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IAG takes UK Government funds, after British Airways said it wouldn’t as an excuse for job cuts

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The British Airways redundancy saga took a new twist this morning as IAG, BA’s parent company, announced its results for the three months to March.

When British Airways announced its 12,000 redundancies, it was partly pitched as a way of keeping the airline from having to take UK Government funding.

Given that BA’s sister airlines, Iberia and Vueling, have been happy to accept a bailout worth €1.0 billion from the Spanish Government, this always sounded a little odd.

IAG takes a UK Government bailout

It was revealed this morning, however, that IAG HAS accessed the UK Government’s Coronavirus Corporate Finance Facility.  This provided a £300 million bailout in the form of a ‘soft’ loan, underwritten by the UK Government and taxpayers.

For clarity, this is what Alex Cruz said in his statement last week to justify both 12,000 job cuts and the huge salary cuts (over 50% in many cases) proposed for legacy Eurofleet and Worldwide crew members at Heathrow:

There is no Government bailout standing by for BA and we cannot expect the taxpayer to offset salaries indefinitely.

Except, as we said at the time, there was.  As IAG has taken the loan directly (it is allowed to do so, even though it is a Spanish company) BA can continue to claim that it is not seeking UK Government funds.

Interestingly, IAG took this money in the second week of April, according to Bloomberg, which means that it was already in the bank when Alex Cruz made his statement about British Airways not getting a bailout.

In a call, Willie Walsh clarified that IAG has never been opposed to accessing government support that is available to “all” companies – although the CCFF is not open to all.

Where this leaves Virgin Atlantic in its attempts to secure UK Government support remain unclear.  As a reminder, it is only due to a technicality – that it had no traded bonds in issue before coronavirus struck and so did not have a credit rating – that it cannot take its own bailout from the Coronavirus Corporate Finance Facility.

What else was in the IAG financial results?

I won’t dwell on the financial results for Quarter 1 since they are irrelevant in the scheme of things.  These are the key points:

The Group is burning €200 million per week albeit with a €10 billion cash cushion

‘meaningful’ scheduled flights will operate in July, subject to travel restrictions being removed

2019 passenger volumes are not expected to return until 2023

68 aircraft deliveries across the group have been delayed 

The group has lost €1.3 billion on its fuel and currency hedging strategy

Outside of the official results statement, it was confirmed that:

IAG is proceeding with its €1 billion acquisition of Spanish airline Air Europa, depending on what conditions are attached by the European Commission (it would give IAG 73% of the Spanish domestic flight market).  The purchase agreement contains a mechanism for adjusting the price.

The Letter of Intent to acquire 200 Boeing 737 MAX aircraft remains in place

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Comments (133)

This article is closed to new comments. Feel free to ask your question in the HfP forums.

  • Scott says:

    The biggest factor in this story for me is the lack of it across ANY UK news outlet. The actions of BA and the (largely completely inaccurate) sensational red top bear baiting of Richard Branson are appalling.

    Something stinks here. BA furlough 22000 staff to the tune of £110 million to the U.K. government, then dump 12000 of them. Then Cruz makes a public statement to say that culling the staff is the only way to deal with it to avoid the taxpayer stumping up for it AFTER they have already, through the back door, ALSO secretly accepted £300 million.

    I’m constantly sickened by the way my fellow citizens react to things in this country. The amount of vile social media campaign abuse being directed towards Virgin Atlantic, and SRB in particular, regards a possible “loan” by idiots as “he owns an island” shows the underlying large levels of jealousy that exists through our nation like a cancer. It the old horrible British pastime of “build them up then shoot them down”. Even Karren Brady was at it with an article written FULL of inaccuracies.

    Astounded that the true appalling actions of BA receive little attention, yet there are many articles, petitions, campaigns, almost ALL of which are based on complete factual inaccuracies, regarding VA.

    • Anon says:

      Agree 100%, the level of populism and the state of much of the media in the UK is extremely depressing.

    • Tony says:

      The social media and media in general, campaign against SRB, has been a disgrace with no regard to the staff.
      The key board warriors seem happy for people to loose jobs rather than help a British registered airline to survive.

This article is closed to new comments. Feel free to ask your question in the HfP forums.

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