LONDON (Reuters) – Shares in airline group IAG (ICAG.L) fell 3% after the airline group launched a plan to shrink its main British Airways business, axing staff numbers by a quarter as it warned of a slow recovery from the coronavirus pandemic.
FILE PHOTO: British Airways planes are seen parked at Bournemouth Airport, as the spread of the coronavirus disease (COVID-19) continues, Bournemouth, Britain, April 1, 2020. REUTERS/Paul Childs
With no end in sight for the travel bans which have brought flying to a near-halt, airlines across the world are facing deep uncertainty and heavy future losses, and no visibility on how and when operations can restart.
British Airways could make up to 12,000 staff redundant, its parent company said on Tuesday, as it forecast that passenger numbers will take years to recover from the crisis. BA has 45,000 employees, including 16,500 cabin crew and 3,900 pilots.
Traders said that IAG’s shares fell due to the warning over demand and after first quarter results came in worse than expected. Its stock has lost 64% of its value in the last three months.
The radical shake-out planned at IAG to help it survive the coronavirus crisis contrasts with moves at rival big European airline groups Air France-KLM (AIRF.PA) and Lufthansa (LHAG.DE), which are both hoping that government bailouts will see them through.
Lufthansa said on Tuesday could seek some form of protection from creditors while talking to the Berlin government about a 9 billion euro rescue package.
But IAG’s chief executive Willie Walsh has long-opposed state-backed rescues for airlines and BA said on Tuesday that there was “no government bailout standing by for BA”.
IAG, which owns Iberia and Vueling in Spain and Aer Lingus in Ireland as well as BA, has, however, used government furlough schemes to help pay staff who have been temporarily suspended while planes are not flying.
Analysts pointed to IAG’s strong financial position, it said on Tuesday it had 9.5 billion euros available at the end of March, saying that this meant IAG was in a better position compared to its peers.
“(This) gives some reassurance to investors that IAG will be one of the survivors and possible long-term beneficiaries of this current crisis,” Goodbody analyst Mark Simpson said.
Earlier on Wednesday Finnair (FIA1S.HE) announced plans to raise 500 million euros ($543 million) through a rights offering that would be almost as large as its current equity.
Reporting by Sarah Young, editing by Louise Heavens