Monday 12 October 2020

Can BA (or other airlines) survive in 2021?

I noticed over the weekend that IAG has no replaced its long-standing CEO, Willie Walsh and now also replaced the CEO of main subsidiary British Airways. 

Lots of commentary notes that the huge dispute with staff over the 13,000 job losses was hte root cause of the changes. I recall from day slong gone that Rod Eddington lost his job for the same reasons in the last decade and then Wille Wlash himself was booted upstairs because of staff disputes. Basically, fighting the unions at BA is the main job of any CEO. The company is stuck with a huge historic Union base in a way that competitors like Easyjet and Ryanair are not. It has always made BA a hardship to manage. 

However, the current  effect of covid-19 is having a massive impact. IAG has raised extra finances (€2.7 billion) to help them through the crisis, but the plans for next year are to have flying capacity at 70% of 2019 levels. That feels very optimisitc, with the pandemic accelerating across Europe, India and the US, international travel is going to remain limited well into next year. Plenty of people will have a fear of flying too caused by the pandemic. 

Overall, I would be surprised if they got to 70% by the end of next year, after some vaccines have begun to be rolled out. To make it that far is going to need some epic cost cutting to really slim the airlines down, I can only see many airlines really surviving if  Governments' steps in to help with the blalance sheets. 


Matt said...

Why not prop up zombie airlines as well? Sunak's magic money tree seems to have no limits to the bounteous fruit it produces.

Anonymous said...

"That feels very optimisitc, with the pandemic accelerating across Europe, India and the US"

There's no acceleration. Look at the figures for deaths in the UK and US. Nowhere near, not even close, not even the same order of magnitude as what they were in April. The numbers are going up because people are being tested much more. Many people (eg students) are forced to be tested. And many have to be tested regularly, every two weeks or even more often.

What's killing airlines, commercial landlords (and therefore pension funds), hotels, pubs, restaurants, the National Trust, charities, country parishes and many thousands of small businesses is not the virus, but the government's response to it. Surely this blog is intelligent enough to see that?

I've heard that only about 300 people in the UK under 60 have died of Covid since the whole thing began -- even using the 'death rates' that include people who die of heart attacks etc who test positive for Covid. Can someone verify that?

Nick Drew said...

anyone know what the French rescue deal is for Air France? I have heard they must undertake to reduce radically internal flights (to allow rail / SNCF to regain market share)

obviously Air France says the EUR 10 billion stumped up by France + Neth is not enough ...

Anonymous said...

It's a casedemic, not a pandemic.

E-K said...

As I said from the outset.

Many more have CV-19 than was realised at the beginning of the year. The disease (though serious enough) is not nearly as lethal as first thought.

This was obvious when the top Hollywood star Tom Hanks got it and didn't die - meaning it was already established in that social tier. And how many top stars do we know who have had it and died ? None. We know of a couple of obscure Z listers and the hubby of one UK B lister (who is still alive - Derek Draper.)

So the obsession has now moved from death rate to infection rate. A total con trick.

This is because our governments can't be seen to blink first. You get New Zealand able to get infections down to zero but that is a very unique country and no-one is reporting on the devastating economic impact of their international self isolation.

So the airlines are going to go bust.

Huge swathes of the western economies are going to go bust.

Many many young people are now going to die and be forced to live shit lives.

And no-one is even reporting on the consequences on public health of China positioning into leading world super power.

dearieme said...

"The company is stuck with a huge historic Union base": only because its managers are not businessmen. Any businessman would grab the Covid crisis as the perfect opportunity for a bit of union-busting.

Bill Quango said...

Royal Mail have the same problem for the same reason s.

Xmas 2019 87% of mail workers balloted, voted to strike. A nationwide Xmas strike breaks RM.
the threat alone pushed the profitable business parcels accounts to other carriers. The strike was only halted by legal action by the chairman of Royal Mail, which succeeded on a very thin technicality. That some shop stewards had tweeted out themselves, filing a vote for strike action.

RM, CWU union have well dodgy form on strikes. But the 2029 was a genuine response to a management caught between the urgency of making cuts to remain competitive and a workforce with nothing left to lose by strike. If the company goes bust, so what? As the good jobs will be lost anyway if the strike fails.

Much as with BA Before the Union could ballot again, the despised chairman, and his golden hello, good morning, good afternoon, good evening, goodbye deals, was gone. Jumping before booted.

87% is a shocking indictment of his foolishness. The average RM ballot to strike, succeeds on half that.

It’s a tough old job being chairman. Covid has made RM busier than ever. But the covid rules and such have disproportionately effected RM more than their more casual competitors.

Time has been bought. As with BA the real new world and new normal, will be visible next year.

CityUnslicker said...

Anon - there is clearly an acceleration from the summer, when even with poorer testing we were finding 500 cases a day, no 15,000.

We all want the pandemic to go away, i wrote last week about choices I would make to balance the economy with the disease. What I won't bother with (not saying this is you) are the casedemic people and types - I know 4 people who have died of covid, one a healthy young guy. It is not a fantasy or a disease which is easily handled. IN small numbers it is fine, but if we get back to 100,000 cases a day it will be more than just students getting it and the hospitals will be crowded with very ill people.

BlokeInBrum said...

Has the health minister got back to us about what the false positive rate for testing is? As for ICU capacity, it's been running at around 80/90% for the last five years. Yet even with the Covid outbreak, the Nightingale hospitals have barely been used.
Hospital admissions have been creeping up, but it's hardly the Holocaust that has been predicted. As in most things the government does, the cure is worse than the disease.

DJK said...

People who think that the government are simply scaremongering on Covid-19 are welcome to try living in Manaus, Brazil, or one of the other municipalities where no preventative action at all is being taken. I here there are still plenty of vacancies for gravediggers.

On BA, I do find the glee with which some folk talk about union busting or welcome the replacement of well paying permanent jobs with minimum wage, zero-hours contractors, in extremely bad taste. Yes, the market has changed and companies need to adapt or die, but we can all surely see that working for BA provided a great deal more human dignity than working for Ryanair.

BlokeInBrum said...

It's a little disingenuous to compare an emerging economy like Brazil, where large numbers of people live cheek to jowl in complete poverty in slums, to a first world country like Britain.
The hospitals in Manaus and the like were totally overwhelmed by the first wave of the virus which resulted in many excess deaths.
I think many Brazilians are simply too poor to sit on their arse and do nothing for 6 months to wait out the virus, they have no choice. Which is why for Bolsonaro and Brazil, its business as usual.

E-K said...

Bloke in Brum.

The Nightingales can't be used because they are unsuitable.

The vast majority of people admitted to hospital with CV-19 have comorbidities which the Nightingales are not equipped to treat.

They were built to cope with thousands of ordinary otherwise healthy people needing to be put on ventilators - when we didn't know anything about the virus.

So now we're going to crash the economy. No sign of Thud's autumn vaccinations to date.

We will be Brazil by this time next year.

By that time CU may well know more people who have died of suicide, cancer or the effects of poverty (crime) by then.

And poor unemployed people aren't going to allow those WFM to keep their money for themselves.

This was all so bloody unnecessary.

BlokeInBrum said...

With all due respect to CU and the families of those that have had their time cut short by the virus, the fact remains that in the UK, the average age of those who have died is 82.
What of the hidden cost of those who have died, or are yet to die from causes other than Covid? Those who are unable to access the treatment they need in a timely fashion because of the sole focus of the NHS on Covid, and nowt else?

Nessimmersion said...

It is extremely disingenuous to compare us to Brazil.
Instead compare Brazil to Peru, they are neighbours after all.
Peru has had one of the strictest lockdowns in the world and has a higher death rate than Brazil.
Although if we carry on with these lockdowns our standardnof living will be closer to Manaus than to Stockholm.

Elby the Beserk said...

We have two friends, older than us, one 75 the other 954, both of whom came down with COVID, then were told they tested negative.

It now seems that 20% of tests give a false negative. I.E. They are worse than useless

Thud said...

Ek, vaccinations still seem to be on track within a margin of a couple of weeks, the system wide hatred of Trump is slowing things down a little as they can't be seen certificating one before the election.end of Oct begining of Nov was and is my belief.

E-K said...

OK. But I was expecting field centres to be getting set up in anticipation of that by now.

E-K said...

Head of the Oxford corona virus vaccine team says a vaccine will not be with us for at least six months and even then will not be enough to end social distancing and masks. Boris said it twice yesterday.

As I said from day one.

Shielding the vulnerable and going for herd immunity was the only way.

That life you loved ?

Forget it. It's gone.

Thud said...

EK, for whats its worth Pfizer are looking at last week in Nov as they announce results (already leaked) 3rd week in Nov, there will be more before and after.