hedges which were ineffective and contributed a €1.3 billion charge to pre-tax profits.

What would a 25%-30% cut in staff numbers mean?

As the number of staff required to crew an aircraft are fixed, a 25%-30% cut in staff numbers – assuming an equal cut between office staff and crew – would mean a 25%-30% reduction in flights.

How this pans out remains to be seen.  British Airways would presumably leave either Gatwick or Heathrow Terminal 3 permanently, although it is unlikely that it could do both.

The current phasing out of the Boeing 747 fleet would free up some capacity, but there are outstanding orders to replace many of these.  Whether these can be cancelled or not is up for debate – you can be sure that Boeing and Airbus won’t be letting airlines off the hook easily.  There is, quite simply, no easy option to remove this much capacity from the fleet in a logical way.  It could even be that larger aircraft such as the A380 fleet and Boeing 747 fleets become more important – not less – if airlines are forced to leave substantial numbers of seats empty.  There are a lot of discussions to be had.

PS.  If you think this is extreme, it may be not enough.  SAS announced today that it is making almost 40% – 5,000 – of its employees redundant.

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Comments (161)

  • MikeG says:

    I guess much will depend on how the international business community react in the next couple of years…how many companies will continue to make use of technology instead of going back to global travel for face-2-face meetings.

  • Paul says:

    It will never happen
    This is a stunt designed to frighten people and governments. There may be job losses but not on this scale. Fake news

    • Simon says:

      Morning Donald. Only person holding that view. Again.

      • TGLoyalty says:

        I don’t think Paul’s view is too far off the mark.

        BA are telling the staff and the government what will happen if the furlough scheme isnt extended or flying isn’t back on the cards.

        There will be job losses but is suspect not to the level of 1/3 of the workforce.

    • Secret Squirrel says:

      Hey Paul, that’s my line (after Trump)! 😃

    • Rob says:

      Given that SAS has already made its redundancies, I wouldn’t be so sure.

      • TGLoyalty says:

        I don’t know what that means in terms of their overall workforce and how strong they were before all of this.

        No doubt this will lead to axed staff and closure of under-performing business units all over the world will it mean you shed 1/3 of your workforce and close 50% of your business…only time will tell.

        • Lady London says:

          Good businesses are going down though including SME’s.

          • TGLoyalty says:

            I meant business units within large multinationals etc

            Absolutely lots of SMEs will go bust because they’ve been starved of cash.

  • Kevin Mann says:

    BA could employ some of the 12,000 in answering the phone so that we can get refunds instead of vouchers.

    • Anna says:

      Or re-writing their java script to allow online refunds!

      • Lady London says:

        Until they do both those things I really hope Brutush. Airways doesn’t have the brass neck to try for a handout.

  • AJA says:

    There is so much speculation, the statement to the stock exchange said UP TO 12,000 jobs are at risk. That doesn’t mean 12,000 jobs will.actually go but I do think it will be at the higher end. It all depends on how quickly we get back to anything approaching normality.

    Also depends on how many companies cut back on business travel having adopted the technology for virtual meetings and having seen how much it has improved. I said this a few weeks ago but the response at the time was it would all bounce back.

    There is also the not so small issue of insurance and company obligations of duty of care to their staff, not to mention the possibility that we will have entry restrictions into other countries. Argentina announced an extension of its ban on international flights until September. If many other countries do the same then the airlines are screwed as that’s a further couple of months of no flights.

    Sad times but it’s better to do hard cuts now and have the opportunity to survive as a smaller stronger airline that has the opportunity to grow in the future.

    • Rob says:

      If there was an easy way to cut the fleet by 30% it would be more clear cut. As BA will still have the aircraft, there is a real risk of being short of pilots and crew to fly them if things do pick up. IF we got a functioning vaccine which could be produced at scale quickly then Summer 2021 in Europe could arguably be back to normal. Not long-haul, admittedly, as some countries will be rubbish at vaccinating, but I would have more faith in Europe.

      • Novice says:

        US are pretty anti vacs too. Even in Uk I’ve heard of ppl anti vacs. Doesn’t help when you get Djoker and M.I.A spewing out anti vacs stance.

        • Rob says:

          There will almost certainly be some passport stamp to show you had it.

          However, I agree that I am not too keen on my kids having a vaccine with unknown side effects. It may be that under 30s are exempt for example.

          • Novice says:

            Personally although I’m not anti-vaccs I’m not keen on the idea of this rushed vaccine. I will probably wait a few yrs after they roll it out. Hence my belief that I will have to wait 4/5 yrs before resuming travel.

            Or I might just get lucky as I’m young so they might not ask for proof etc.

            But it looks like bad news for old people because I just read cruises are thinking about medical tests before embarking and Turkey is asking for proof of no covid.

            I have the years hopefully to sit and wait.

      • TGLoyalty says:

        It’s highly likely any vaccine would go to those that are already recommended to get the flu jab and it would have to be administered every year in the same way.

        • Novice says:

          Maybe but there’s all sorts of reports. Don’t know who to believe. A geneticist in Iceland has said apparently there are a lot of different mutations as he’s checking a lot of different genomes. Then we have Uk scientists (don’t know if they truly are) apparently saying this is a very simple virus and vaccine will be easy.

          So don’t believe anything you read. It’s a waiting game.

  • Kieran says:

    Terrible news if it goes ahead. Secretly hoping this is just to scare the government into extending the furlough or bailing them out further down the line.

    I wonder how much ‘saving’ could be made by reducing back office staff, not that they are any less important. Often when times are tight ‘support’ areas such as IT, HR and facilities are the first to go.

  • David S says:

    Two thoughts – do we know anything about the reductions elsewhere in the IAG empire ? And how can you get your hedging wrong by £1.3 BN. Fuel I can understand as all airlines will be having that same issue unless they have a better model. £1.3BN would keep a lot of staff employed

    • J says:

      No idea although I know right now I’d rather work for Iberia (on a Spanish contract) than BA. As it’s cheaper easier to get rid of people in the UK I’d expect BA will fare worse…

    • BSI1978 says:

      +1

    • Bagoly says:

      They hedged themselves against oil prices being high by buying futures.
      So if the amount they had to pay for the fuel was more than budgeted, that would be offset by income from the futures.
      If the amount they had to pay for the fuel was less, they would have to pay out on the futures.
      So they effectively fixed the price for the fuel.
      All very sensible.

      What tripped up the airlines was that they ended up not flying, so not buying the fuel, but the price of oil fell sharply so they still had to pay out on the futures.

      It would have been the same if they had actually bought a defined volume in advance at a fixed price with E.g. Shell – on delivery they would have to accept delivery and pay at budgeted price, then resell surplus at diddly squat.

      • David S says:

        Just to help my understanding, who is usually the other partner to this type of deal. BA loses £1.3BN on the hedging, is it simply a case of a hedge fund having a monster payday

        • pauldb says:

          They’ll be banks and speculator in the middle, but mostly on the other side they’ll be oil producers who are natural sellers of oil futures covering some of their production to smooth prices and manage risk. They tend only to sell a proportion, so they are certainly not having a great time of it either.

          Mexico infamously has a big hedge of its oil output, hence why they have resisted OPEC calls to cut production and support the oil price which is short-term irrelevant to them.

    • Reeferman says:

      It’s very easy to make huge losses or huge gains on hedging. I don’t follow aviation fuel prices, but do know a little about ship fuel (bunker) prices. The price of IFO380 fuel at Rotterdam has varied this calendar year form a high of about $310 a tonnes to a low of about $123 a tonne.
      If you hedge near the top (either fearing further price rises or “just” be certain about fuel costs as an element of your ticket price) then your financial settlements (typically monthly) – and resultant cost – would be huge.

  • BA FAN says:

    Could this be an opportunity for BA to break the stranglehold the unions have had over them forever, and adjust staff costs to a more sustainable level rather than staff numbers. Cutting the fleet or number of flights means sacrificing slots and opening avenues to further competition.

    The Company has never had more leverage over the unions than they do now, a strike now could actually save BA money.

    Is this the strategy?

    • Rob says:

      You COULD use this as a chance to make the rest of the ‘old’ crew redundant. The payoffs would be immense, however, and I doubt BA wants to suck up such a cost at the moment. More likely to be Mixed Fleet who go as it will cost the airline peanuts.

      • J says:

        Indeed a lot of Mixed Fleet crew will have been there less than 2 years so it won’t cost anything to make them redundant. While BA would love to get rid of long serving staff on old contracts as Rob mentions the pay offs would be immense, doubt they could afford it – and it would be a little awkward to ask for government money to make long standing staff redundant when it’s possible to make newer staff redundant at little or no cost (even though in the long term Mixed Fleet crew are obviously cheaper).

      • Michael C says:

        Yes, the *obvious* solution would be to start with the 747-ers, but they’ve all been there since forever!

      • Andy says:

        It’s simple, slightly enhanced statutory redundancy terms, irrespective of fleet with a minimum package value, capped. “the airline can not afford guided parachutes that they once could” will be the mantra. I would imagine this will all be wrapped up at the end of the Furlough……

        • Lady London says:

          I would have thought that amongst longstanding staff on more lucrative contracts, everybody that was open to a deal already took one on one of the many previous rounds.

          If very close to retirement age some might be tempted but terms may not be generous. Forced redundancy of cheaper staff who have accrued no rights will bear the brunt.

          Welcome to the UK folks. But I have witnessed first hand how damaging it is to business to have the excessive featherbedding of employees that are impossible to make redundant in France and Germany.

    • Paula wilson says:

      I agree. Is all about getting rid of staff that are on old contracts and replace later with cheap labour.

  • Andy says:

    I hear that all three Mixed/Euro/Worldwide are to be closed with the launch of new Heathrow fleet… all LH and SH and a change in management structure (perhaps to get rid of the disparity across the fleets) …. (not sure how that fits with LGW operations)