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

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• insider says:

  7 May7 May 10:03

  WW clarified on the call that he doesn’t object government schemes that help employees (which he mentioned back in March) and general schemes available to all companies (the CCFF) which was available to companies with solid credit ratings before the crisis, but does object to specific bailouts of individual companies. I don’t think this is different to what he said at full year results so your headline is a bit Daily Mail…

  • outsider says:

    7 May7 May 10:11

    I hear what you are saying….but their taking the loan isn’t really helping BA staff is it?

    • insideoutside says:

      7 May7 May 10:14

      Maybe not, but I don’t think the loan is supposed to be there to retain staff, it is there to make sure the business can ride out the virus and right size to the new normal.

      • JohnG says:

        7 May7 May 11:34

        True, but not what Cruz said when using the lack of a government bailout as a shield to try and protect BA from criticism for firing 12,000 people. Rob’s point is they’ve tried to mislead at best, and I’d happily call it lied, in that announcement; What Walsh said about targeted bailouts is irrelevant to that point.

        • Helmut Schmidt says:

          7 May7 May 12:17

          BA and it’s parent do seem a little brutal here.
          They will pay their staff using furlough scheme on the one hand while erasing 12,000 of their better paid staff. In the background they will claim they don’t need a bailout while their foreign owner takes 300m to buy another airline. At the same time, BA will be trying to push VS into administration, threatening to pull out of LGW unless there are incentives, and then hoover up cheap slots in heathrow, most likely to sell to cash rich ME airlines.

    • Rob says:

      7 May7 May 10:15

      Virgin can’t access the CCFF because it has no tradeable debt and so never got a credit rating. Not exactly a fair reason is it?

      • BlueHorizonuk says:

        7 May7 May 10:21

        If BA is burning through 200m a week then why take this pittance of a loan?

        • genius says:

          7 May7 May 10:23

          because it gives them an extra week and a half?

        • Rob says:

          7 May7 May 10:28

          IAG, not BA. Free money is free money! If nothing else you simply repay a more expensive loan you’ve already got.

      • insider says:

        7 May7 May 10:22

        It’s a perfectly fair reason! Virgin doesn’t have tradable debt presumably because they didn’t have attractive rates available to them, presumably because it would have been rated junk. Virgin may not have been failing to the scale of Norwegian (who incidentally seem to have somehow survived), but there were not a solid, continuously profitable company. Even you should be able to see that Rob, if you take off your Virgin branded rose tinted glasses.

        The scheme operates just like many companies do when they hire graduates, it throws out all the applications below a 2.1 as a crude filter. Virgin only got a 2.2, for good reason.

        For clarity, I hope Virgin pull through, but you can’t treat them more favourably just because they are Virgin. There are many companies out there without the brand power of Virgin that are failing that would be not happy if Virgin were favoured over them

        • AJA says:

          7 May7 May 11:19

          Norwegian have survived, for now, by swapping debt for equity which has wiped out existing shareholders leaving them with just over 5%. Virgin could do the same thing but that would mean diluting SRB and Delta’s existing shareholding. Seems they would rather not do that.

          As for IAG taking the 300m, it’s either something they should be doing or they shouldn’t. As Rob admits they’d be daft not to take advantage of the scheme. That said it’s a bit rich to have claimed that BA were making 12,000 redundant instead of taking the cash when they’ve done just that. It’s also morally dubious to use the opportunity to get rid of expensive pay contracts but it is decidedly good business for BA if they succeed and the reputation of the business doesn’t suffer.

          That said it’s also a bit rich to accuse BA of acting immorally in making 1 in 3 of their staff redundant but not to criticise Virgin for making 1 in 2 of their staff redundant. Both airlines have recognised that they’re over staffed when demand is predicted to be so low so it’s a perfectly reasonable thing to do. It’s just very unpleasant for the staff and I do sympathise with their predicament.

        • pauldb says:

          7 May7 May 12:12

          Virgin doesn’t have tradeable debt because it’s not big enough, rather than because it’s junk. There’s a lot more cost involved with having tradeable debt: internal functions to service it, credit agency to assess it and brokers to sell the bonds at issue. If you’re big the slightly lower interest rates make it worthwhile having tradeable debt and that would be true even if you are junk (maybe more so if you are junk); if you are small it’s cheaper to use a syndicate of banks and specialist aircraft finance.

        • Chrisasaurus says:

          7 May7 May 14:24

          That’s a lot of presumably there…

      • marcw says:

        7 May7 May 10:31

        Rules are rules, whether you like them or not.

      • ken says:

        7 May7 May 14:27

        As of 31st December 2018 Virgin Atlantic Airways had negative retained earnings.

        They lost money in benign times (lets ignore stuffing fuel hedging losses into exceptional items).

        Their accounts have been out in April every years since they changed their accounting period – but not visible yet.

        First half of 2020 is going to be a disaster. Fuel hedging in 2020 will also be horrible (whether its shown in exceptional items or not).

        The have mortgaged their landing rights to some special vehicle registered in Barbados.

        Their 2 shareholders are sitting firmly on their hands.

        They owe Delta $200m – although its not entirely clear what for or from when.

        Only 6 weeks ago they were merely asking for a loan guarantee – a ruse just to get the taxpayer firmly on the hook.

        Lets be honest here, any ‘loan’ bailout to Virgin has a remote chance of ever being paid back.

        Lets just call it a gift.

      • Mikeact says:

        7 May7 May 19:25

        Of course it’s fair…. Virgin and their advisers fell far short and took their eye off the ball, if they ever had it on the ball.

  • GaryC says:

    7 May7 May 16:01

    I agree with some of the headlines on this site being increasingly Daily Mai style click-bait. I like reading informative, thought provoking articles, authentic journalism if you like, expressing someone’s genuine point of view. Rob’s background (I believe) is working in Private Equity in the City of London, from which he’s made his money, lives nicely in the swankiest part of London and has moved on to build this business and fulfil a passion. All of which I think is great BTW, and my own occupation and lifestyle makes me the last person to throw stones in this regard. But as a result I do struggle to believe that a lot of the rhetoric on this site of late, particularly around BA and Virgin, is actually the genuine view of someone steeped in PE and the City. But I guess ultimately, as is pointed out quite regularly, this is a journalistic web-site, clearly run as a business and click-thrus and ad revenue are the main name of the game.

    • Rob says:

      7 May7 May 16:44

      Note that Cruz has written to BA staff this afternoon to try to justify the IAG loan so some people clearly see it as an issue.

      Note also that we make virtually no money from ads at the moment (roughly 0.12p – ie £1 from 800 views – per page view) so driving clicks has no upside for us. Amazon paid us twice as much as the ads made last month.

      • GaryC says:

        8 May8 May 12:43

        That may be so, and I wish you better fortune on the ads. But the fact remains that the tone of the rhetoric of late is very much tabloid style “evil BA”, when in fact they’re following the very same principle of surgical cost cutting that anyone who has made their money in private equity would themselves have engaged in.

• Lady London says:

  7 May7 May 10:14

  I thought BA is the main workhorse and profit-producer of IAG? So any government support money taken by IAG, is as good as subsidising BA.

  When BA’s sanctimoniously announcing they’re not taking support from government so they can claim they are forced to remove any decent legacy employment contracts that have survived all their previous attempts
  …well this is hypocrisy at its worst.

  Although I suspect 90% of HfP readers will just keep on flying BA anyway

  • J says:

    7 May7 May 10:31

    Well yes not many other options.

  • Mervyn Miller says:

    7 May7 May 10:57

    That must be a typo surely lady London! There is no no need to ”suspect 90% of HfP readers will just keep on flying BA anyway” – the real % will be very near to 100% when members here resume flying.

• Nick says:

  7 May7 May 10:16

  “We will ipdate this article”
  But clearly proof-reading before pressing go is too much trouble!!

• Aston100 says:

  7 May7 May 10:17

  Weasel words.
  The sort of thing I associate with politicians.

  • Aston100 says:

    7 May7 May 10:18

    For clarity, I am talking about IAG / BA here, not Rob’s article.

• Spk says:

  7 May7 May 10:23

  I really hope the loan was given with a condition that it is used for its UK business.

  • Olly says:

    7 May7 May 11:01

    Unless there is some contractual obligation for it to go solely to BA I doubt it. It will go to prop up the whole IAG entity, and I would think even if it is written in a contract to the the contrary the lawyers will blow smoke and tilt mirrors to give the illusion of compliance.

    • Spk says:

      7 May7 May 13:32

      🤡

• Matthew says:

  7 May7 May 10:29

  Sadly I will still fly BA again. This is due to choice or rather lack of it. I will not fly LH or its companies. I will not fly Ryanair, and will use Easyjet as and when. BA has the routes, and BAEC is the best of the schemes that work for me. My local airport is CWL, and to be honest is a joke, run by the Welsh Parliament ( as of yesterday so millions more wasted). Look like Qatar will be ending their services to CWL as well. I can use Bristol, but it is almost as quick to get to LHR and BRS is a grotty horrible airport with rude and unhelpful staff. Easyjet badly let down by ground staff here, despite wearing their colours.

  • Andrew says:

    7 May7 May 11:30

    I usually travel transatlantic from EDI…

    Just rely on a BA domestic to get me there.

    • Baji Nahid says:

      7 May7 May 12:33

      Why from EDI? wouldn’t it be more cheaper to fly from other UK cities that are cheaper to the americas etc

      • Secret Squirrel says:

        7 May7 May 15:36

        Probably in First as most of the good deals to the U.S originate from EDI.

  • LewisB says:

    7 May7 May 12:30

    How is it millions wasted on a name change to Welsh Parliament? If you take just 1% of the cost of revamping Westminster and you can fund the Welsh Parliament for an entire year.

    • Spaghetti Town says:

      7 May7 May 16:41

      There was nothing wrong with the previous name. We all knew what it was called and what it did.

    • Spaghetti Town says:

      7 May7 May 16:44

      Westminster is a historical building and should be protected as so. Sadly it’s the people that work inside it are clowns.

• pauldb says:

  7 May7 May 10:29

  I don’t think the messaging is totally inconsistent. The government loan is not going to going to have a material effect on how BA looks after the crisis and during a slow recovery, and It doesn’t really postpone how quickly BA need to progress this employment consultation to demonstrate how profitable it can be in the future to keep the rest of its debt management under control. In that sense, the loans are hardly a bailout that prevents any need for a right-sizing.
  That’s not to say BA won’t use the moment to drive through as much change as they can.

• jamie says:

  7 May7 May 10:34

  Totally astounding that Virgin are at such an unfair competitive disadvantage in a situation created by the government, they are as British an airline as any other. Hopefully common sense will prevail and they will get a bail out.

  • Mervyn Miller says:

    7 May7 May 11:04

    ”as British an airline as any other” Jamie? Really?

    Owned by a Caribbean tax exile’s Virgin Group (51%) and Delta Airlines (49%) and the latter is as American as Apple Pie as the saying goes..

    I see no real British based ownership in that at all.I realise that you are a Virgin fan but that should not cause you to be inaccurate.

    Be advised that BA, for your information as you stated wrongly that Virgin is as British as any other airline, is majority owned by UK & EU resident taxpayers and institutions. As is Loganair and several others.

    • Umba says:

      7 May7 May 11:18

      So off the top of my head, Mini is owned by BMW, Cadbury by Kraft, ARM Holdings is owned by Softbank, The Times, The Sun, Sky is owned by Rupert Murdoch, Boots by Walgreens. How did we get here?

      • Mervyn Miller says:

        7 May7 May 11:20

        We did not.

        • Umba says:

          7 May7 May 11:28

          Ah, magic occurred.

      • Spaghetti Town says:

        7 May7 May 17:17

        Thats what a free market economy does for you.

    • David says:

      7 May7 May 11:18

      So Qatari and US shares in IAG make BA more British than SRB and DL shares in VS?!

      • Mervyn Miller says:

        7 May7 May 11:22

        Nothing to do with the point at all.

        Virgin has no tax resident British taxpayers – note: NONE AT ALL – so why should British taxpayers agree to bail it out. If asked, I am very confident as to what the great British public would say.

        • Anthony says:

          7 May7 May 11:30

          Except for the fact it’s registered in the UK and pays in the £100m’s of tax to the UK each year. Big difference between the nationality of your shareholder register vs how much you contribute to the economy and HMRC.

          The government has not so far imposed any nationality of ownership requirements on businesses receiving help. Lots of train franchisees are owned by overseas investors – these were nationalised. P&O ferries are owned by Dubai, but provide critical infrastructure, and are in talks for funding.

        • Lady London says:

          7 May7 May 11:36

          So it’s like asking us to bail out Google or Amazon?

        • Anthony says:

          7 May7 May 12:27

          No that’s the whole difference that’s being missed in my view. Google and Amazon are structured to pay as little UK tax as possible due to the way they are domiciled. Google pays ~£50m a year vs the £1.5bn estimated it “should” pay.

        • ken says:

          7 May7 May 14:32

          ” Google and Amazon are structured to pay as little UK tax as possible due to the way they are domiciled”

          Just like Virgin’s whole network of companies & stakes.

          Opaque doesn’t begin to describe it.

          Branson has used aggressive tax avoidance for decades – you reap what you sow.

      • Lady London says:

        7 May7 May 18:24

        Well the Qataris own Harrods and Aspreys and lots of other trad British stuff so why not.

    • Oh! Matron! says:

      7 May7 May 12:34

      Mervyn, or should I call you “Willie”

      https://www.statista.com/statistics/308954/virgin-atlantic-airways–uk-taxation/

      Please read before spouting merde. It’s embarrassing and I feel sad for you.

      “Virgin has no tax resident British taxpayers”

      Neither has WizzAir and it got a bailout…

      • Mervyn Miller says:

        7 May7 May 14:42

        So clearly you believe that two wrongs make a right then!

        If they do not pay UK tax in any significant way then the UK taxpayers should not bail them out imho.

        Especially when there is not even enough money to do the essentials after this and there was apparently not enough to have adequate beds and ICU places, equipment and PPE before the once in a century financial crisis that is rapidly heading our way now.

        But then all woke / left / ”liberal” people, believe in magic money trees. And Stalinism, Leninism and Bolshevism.

        Far too many people have not properly grasped the consequences of the mo ney being spewed all over the place already and clearly have no idea of what is hurtling down the line now – it will change the entire way of life and the entire economy for the present generations and beyond.

        Simples.

        Virgin is very far from being a deserving case in the new world we face. Nor is Wizzair. The founders of both have made huge fortunes like Branson BTW.

        We shall see who the UK Government agrees with soon enough and why.

        • Rob says:

          7 May7 May 15:18

          No it won’t! A vaccine and 10p on Income Tax and all is fixed pretty quickly 🙂

          Some people are failing to understand the difference between this and a war / hurricane / tsunami. In the latter, productive capacity is destroyed. No productive capacity is being destroyed here – not even much of the labour force. It will make a substantial difference to recovery.

    • TGLoyalty says:

      7 May7 May 12:46

      Non-sense they operate out of Britian and they support British jobs – the company is British.

      • Mervyn Miller says:

        7 May7 May 14:52

        How many full-time equivalent British jobs and at what average remuneration package? Minimum wage like virgin?

        And you want to ”save” them all but at what cost for the bailouts – you also fail to address those questions.

        Where there is demand, new airlines will emerge at no cost at all to the taxpayers and many of the jobs you value at a limitless amount will then be saved. Where there is no demand, goodbye is all we need to say.

        Now having stated what I believe to be obvious, this topic has been done to death and it has partly descended into political worldviews which are many continents apart so I am bowing out of this thread now where both sets of opinions are firmly entrenched – basically the leftist state intervention camp and the rest of us.

        We shall see whose views the UK Government agrees with soon enough. Just do not bet on your worldview on this subject being backed by the UK Government. Your day has come and gone so that ship has sailed. I am delighted to know that. Thanks. Have a fine weekend when it comes. M.M.

  • David Safir says:

    7 May7 May 13:09

    I’m not an accountant and my views on (alleged) tax exiles are irrelevant. I am however (like 9,000 VS employees) a UK taxpayer who – in more than 35 years of business and leisure travel in all cabins – is yet to find an airline that gives better service or appreciates my custom more than VS.

    SRB surely deserves credit rather than opprobrium for his entrepreneurship and philanthropy; and his employees, suppliers and customers need and deserve VS to survive every bit as much as those at BA – whose imcompetent and cynical management are using the pandemic to bully them.

    • Colin says:

      7 May7 May 15:42

      Likewise David. As a travel agent of over 30 years who has travelled the world and used all major airlines at various times (both personally and with customers in tow) … VS undoubtedly makes me feel more appreciated. Probably a result of all the business I have given them over the years but then again, I have given an equal amount of business to BA (route options/availability) and they somehow keep making me feel like a liability.

    • J says:

      7 May7 May 16:07

      Agree David.

    • Lady London says:

      7 May7 May 18:28

      +1. I just wish the numbers for Virgin as a business would add up.

      Also apologies to Sinead – who must be under particular stress at this time?

    • Scott says:

      9 May9 May 00:32

      Most sensible words I’ve read on this topic David. 100% agree.

  • Mikeact says:

    7 May7 May 19:33

    @Jamie. Total rubbish…shame you don’t keep up to date with numerous articles written. British company? You need to go back to the drawing board to understand.

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