Willie Walsh, Chairman and Chief Executive of International Airlines Group (IAG), the parent company of British Airways, appeared before the House of Commons Transport Committee yesterday.
If you were hoping for any revelations regarding the proposed British Airways restructuring you will be disappointed. Walsh’s favourite line throughout the entire 110 minute ordeal was:
“we will engage in good faith consultations with the elected representatives”
Despite the MPs’ best intentions Walsh did not deviate from this argument. To be fair to Walsh, there is little else he could have said. Commenting on the ongoing consultation would have been inappropriate and angered the unions even further. IAG is also a quoted company which means that he needed to be careful not to give any information which could move the share price.
Nonetheless, the line enabled him to deflect questions from MPs who have received emails, letters and documents from British Airways staff regarding the restructuring efforts. Huw Merriman, the chairman of the committee, estimated that he had received around 1,000 emails from concerned staff, and many of the other MPs also referred to inboxes full of emails from employees.
Despite this, there was little to say about the proposed redundancies or pay cuts at British Airways since this depends entirely on the current ‘consultation’.
Throughout the committee, Walsh re-iterated IAG’s position that it the aviation industry was facing its most significant crisis ever, and that British Airways was ensuring not just its short term survival but also long-term ability to compete in the global aviation sector.
Walsh again said that IAG does not believe that air traffic to return to 2019 levels until 2023 at the earliest, and called this the “most optimistic” scenario. 2024 was mentioned more than once.
He said that he is keen that British Airways WILL return to Gatwick Airport. Given that Heathrow will remain at capacity (airlines will do whatever they can not to lose their ultra-valuable landing slots) this should not be a surprise. Unless BA permanently shrinks to a size 20% smaller than it was in January, it will need Gatwick. It will also need its leisure-focused customer base if business travel is slow to return.
One interesting figure to come from the committee is the effect of the Government’s Job Retention Scheme. According to Walsh, the scheme has only reduced BA’s cash-burn to an extent that it could survive an additional 10 days. Given that IAG is losing €200 million per week at the moment, this is not surprising.
How will a 14 day arrival quarantine affect British Airways?
Walsh was not particularly impressed by the announcement of a 14 day quarantine for air arrivals into the UK. He was disappointed by the vagueness of Boris Johnson’s Sunday address, stating that
“the announcements of a 14 day quarantine period […] is definitely going to make it worse, there was nothing positive in anything I heard the prime minister say.”
Walsh had stated last week that IAG hoped to reinstate approximately 50% of capacity in July. He said yesterday that the announcement of a quarantine period would require the airlines to review their plans and that passengers flights from the UK would be ‘minimal’ if it went ahead.
Walsh was also disappointed that the quarantine would apparently not apply to Eurostar or ferries. That said, the official Government guidelines published yesterday afternoon – after Walsh had spoken – make no reference to special treatment for non-air traffic.
As we reported last week, British Airways is running a key number of routes that are cash positive on a cargo basis alone. In April, BA operated 422 dedicated cargo flights using passenger aircraft. Walsh expects this number to increase this month and next.
When it comes to how flying will look in the future, Walsh pointed to his hopes that a forthcoming document on in-flight standards and safety to be published jointly by the European Aviation Safety Agency.
Could the RAF offer support to pilots?
One issue that was raised was discussions to allow ex-RAF pilots to return to active duty for a limited period. This is a plan put forward by BALPA, the British Airline Pilots’ Association. It was not clear in what capacity, if any, discussions had taken place with the RAF.
Such a scheme would allow British Airways to release pilots to the RAF and thus reduce its cost base by a fraction. In effect, the UK Government and the Ministry of Defence would be offering financial support to British Airways in the form of financially-backed secondments.
Whether or not the RAF actually needs additional pilots, and what exactly they would do with them, is another matter. At this stage it appears the unions are pursuing all avenues. I would not necessarily expect this to come to fruition.
Is British Airways withholding refunds?
One topic that has been extensively covered on Head for Points as well as mainstream media is the difficulty in getting cancelled flights refunded.
When challenged why British Airways had removed the option for online refunds, Walsh claimed that
“the online system was not set up to deal with the volume of correspondence we were receiving”
“most of these have to be manually processed at one level or another to ensure that the refund is correct”
Asked directly whether the removal of online refunds was taken to put people off refunds, Walsh stated that it was “most definitely not” the case. He said that IAG has paid out over €1 billion in flight refunds since March.
That said ….. who is doing a better job than British Airways? easyJet, Ryanair and Virgin Atlantic have not been covering themselves with glory either. Virgin Atlantic is currently insisting that passengers wait 90-100 days for their money, whilst British Airways is processing refunds quickly once you manage to get through to the call centre.
Did Walsh get away with it?
In general, Walsh will feel that he got off lightly. He never had to give a straight answer as to why redundancy notices have been issued to virtually all British Airways staff or why Eurofleet and Worldwide cabin crew at Heathrow will have to accept pay cuts of 50% or more.
Whilst some of the committee members were well briefed, others took the debate off into obscure corners (such as the RAF secondment scheme, or the acquisition of Air Europa) which gave him breathing space.
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