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.
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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