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April 29, 2020, 7:05 a.m. EDT

Air travel demand will take ‘several years’ to recover, British Airways warns as it looks to cut up to 12,000 jobs

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By Callum Keown


Associated Press
British Airways planes are parked at Heathrow Airport in London.

British Airways will cut up to 12,000 jobs as the airline’s owner warned the coronavirus recovery will take “several years.”

BA parent International Consolidated Airlines Group /zigman2/quotes/208070069/delayed UK:IAG -0.26%   (IAG) said it had launched a restructuring and redundancy program due to the impact of the pandemic and the expectation that the “recovery of passenger demand to 2019 levels will take several years.”

In a letter to staff Alex Cruz, chairman and chief executive of British Airways wrote: “In the last few weeks, the outlook for the aviation industry has worsened further and we must take action now.”

The warning could come as major blow to U.S. airlines and carriers around the world, desperately hoping for a return to normality.

The global aviation industry has come to a near-standstill in recent months as countries around the world have implemented lockdown measures and travel restrictions. BA boss Alex Cruz wrote to the airline’s 45,000 workers in March in a note titled ‘survival of British Airways,” highlighting the severity of the current situation.

The airline suspended 22,626 employees earlier this month, making use of the U.K. government scheme offering to pay up to 80% of the wages of staff unable to work due to the virus.

But Cruz wrote on Tuesday: “There is no Government bailout standing by for BA and we cannot expect the taxpayer to offset salaries indefinitely. Any money we borrow now will only be short-term and will not address the longer-term challenges we will face.”

IAG said on Tuesday that up to 12,000 workers could now permanently lose their jobs, subject to consultations with trade unions. The announcement was made after the London close. IAG stock has fallen 65% so far in 2020.

The biggest U.S. airlines reached a deal with the federal government earlier this month for financial aid to prevent layoffs in the industry. The government’s $2.2 trillion economic relief package included $25 billion to allow airlines to keep paying salaries in the coming months. United Airlines /zigman2/quotes/205037281/composite UAL -1.34% ,  Delta Air Lines /zigman2/quotes/200327741/composite DAL -1.37%   , American Airlines /zigman2/quotes/209207041/composite AAL +1.93%   and Southwest Airlines /zigman2/quotes/201071949/composite LUV -0.48%   were among those who agreed to receive aid.

Read: Delta reports first loss in 5 years as coronavirus ravages travel industry

Global airline losses from the pandemic climbed to an estimated $314 billion earlier this month, according to trade body the International Air Transport Association.

IAG’s redundancy announcement came alongside first quarter results, in which revenue fell 13% to €4.6 billion and passenger traffic declined by 15%. The company, which also owns Aer Lingus and Iberia, reported an operating loss of €535 million compared to a profit of €135 million last year. The group said its performance in the first two months of the year was similar to that of 2019 but all of the operating result reduction came in March.

/zigman2/quotes/208070069/delayed
UK : U.K.: London
169.55 p
-0.45 -0.26%
Volume: 52.89M
Dec. 4, 2020 4:35p
P/E Ratio
N/A
Dividend Yield
6.24%
Market Cap
£8.42 billion
Rev. per Employee
N/A
loading...
/zigman2/quotes/205037281/composite
US : U.S.: Nasdaq
$ 49.24
-0.67 -1.34%
Volume: 26.30M
Dec. 4, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$14.41 billion
Rev. per Employee
$450,615
loading...
/zigman2/quotes/200327741/composite
US : U.S.: NYSE
$ 42.36
-0.59 -1.37%
Volume: 18.45M
Dec. 4, 2020 7:00p
P/E Ratio
N/A
Dividend Yield
0.00%
Market Cap
$27.01 billion
Rev. per Employee
$516,549
loading...
/zigman2/quotes/209207041/composite
US : U.S.: Nasdaq
$ 16.40
+0.31 +1.93%
Volume: 117.39M
Dec. 4, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
0.00%
Market Cap
$9.92 billion
Rev. per Employee
$345,547
loading...
/zigman2/quotes/201071949/composite
US : U.S.: NYSE
$ 47.59
-0.23 -0.48%
Volume: 7.62M
Dec. 4, 2020 7:00p
P/E Ratio
N/A
Dividend Yield
0.00%
Market Cap
$28.09 billion
Rev. per Employee
$368,882
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Callum Keown is a Barron's Group reporter for the Europe, Middle East and Africa region. He writes for MarketWatch, Barron’s, Penta and Financial News.

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