IAG takes UK Government funding, despite British Airways saying it wouldn’t as an excuse for job cuts

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The British Airways redundancy saga took a new twist this morning as IAG, BA’s parent company, announced its results for the three months to March.

When British Airways announced its 12,000 redundancies, it was partly pitched as a way of keeping the airline from having to take UK Government funding.

Given that BA’s sister airlines, Iberia and Vueling, have been happy to accept a bailout worth €1.0 billion from the Spanish Government, this always sounded a little odd.

IAG takes a UK Government bailout

It was revealed this morning, however, that IAG HAS accessed the UK Government’s Coronavirus Corporate Finance Facility. This provided a £300 million bailout in the form of a ‘soft’ loan, underwritten by the UK Government and taxpayers.

For clarity, this is what Alex Cruz said in his statement last week to justify both 12,000 job cuts and the huge salary cuts (over 50% in many cases) proposed for legacy Eurofleet and Worldwide crew members at Heathrow:

There is no Government bailout standing by for BA and we cannot expect the taxpayer to offset salaries indefinitely.

Except, as we said at the time, there was. As IAG has taken the loan directly (it is allowed to do so, even though it is a Spanish company) BA can continue to claim that it is not seeking UK Government funds.

Interestingly, IAG took this money in the second week of April, according to Bloomberg, which means that it was already in the bank when Alex Cruz made his statement about British Airways not getting a bailout.

In a call, Willie Walsh clarified that IAG has never been opposed to accessing government support that is available to “all” companies – although the CCFF is not open to all.

Where this leaves Virgin Atlantic in its attempts to secure UK Government support remain unclear. As a reminder, it is only due to a technicality – that it had no traded bonds in issue before coronavirus struck and so did not have a credit rating – that it cannot take its own bailout from the Coronavirus Corporate Finance Facility.

What else was in the IAG financial results?

I won’t dwell on the financial results for Quarter 1 since they are irrelevant in the scheme of things. These are the key points:

The Group is burning €200 million per week albeit with a €10 billion cash cushion

‘meaningful’ scheduled flights will operate in July, subject to travel restrictions being removed

2019 passenger volumes are not expected to return until 2023

68 aircraft deliveries across the group have been delayed

The group has lost €1.3 billion on its fuel and currency hedging strategy

Outside of the official results statement, it was confirmed that:

IAG is proceeding with its €1 billion acquisition of Spanish airline Air Europa, depending on what conditions are attached by the European Commission (it would give IAG 73% of the Spanish domestic flight market). The purchase agreement contains a mechanism for adjusting the price.

The Letter of Intent to acquire 200 Boeing 737 MAX aircraft remains in place

The full results document is here. A further article on Friday will look at what was covered in the conference call that followed.

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This article is closed to new posts. Discussion continues in the HfP Forums.

Jess says:

8 May8 May 09:43

Honestly, I’m done being loyal to British Airways and IAG. The way they have dealt with all of this is disgusting, not caring about their employees and just using them as pawns, compared to Virgin Atlantic who have done everything possible first to not have to make redundancies. My boyfriend works for Virgin and despite how horrible this all is, the leadership team have been as good as they can be, and have truly put their staff first.
- Mikeact says:
  
  8 May8 May 09:58
  
  What have they done to not make redundancies? I didn’t quite understand.
  - davvero says:
    
    8 May8 May 11:27
    
    They’ve done nothing, except that I’m sure that Virgin have good PR internally just like externally. There’s probably been a video message with Branson on his island saying that he’s trying so hard for everyone.
    - Rhys says:
      
      8 May8 May 11:34
      
      The criticism levelled at BA was partly on the basis that they were reducing redundancy packages to the statutory minimum. Not sure what Virgin are doing but it seems like it’s slightly less frustrating for their employees given nobody has kicked a fuss
      - Anon says:
        
        8 May8 May 12:33
        
        BA is a textbook case study of poor industrial relations – whatever the rights and wrongs the level of animosity between BA and their staff is striking and it hurts BA. Management regularly show contempt for staff, staff hate management. On the other hand there seems to be significant good will between most Virgin staff and their employer. A close relative as a solicitor used to represent Virgin at employment tribunals and constantly expressed their surprise at the fondness for Virgin amongst former staff taking them to a tribunal! I would also hazard a guess BA spend a lot more on employment tribunals… This isn’t just internal and external PR – the Willie Walsh and Michael O’Leary management style clearly has an effect.
    - Anon says:
      
      8 May8 May 15:27
      
      Virgin have done plenty to avoid redundancies before announcing them, it’s well documented that execs took pay cuts, brand payment deferrals, retiring older fleet, network changes, staff agreeing to take unpaid leave and furlough of staff have all happened to try and avoid this, as time goes on it was inevitable. However not working for them, it’s not likely to be something you would grasp and always put it down to “good PR”. You don’t read about it because nobody complains and genuinely loves working for the company.
- Ralph says:
  
  8 May8 May 10:14
  
  Losing a job is horrible, but both BA and Virgin have already taken all the obvious steps to cut costs to a bare minimum, preserve cash, draw down credit lines, use government schemes where possible etc. They still have a lot of fixed costs such as premises, essential staff, aircraft lease costs and maintenance etc. However, they can only operate a minimal flying schedule now and in a very best case scenario might operate 2/3 of their schedule by the end of the year. The furlough scheme will wind down and cease soon. No major airline has any option but to reduce staffing on a huge scale.
  - Harsh says:
    
    13 May13 May 01:29
    
    Ralph may be you need to understand what IAG and B.A are trying to do here. Willie Walsh is trying to put all staff on new lower pay and terms and condition contracts. Basically zero hours. I really don’t know what you do for a job, but I’m sure you would not work on zero hours contracts. IAG and B.A management have paid numerous fines over the years and recouped the money from their staff by cutting their salaries. Willie Walsh has earned over £30million in wages and bonuses over the years. Also Alex Cruz and the rest of the absurd board of directors have been taking huge bonuses, and what have the staff got. May be you should look deeper into the situation before making your ill judge comments. For your information the new contract the management is taking about £1000 month after all deductions for cabin crew. No fixed rosters, change to grievance and dismissal procedures meaning sacking staff without any notice or reason. Hope you can work for a company like this.As for the B.A using all avenues is total nonsense. This is all about getting rid of favourable contract employees for generating more profit. If they have used all avenues where are they getting the money to by Air Europa for £1.1billion, and also if the air travel is not getting back to normal say until 2023 as you believe why buy other airline. Good luck with your irrational thinking.
Scott says:

8 May8 May 23:52

The biggest factor in this story for me is the lack of it across ANY UK news outlet. The actions of BA and the (largely completely inaccurate) sensational red top bear baiting of Richard Branson are appalling.

Something stinks here. BA furlough 22000 staff to the tune of £110 million to the U.K. government, then dump 12000 of them. Then Cruz makes a public statement to say that culling the staff is the only way to deal with it to avoid the taxpayer stumping up for it AFTER they have already, through the back door, ALSO secretly accepted £300 million.

I’m constantly sickened by the way my fellow citizens react to things in this country. The amount of vile social media campaign abuse being directed towards Virgin Atlantic, and SRB in particular, regards a possible “loan” by idiots as “he owns an island” shows the underlying large levels of jealousy that exists through our nation like a cancer. It the old horrible British pastime of “build them up then shoot them down”. Even Karren Brady was at it with an article written FULL of inaccuracies.

Astounded that the true appalling actions of BA receive little attention, yet there are many articles, petitions, campaigns, almost ALL of which are based on complete factual inaccuracies, regarding VA.
- Anon says:
  
  9 May9 May 00:03
  
  Agree 100%, the level of populism and the state of much of the media in the UK is extremely depressing.
- Tony says:
  
  10 May10 May 11:26
  
  Agree.
  The social media and media in general, campaign against SRB, has been a disgrace with no regard to the staff.
  The key board warriors seem happy for people to loose jobs rather than help a British registered airline to survive.