Thursday 22 October 2020

IAG - BA part 2

Another day, another report of how badly things are going awry for the airline industry.

As discussed last week, I can really see huge changes afoot for the airline sector. Here is BA reducing its rather heroic 70% capacity next year forecasts in favour of a 30% capacity next year forecast. this is much more in-line with the rest of the industry. 

But it does show capacity overall in the sector being reduced by over 66% in total for the next six months at least - and which of us knows really how long this will last for?

BA have made a billion pound loss for the quarter, in reality they can sustain this for over a year in terms of pure financing. However, when do they press the button on permanently halving the size of the business? it is only but hugely cutting capacity that they can give up leases, reduce staff and other maintenance costs as well as slots at the airports where they operate. Reducing capacity will also allow them to charge more for the fewer flights that they are offering as it will bring back pricing pressure. 

A reason I am obsessing over this though for you, readers, is that this is a cast iron example of how things have changed in the world for a long time to come due to Covid-19. 

At this rate, no 3rd runway will be need at Heathrow or Gatwick - indeed, we may not even need all of Stansted, Luton and Gatwick airports with 50% reductions in capacity. Soon conversation will turn to mothballing one of these at this rate. 

There can be no swift return from here to what existed in travel infrastructure terms in January 2019 - lots of business case for travel has gone too - who among us wants to go to a 20,000 person trade show in Nice or Berlin in the next few years for example? The covid scars are going to run deep.


dearieme said...

"The covid scars are going to run deep."

Indeed, and partly because of the woeful, inept, panic-stricken government responses to Covid. Those, in turn, may be partly caused by the politicians' fear of the hysterical, ignorant, and dishonest mass media.

In conclusion, hang the journalists!

BlokeInBrum said...

To see how low the mass media is stooping, you only have to look at what is happening (or not happening) with regards to Hunter Biden and his laptop.
Some pretty juicy things going on there, with direct relevance to the American Election, and yet Titter ground to a halt in the attempt to prevent the news about it leaking. Since when did the newspapers in this country become so utterly supine?

BlokeInBrum said...

I actually meant Twitter, honestly!

E-K said...

"No swift return..."

As one who works in mass passenger transport.

You can't mothball.

Competencies are lost for good, infrastructure and vehicles in storage gunk up.

As a hub and entertainments centre London is now dead. I fear there will not be a high speed network for the planned 2 day week.

Those 100 miles plus from the capital will have to move closer.But geographical London is finished - I expect business London to follow.

This is not merely the death of transport but of cities too.

Anonymous said...

having spent the last 15 years dealing with southern rail attempting to get into london it was a blessed relief at first. and how i hated the trawl round the m25 most months en-route to the another continent.
now its the new normal and i'm desperate for a lunch and a natter with colleagues and friends alike.

global travel and london seems pretty much down out these days, be careful what you wish for.

the problem is all about howto get a decent broadband signal in deepest surrey, something beyond the wit of bt.

already some of the more enterprising types are making plans for a more permanent residence somewhere a little cheaper than the south east, if you only need to be on the end of a zoom call...

dearieme said...

Is there a map showing the parts of Britain with decent broadband, such as might interest a London refugee?

(You can probably omit fair Scotia because of the Scotnaz threat. And Norniron if the Dems win and start subsidising the IRA again.)

Anonymous said...

@EK - neither cities nor transport will die.

For a long time the pendulum has been stuck at working in the office, despite in many cases there being absolutely no need for that. The pandemic has swung the pendulum to the other side, and there are different downsides and challenges to WFH.

So eventually we'll settle on mostly WFH, with some working from the office. No one with a functioning brain cell wants to go back top 5 days of commuting, because it was crap.

Yes, some people are annoyed that they can't micromanage the productivity out of everyone. And the more useless ones get upset they're going to have to be rewarded on producing things rather than being visible and present. Suddenly looking busy isn't going to cut it.

Good. They've been throttling the life out of productivity out of offices for years, with their sad little meetings and tragic twilight existences. I'm dealing with a prize example at the moment, adds absolutely nothing to the business, borderline unprofessional, divisive, engenders a toxic atmosphere. But really good at Gantt charts and powerpoint which has hypnotised the upper management. Productivity has halved, talent is leaving. That they've carved a career out of that is about as a damning indictment of UK office life as you can get.

And I've met a few of those over the years. With remote work though, their "magic" is wearing thin and their ineptitude less easy to hide.

So the office will still be there for some work, not all.

As for, I think it was ND, and "sitting next to Nellie", this can be done in a lot (not all) cases over Teams or Zoom. I've done it a couple of times over the last month and it worked great. I can sit over their shoulder remotely, advise, point things out... There are still occasions where being in the office would be a boon, but not enough to justify a return to 100% office work.

So the distinction between WFH and office work will be as a screwdriver and a hammer - different tools for different situations rather than picking one or the other.

Post-covid, cities will still be needed - there is a still a logic to concentrating things. Metallica aren't going to be playing the village pub. Friends from various towns aren't going to pick a town a week. Some logistics need a network with large nodes, and those are cities.

People like to socialise, so a lot of venue-based businesses may go pop, but out of the ashes new ones will rise because there will be demand for them again.

Cities will change, they will adapt. Some, like Stoke, were never true cities in the first place. They may fade away, becoming more like Crewe, travel junctures. Others will thrive, providing the facilities and support mechanisms.

We may see new ones crop up over time as infrastructure adapts to what suits the nation.

Transport will change and adapt too. The railways have always been a dubious case for outright private ownership, although public ownership has hardly shined either in the UK.

The crystal ball is a bit less clear on that one, but it's a necessity for supporting links between different parts of the nation, so an accommodation will happen.

Lord T said...

Nobody has actually understood the full impact of our governments farcical handling of Covid 19. It will change our society in ways we have not yet seen.
Once we start mothballing an airport and building houses on it we can't simply spin it up again.
We will see a massive shift towards working from home and robotisation which will spread workers around the country and make those with lower skills unemployed which will result in change our society and financial systems forever.

Boris the buffoon has unbottled the genie and we will pay the price with our pensions and taxes.

On the other hand it is cataclysmic events like this that give us a kick and make us make some overdue changes our society.

Nick Drew said...

@ "sitting next to Nellie", this can be done in a lot (not all) cases over Teams or Zoom. I've done it a couple of times over the last month and it worked great

Good overall input, Anon. We're all basically arguing a priori and from our gut instincts / prejudices - a well-known trap for anyone digging in too vehemently. Gotta stay empirical.

On the optimistic side, I have run two big consultancy projects since April where nobody involved actually met in person, with complete success. I've attended online 'conferences' that were really superb (content- and presentation-wise: no networking or succulent lunch, natch). And a university-based organisation I'm involved with has run an entire term's cycle of activities (April-June) ditto ditto

but I persist in the view this has been cantilevering out from well-established practices & relationships, (or, to adopt a diffent idiom, relying on momentum) that we can't be sure could be established afresh in this mode - i.e., we can't be sure it's sustainable

yet another organisation I'm involved with is just starting on induction for the season's new hires in this new virtual mode. We've tried to think of everything and cover it intelligently. Time will tell. (Contexts of the above cases are all highly-educated, tech-proficient, highly-motivated, white-collar - which must be a massive advantage if not sine qua non: I can't even begin to envisage how you'd go about doing the same for low-educ, low-tech, low-motiv, blue-collar endeavours)

I just think back to the many organisations I have worked for, and how much I valued the many ad hoc personal 'learning encounters' on top of any formal induction training & the like. My gut feeling is, they were irreplaceable. In the most succcesful of these organisations, that kind of interaction was much prized and promoted: "actively share your experiences; actively share your problems; with everyone! at the water cooler!". It's how good ideas drive out bad ideas. Whenever I've been in charge, I've insisted on it, too.

footnote: the uni-based case cited above is interesting because, notwithtanding the total 'success' of last term's virtual effort, they've vowed to go back to doing it in 'in the flesh' for the new term just started - because "it just wasn't the same" (and no, it wasn't a May Ball or a student bonkfest ...)

Jan said...

@EK I think you are a bit too pessimistic about rail travel. I live on the GWR line and people are gradually returning and I have to say it's more pleasant than it used to be with so much space. I have even had a whole carriage to myself!

There is a somewhat reduced timetable but mostly trains are running as normal and the car park now has about 40-50 cars whereas in lockdown it was around 10 max (probably 200-300 before CV-19).

The lovely new trains on the newly electrified line are not being mothballed and CV-19 isn't going to last forever. I don't suppose the 5 day commute will ever come back but I wouldn't mind betting that this time next year there will be a new nornmal which definitely includes train travel.

E-K said...

Hi Jan

I think GWR is particularly problematic. It has gone through massive investment (I mean HUGE - billions):

- Redevelopment at Reading - 15 platforms and concourse now with boarded up shops.

- Installation of overhead electrification Paddington to Chippenham/Newbury stopped because of environmental campaigns and running out of money. Box tunnel was completely excavated in order to provide clearance for wiring which was abandoned.

- The introduction of a huge hybrid IET fleet to cope with the above, at crucifying levels of leasing and maintenance charges with Hitachi as well as the building of a depot at Bristol Parkway and conversion of depots at Exeter, North Pole, Cardiff and Penzance.

- Mass recruitment and training of staff

- The routine costs of maintaining tunnels, track and bridges throughout the network...

Millions upon millions.

All of this ready for the planned expansion in services to meet the railways renaissance of ever growing passenger numbers and the shift away from cars.

1/5 of passenger numbers is simply not going to sustain it nor justify its existence... and like a mortgage defaulter posting his keys through the building society, he's got another thing coming if he thinks the structural debt is going away.

As a rail expert I simply cannot see how an essential 125mph capability can be maintained nor the capacity given that 1 day a week workers won't tell us when they want the service to run nor do anything to avoid clashes with hi days and holidays.

And this is but one area of our economy.

As I said. We are looking at this through the wrong end of the telescope. We should not really be asking how BA are doing in this crisis but how our cities (that no longer need BA) are going to survive.

Those lucky enough to WFH are going to have to be taxed out of existence.

I did try to say that "shielding the vulnerable and keep buggering on" was the way to go with this.

This disease has roughly a 0.04% kill rate and even if it were 1% most of those are unproductive and therefore can be shielded.

I remain pessimistic. Not because of the disease or my lack of trust in our people's capacity to make things work but because of the utter idiocy and downright evil that exists in our political and administrative class.

I now predict we will be Brazil by next year.

There won't be a pet left alive and this wretched government and oaf of a Prime Minister will be forced out of office by violent disorder.

And I haven't even mentioned death by reaction to CV-19 outstripping the disease itself nor the fact that we've handed the world to the CCP on a plate.

E-K said...

The give away was when Tom Hanks announced he had the disease at the beginning of this crisis.

We should have heard of at lease one big Hollywood name dead by now if this were the plague pit variety of pandemic as in Contagion (a film I watched last night.)

It is nothing of the sort. Not even close to it.

And I said so from the beginning. Tom Hanks was the big clue. If he had it then very many people in Hollywood have it.

The best we can come up with ?

The husband of a minor TV presenter in the UK and he's still alive.

I said so on this site from the outset.

For once I will say. YES. I wish I'd been Prime Minister for this past 8 months. I WOULD have done a better job.

Anonymous said...

Tom hanks was in Australia when he got Covid not Hollywood.

BlokeInBrum said...

I thinks it's probably quite easy for the Hollywood elite to self isolate in their hovels. The only danger is their own need to socialise and network, which, in the age of zoom and the interwebs is not such a big deal. What of all the up and coming actors living 3 to a flat and waiting on tables to make ends meet? Their futures have just gone up in smoke.

E-K said...

If the #1 star in Hollywood got it then it must have been everywhere already.

Name me one Australian star that has died of CV-19 then.

You are more likely to die driving your car than of CV-19.

E-K said...

"What of all the up and coming actors living 3 to a flat and waiting on tables to make ends meet? Their futures have just gone up in smoke."

A future of VR actors, AI accountants, ultra hi def/VR zoom meetings and general automation just got a lot closer.

The government seriously needs to be investing in broadband and not transport and certainly not HS2.

This is about to become a seriously economically fragmented nation and socialism is the only way to stop widespread dystopia. We're going to have to get used to it - Sunak is giving us a taster.