NEWS: IAG’s Willie Walsh taken to task by Select Committee – will BA leave London City, outsourcing & more

So slightly delayed… I sat and watched the Transport Select Committee yesterday and then ended up running out of time to finish this. Overall I have to say Willie Walsh did not come across well. If I thought politicians were excellent at avoiding the question, Mr Walsh took it to a whole other level! He often spoke over people and refused to listen to MPs which came across as pretty rude. Finally, he asked how much longer it would take because he was busy….

You also have to take what he says in the context of being questioned over making 12,000 staff redundant and changing their terms and conditions. 

Some people were less than impressed with Willie on Twitter

Man trapped in toilet cubicle struggles to answer any direct questions using earbuds that cost £7.99 on EBay pic.twitter.com/klgaJqBzFj

— Capt Twit(ter) (@Intrstng) May 11, 2020

Quarantine for UK arrivals

In March BA 50% less traffic and 30% less capacity than 2019. Up until the announcement of the 14-day quarantine, BA had been been planning to start flying on a fairly significant basis in July. They will have to review that based on what the government have announced.  Willie said he couldn’t really believe that the UK were introducing the quarantine and why air transport had been singled out. If it is introduced as the government has announced, they would be forced to reduce flying to a minimal level in that event. He also questioned why it would not apply to arrivals from France (my thoughts exactly). 

“We had been expecting governments around the world to start easing restrictions.”

Freight operations

The amount of freight BSA were carrying using passenger aircraft was discussed, presumably to understand the economic position BA are actually in. In April there were 422 freight flights with passenger aircraft and they are expecting more than that in May and June. They also have partnership arrangements such as Qatar transporting freight on their aircraft within the commercial revenue-sharing arrangement on certain routes. 
The freight they have carried included 2000 ton of PPE, thousands of tons of food and medical supplies, gold, diamonds and money!

Traffic levels and outlook

Now personally I take anything the airline take about demand with a pinch of salt. Firstly because at this point it is complete guesswork and secondly it is also in airlines interest to paint a bleak picture to get funding from the government. Or in BA’s case get rid of thousands of employees and reduce the salary and terms of conditions of many of the rest. 

Willie thought that traffic (notwithstanding the potential effect of the quarantine) would gradually build up by 2023 to 2019 levels. A lot will depend on what kind of recession we end up with and how long it may last. The airlines will have had a double impact from the virus and a recession. 

Financial situation

Willie stated that BA had a much greater exposure to the impact than other IAG brands due to the level of business travel on BA than other airlines. 
BA accounted for most of the profit of the whole group in previous years, however, they have the highest fix base cost of the whole group. Therefore the swing from profit to loss will be much greater. Therefore BA will need to adjust their costs more significantly or will make a more significant loss than others in IAG. 

Then Willie managed to contradict what he says in the Air Europa questioning below about each airline being a separate entity:

He was asked how much liquidity BA had at the moment. At the end of April 2020, IAG had €6.4bn in cash and €3.6billion in loan facilities, part of which is a 12-month revolving credit on secured on aircraft. He refused to answer how much cash BA had saying they don’t disclose that number. But her, I thought all the airlines were separate entities?? 

Air Europa acquisition and aircraft orders

Understandably there have been a lot of questions raised about the purchase of Air Europa by IAG despite then claiming poverty and a need to get rid of over 12000 staff. When discussing the purchase he eas careful to state “if it proceeds” but he did not say anything about that they were considering pulling out. He tried to distance BA from the purchase claiming it was purely Iberia and that all the airlines within the group operate as separate entities. They do have indeed each have their own P&L. But Willie Walsh said all IAG did was to “co-ordinate” the airlines and that they make their own decisions. So Willie has no say at all on what each airline does? Hmmmm…. 

He also confirmed that they are not planning to buy a share of Austrian Airlines which has been rumoured recently.

They discussed the 200 B737 MAX on “order” and Willie confirmed that they were only an option so the order could be revised. IAG have also renegotiated delivery to reduce the number of new aircraft received by 68 for 2020-22. 

Job cuts

In this section of questioning Willie Walksh pretty much dodged every question. His main reply was that he was acting as required by law and consulting the trade unions. The MPs grilling him all stated that they had been inundated by BA employees begging for help in the face of the threat or redundancy or huge pay cuts and new terms and conditions. He trotted out all the usual stuff about how it was the greatest threat aviation has veer faced etc etc without actually answering a single enquiry despite repeated requests. 

He did state that they were investing in equipment, not people by replacing their fleet with more modern aircraft. He was questioned about whether he was taking advantage of the union’s relatively weak position at the moment and said he was surprised at the question. Do we really believe he didn’t think that people would jump to that conclusion? Willie did admit that the crisis was not the only reason he was planning to make the changes.

When questioned about BA’s cash burn rate, he also stated that furloughing staff for longer (as it now has been extended) would only save them about another 10 days cash burn. And yet he was also trying to say that staff were one of their biggest costs. So if furloughing most of your staff makes little difference to your cash burn, why would making them redundant help in the short term? 

MPs also challenged him on the fact that BA have taken a government loan despite Alex Cruz’s email stating that they could not rely on government bailouts. This was justified by the fact is was not an airline-specific bailout but an option available to any business. 

There was also discussion of outsourcing Heathrow flight management, ticketing and the worldwide baggage resolution centre offshore. 

Gatwick and London City

There has been a lot of discussion about closing Gatwick but in fact, Mr Walsh seemed very keen to return saying he saw a future there and that it was a better run airport and more commercially focus than Heathrow (i.e. cheaper). 17% of BA operations are normally based at Gatwick.

“I’d like to think BA will be operating at LGW in the future”

Willie did not seem very positive about London City airport, which is understandable given the predicted downturn in business travel and Crossrail coming into action in the future. He said they would be looking at its future with the unions as part of their wider consultation. Willie pointed out that London City was me of the first airports to completely close in the crisis. 

In my own opinion, London City’s BA1 was already looking shaky prior to the crisis. I think it is highly unlikely to return now sadly. 

Refunds

Willie Walsh dismissed claims that they were deliberately trying to prevent people from getting a refund. He did state that they will give all passengers a refund if requested. IAG say they have issued €1.1 billion in refunds to passengers whose flights have been cancelled. Sadly the MPs did not really have the expertise to pursue this with him. The question should have been, why did you deliberately remove all online refund options from your website that there were before COVOD struck? However, BA are gradually refunding people’s money and my advice is to keep trying the phone lines, don’t select any options or press anything and you will get through eventually!

Safety for passengers

BA have been surprisingly quiet compared to other airlines about wearing mass on board. Willie said they are working with regulators to get a EU system of what measures should be taken for safety. They were also in favour of masks on board and track and trace of passengers. Surprisingly he liked the idea of temperature checks both ends of the journey. A lot of people don’t favour this as obviously it does not pick up everyone with COVID. But surely it picks up some people, so why not use as one of several measures?