- The airlines are facing a substantial financial crisis while the government is taking all measures to stop the spread of the virus.
- More than 6,000 British Airways workers have conceded voluntary redundancy
- Authorities of Gatwick Airport's South terminal indicated closure of operations at the terminal until next summer
Travel bans had been imposed by almost every country to stop the spread of infectious disease, Covid-19. The resultant effect has been a significant financial loss to the aviation sector worldwide. Saving lives is the priority for any government right now, and they are left with no other choice but to restrict the movement of people from one place to another.
Due to the travel bans and lockdown, all airline operations have come to a halt with only a few exceptions. The airlines are facing a substantial financial crisis while the government is taking all measures to stop the spread of the virus. The crisis has had a devastating effect on the airlines, making them turn to the government for cash injections.
The coronavirus pandemic has massively hit the travel, tourism, and aviation industries across the globe. Millions of jobs are at risk in the Tourism and Travel industry due to the pandemic crisis.
British Airways on a job cutting spree
Many British Airways crew members and ground staff will discover whether they will lose their employment or face pay cuts after more than 6,000 workers conceded voluntary redundancy. The individuals who don't chip in for voluntary redundancy and afterwards deny new roles under the new terms could be dismissed, with the chance of them being re-employed again on a condition that they later choose to acknowledge a different role.
In April, British Airline's owner International Consolidated Airlines Group (IAG) reported that it would be removing up to 12,000 jobs due to the coronavirus pandemic. BA is still flying under less than 20 per cent of its capacity after the crisis started and as of late.
Union has commented saying the company is planning to rehire the rest of 30,000 employees on downgraded terms and conditions if an agreement cannot be reached in what they have branded 'fire and rehire proposals'.
Gatewick to Close Down its South Terminal
After the IAG owned BA signalled further job cuts, the authorities of Gatwick Airport's South terminal indicated closure of operations at the terminal until next summer. The industry has been devastated by the onslaught of the novel coronavirus and was further crushed by the new travel regime announced earlier in the UK. The Gatwick airport has been witnessing huge decline in passenger numbers due to the unprecedented crisis.
Financial worries of IAG
Government’s travel restrictions have affected IAG airlines, resulting in the airline company to end up making substantial losses. The company’s Q2 passenger traffic fell by 98.4 per cent on a capacity reduction in the quarter of 95.3 per cent. It is evident that the demand will recover when government restrictions are lifted. The company has to adopt safety measures to provide additional reassurance to their customers and employees onboard and at the airport. It is expected by the airline company that it will take until at least 2023 for passenger demand to recover to 2019 levels. IAG has been consistently taking action to strengthen its balance sheet and liquidity position, by reducing its operating cash costs by 50 per cent, and therefore, significantly reducing its capital spending.
The liquidity position of the company stood at €8.1 billion. On the basis of their current capacity planning scenario, it would be reaching breakeven in terms of Net cash flows from operating activities during Q4 2020.
The company recorded an operating loss of €1,365 million before exceptional items in comparison to an operating profit of €960 million last year in Q2 2020. The total operating losses including exceptional items relating to the early retirement of British Airways' Boeing 747s and Iberia's Airbus A340s came to €2,177 million.
IAG operated 1,875 cargo-only flights using passenger aircraft in Q2, contributing cash to the Group.
International Consolidated Airlines Group PLC (LON: IAG) stocks last traded at GBX 185.65 on 7 August 2020, down by 0.24 per cent from its previous close. The 52-week low/high price was GBX 163.85/671.00. It was having a market capitalisation (Mcap) of £3,696.47 million. The company recorded a negative return on price, which was 70.82 per cent on a YTD (Year to Date) basis.
IATA’s Take on the Airline Industry
According to the data from IATA (International Air Transport Association), a trade body, the industry-wide RPK’s (revenue passenger-kilometres) fell by 86.5 per cent in June 2020 compared to the same period previous year. Notably, the RPK’s fell by 91 per cent in May 2020.
Domestic flying continues to drive growth in the domestic markets. As international travel restrictions have been lifted in some parts of the world, improvement is expected in July. The industry overall witnessed a continuous plunge in passenger volumes with reference to available seat-kilometres (ASKs). The global passenger load factor reached an all-time low at 57.6 per cent for the month of June.
The British Airline Industry has probably been one of the most affected industry due to the COVID-19 pandemic. However, with the support from the government, improving the lockdown situation, and neighbouring countries moving towards opening travel restrictions, the industry might start seeing some gradual traffic improvement in the coming months.
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