28th Apr 2020 18:36
(Alliance News) - International Consolidated Airlines Group SA on Tuesday reported a double-digit revenue fall in its first quarter, said it took a EUR1.3 billion profit hit due to fuel and foreign currency hedges and added there could be 12,000 redundancies at British Airways.
The travel sector has been battered by lockdowns being implemented globally as governments grappled to halt the spread of Covid-19.
IAG, which owns BA, warned it will take several years for passenger demand to return to pre-virus crisis levels, and in turn, the UK flag carrier is "formally notifying its trade unions about a proposed restructuring and redundancy programme".
"The proposals remain subject to consultation but it is likely that they will affect most of British Airways' employees and may result in the redundancy of up to 12,000 of them. As previously announced, British Airways has availed itself of the UK's Covid-19 job retention scheme and furloughed 22,626 employees in April."
The news drew the ire of the British Airline Pilots Association trade union.
Brian Strutton, general secretary of BALPA, said: "BA pilots and all staff are devastated by the announcement of up to 12,000 possible job losses in British Airways. This has come as a bolt out of the blue from an airline that said it was wealthy enough to weather the Covid storm and declined any government support.
"BALPA does not accept that a case has been made for these job losses and we will be fighting to save every single one."
IAG has previously been at odds with the trade union. In the third quarter of 2019, cancellations relating to industrial action by BALPA pilots as well other disruption, caused a EUR155 million hit to IAG's profit.
Last September alone, planned industrial action led to 2,325 flight cancellations.
In a brief update ahead of a larger first quarter statement in May, the British Airways owner said revenue in the period to March 31 fell 13% to EUR4.6 billion from EUR5.3 billion a year ago.
IAG said it swung to a loss. Its operating result before exceptional items was a EUR535 million loss from a profit of EUR135 million.
"IAG's pretax profit was impacted by an exceptional charge of EUR1.3 billion resulting from the ineffectiveness of its fuel and foreign currency hedges for the rest of 2020 due to over-hedging," the FTSE 100 firm said.
"The operating result in the first two months of 2020 was similar to that of last year, despite the suspension of flights to China due to Covid-19 from the end of January. All of the reduction in the operating result in the quarter compared to last year came in March. The majority of the reduction in IAG's operating result was incurred by British Airways, followed by Iberia and Aer Lingus, while Vueling experienced a modest increase in operating loss."
Passenger capacity, measures in available seat kilometres, slipped by 11% in the quarter, while traffic, in terms of revenue passenger kilometres, fell by 15%.
The company added: "IAG has reduced passenger capacity in April and May by 94% compared to last year, only operating flights for essential travel and repatriation.
"Passenger capacity from June will depend on the timing of the easing of lockdowns and travel restrictions by governments around the world."
IAG will release a more detailed first quarter update on May 7.
The company is not currently providing profit guidance for 2020, due to the pandemic. It did, however, guide for a second quarter which will be "significantly worse" than the first.
This is due to a "substantial decline in passenger capacity and traffic and despite some relief on employee costs from government job retention and wage support schemes", IAG noted.
Shares in IAG closed 1.0% lower at 217.90 pence each in London on Tuesday.
By Eric Cunha; [email protected]
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