London Air Travel’s Monday Briefing – 15 June 2020

Welcome to London Air Travel’s weekly briefing on air travel around the world, as published every Monday at 06:00 BST.

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British Airways Tail Fins, London Heathrow
British Airways Tail Fins, London Heathrow (Image Credit: Heathrow)

Welcome to London Air Travel’s Monday Briefing for the week beginning 15 June 2020.

Transport Select Committee Excoriate BA

House of Commons Select Committees like to give large companies a good kicking and, on Saturday, BA got one.

The Transport Select Committee released its report on the impact of COVID-19 on the aviation sector.

It’s a reasonably substantial body of work, running to 45 pages, covering the quarantine regime, government support, passenger refunds and of course proposed redundancies in the sector.

The report was given to the press before publication under an embargo and much of the coverage focused on it branding BA “a national disgrace” for planning large scale redundancies and proposing wholesale changes to staff terms and conditions.

BA insists its proposals are subject to consultation and no final decisions have been made.

The committee’s report contains a lot of commentary and broad-brush recommendations. It is, as anyone would be, understandably sympathetic towards those facing redundancy. However, it is of little practical help to airlines facing draining cash balances and, at a minimum, months of significantly reduced demand.

The report proposes that airlines wait until the government furlough scheme expires in October before considering large scale redundancies. For Virgin Atlantic staff who were notified they had been made redundant last week, this is too late.

It’s also too late for Norwegian staff in the UK. Two months ago, Norwegian terminated its contract with its subsidiary Norwegian OSM UK Ltd which employed around 1,200 pilots and cabin crew.

It’s worth adding that whatever you think of BA’s motives from a commercial or moral perspective, it will have ensured it has acted within the law. And it is MPs who are supposed to be responsible for scrutinising proposed legislation before it hits the statute book.

The report also entertains the suggestion that BA should be stripped of its slots at Heathrow. Whilst this would please fans of Emirates, from a UK employment perspective, this is bizarre. This would result in mass job losses, which would be mostly replaced overseas.

The 45 day consultation announced by BA on 28 April 2020 expires today. It would be wise for the airline to show it is intent on a meaningful consultation and resolution to extend this. Similarly, it is incumbent on the unions to put the energy they have in to public campaigning, in to negotiating with cool heads behind closed doors.

Back to Virgin Atlantic. This is a potentially significant blind spot. It is mentioned a mere four times in passing in the body of report. The airline has yet to undergo a recapitalisation. According to Bloomberg it is still in discussions with potential private sector investors and hopes to secure some form of state support, such as a credit guarantee to prevent credit card companies from withholding funds.)

Update: In a video obtained by ITV News, Alex Cruz has strongly criticised the report as “not based on facts” influenced by “rumours and emotions” and it “fails to grasp the economics of the airline industry”. Alex Cruz also criticises a “misinformation” campaign from people outside the airline. The video also confirms that BA will suspend a number of routes. A full transcript of the video is available here.

Air New Zealand Rebuilds Domestic Operations

New Zealand is widely seen as one of the best performing countries in suppressing the spread of COVID-19.

The country is at Level 1 of its own alert system. It has started to lift social distancing measures. Sporting events with spectators returned at the weekend.

In terms of what this means for aviation, Air New Zealand will operate around 55% of its domestic capacity in July and August. Social distancing measures at airports and on board aircraft have been lifted. The majority of its domestic lounges have reopened with a full food and beverage service.

On a less positive note, Air New Zealand will still maintain a skeleton international network until 31 August 2020. These are limited to a small number of weekly flights Australia, the Pacific Islands, Los Angeles, Hong Kong and from, 25 June, Tokyo Narita. Talks between New Zealand and Australia on forming a “travel bubble” have been held up by state travel restrictions remaining within Australia.

Also of note this week:

Cyrus Capital, one of the final bidders for Virgin Australia, has outlined its proposals for the airline. It proposes to simplify Virgin Australia, whilst retaining its brand and long-haul operations, and position it between Qantas and JetStar. (Sydney Morning Herald)

An interesting article in the New York Times on the impact of COVID-19 on the city’s hotel industry, where many properties had sought to be “urban resorts” with a focus on public spaces to attract locals and large scale events (often at the expense of the guest experience it has to be said). (New York Times)

An inevitable consequence of an event like COVID-19 is that underlying trends accelerate. Many print publications are struggling due to a lack of advertising revenue and falling circulation. Lonely Planet UK has suspended publication of its magazine. Its editorial team have released a set of 12 unpublished articles for free. National Geographic UK, which continues to publish, has also released its May / June digital issue for free.

Late post publication updates:

[Reserved for updates throughout the day]

The Swedish government has put forward a proposal to the Swedish parliament to provide SAS with SEK5 billion (~£425 million ) of new funding as part of a recapitalisation of the airline. SAS estimates that it needs SEK12.5 billion (~£1.064 billion) of new funding. The Danish government has also indicated political support for a recapitalisation of SAS. As part of this 5,000 jobs will be cut and the airline is seeking productivity improvements of 15-25%. (SAS)

Elliott Management Corporation and Greybull are reported to be in talks to make a joint offer to provide new funding to Virgin Atlantic. (Sky News)

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