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.
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
The full results document is here. A further article on Friday will look at what was covered in the conference call that followed.
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