British Airways job cuts top 8,200 as parent company IAG raises billions of euros to shore up finances

Jim Armitage @ArmitageJim10 September 2020

British Airways today announced it had cut 8,236 jobs, while its parent company IAG said it had struck a deal to raise e2.7 billion from shareholders to shore up its balance sheet.

The group, whose BA division is in the process of cutting 13,000 staff in sometimes bad-tempered negotiations, said most of the BA jobs had gone from voluntary redundancies.

The fundraising plan was approved by shareholders earlier this week.

Those taking part will buy new shares at a 35.9% discount to last night's closing price.

The capital raise has been fully underwritten by its supporting banks and IAG's biggest shareholder, Qatar Airways, has agreed to take part with its 25% stake.

The fundraiser is intended to give IAG the ability to survive a more prolonged downturn in air travel.

New chief executive Luis Gallego said June's end to lockdowns had seen a bounceback in bookings to around 30% of pre-Covid levels, but that had levelled off since July, with short haul bookings in particular being impacted by quarantine rules putting people off taking trips.

The recovery had mostly been in domestic and short haul, but long haul booking activity had never recovered as travel restrictions to destinations including North and South America restrict demand.

Gallego said there had been a modest pick up since the middle of August, adding: "Where travel markets have reopened without border restrictions and quarantine requirements, IAG has been encouraged by the level of pent-up demand that exists for air travel."

IAG has cut its capacity plans for the third quarter further than before, taking it down 78% lower than last year as opposed to 74% in its previous plan.

For the fourth quarter, it will be down 60% against the earlier forecast of 46%.

Next year's capacity overall will be down 27% on 2019 compared with 24% previously planned.

However, it will still hit breakeven on cashflows in the fourth quarter of this year due to harsh cost cutting.

The BA job cuts plan has seen deals done with pilots, engineers and Heathrow customer service staff.

Ill-tempered talks with the Unite union over cabin crew have reached an agreement in principle but the terms of the cuts are still to go to the ballot.

Further job cut negotiations are now ongoing with Heathrow ground handlers and cargo staff, UK contact centre workers and Gatwick-based cabin crew.

Staff at Iberia and Vueling are still on the Spanish government's furlough scheme which, unlike the UK, is being extended into next year.