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The Airline Industry Is Feeling The Heat Of Covid-19

Posted on Apr 14, 2020. by NTI

British Airways

It has been reported that British Airways is expected to announce it will furlough 80% of its staff from cabin crew, ground staff, engineers and head office employees. It is however anticipated that no one will be made redundant.

Talks with the Unite Union about how to manage staff during the crisis have been ongoing for a week and it is reported that a broad agreement has ben reached. Talks continue to finetune the details.

BA will rely on the governments furlough scheme to meet the wage bill. This comes as all flights out of Gatwick and London City have been suspended until the pandemic is over. The airline is still running some services from Heathrow.

BA’s parent company is in better financial position than most carriers and has reportedly extended a £1.1bn credit buffer by a year to June 2021. This means BA has access to £8.2bn in cash, cash equivalents and loans.

 

Boeing

It is not just the airlines that are struggling financially. It is being reported that American based Boeing, who are one of the main suppliers of passenger planes, is set to offer buyout and early retirement packages to employees in a bid to mitigate the financial fallout from the pandemic. Voluntary layoffs will be available as early as Thursday this week.

 

Virgin Atlantic

Following our news post on 28 March about Virgin Atlantic’s request for a government bail out, it has been reported that this has been backed by both Rolls Royce, Airbus and Heathrow.

The three big players in the airline industry have reportedly written to Grant Shapps, Transport Secretary urging state assistance for Richard Branson's airline.

Virgin has ordered a fleet of Airbus 330 with Rolls Royce engines whose wings are made at the Airbus Broughton plant in north Wales. The airline had also planned to expand its operations at Heathrow shortly before the pandemic took hold.

It has been reported by Sky News that in his letter to Mr Shapps,  the UK chairman of Airbus stated Virgin’s “collapse could have an extremely negative impact on the A330 programme” adding that “all wings for these aircraft are designed and manufactured in the UK, and orders from airlines like Virgin are vital for the continuation of our business.

Any bailout would likely be challenged by Virgin's larger competition, British Airways. So far, Rishi Sunak’s stance has been for the airlines to apply for funding using the business loan interruption scheme available to all struggling businesses across the UK.

 

Easyjet

We have yet to report on the controversy surrounding Easyjet, who paid a dividend of over £170m to shareholders yet in the same week talked of insolvency unless it was able to cancel a reported $4.5bn aircraft order from Airbus.

Sir Stelios Haji-Ioannou, the founder of Easyjet, who received a dividend of £60m from the dividend, was reportedly perplexed by media reports that he should have waived the payout and stated “the dividend was legally at the point of no return”

Easyjet’s entire fleet was grounded on 23 March but it reportedly has £1.6bn net cash and a $500m revolving credit line. Whilst negotiations are ongoing with Airbus to defer and reduce payments for the payments for the 107 aircraft on order.

 

Ryanair

Ryainair are reportedly still operating most of their fleet on a regular basis in order to keep them serviceable.

Ryanair are operating “ghost flights”, empty planes with no passengers that take off, circle the airport and land again.

Planes that have been grounded for a significant period of time have to be serviced before they are cleared to fly again, a process that keeps planes out of the sky for longer, increasing lost revenue.

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