Welcome to London Air Travel’s Monday Briefing for the week beginning 3 August 2020.
Cash Is King
Air France-KLM and IAG published their second quarter results on Friday.
The two groups reported operating losses of €1,553 million and €1,395 million respectively. Net debt stands at €7,973 million for Air France-KLM and €10,463 million for IAG. Lufthansa will publish its results on Wednesday.
For IAG CEO Willie Walsh it was his last results announcement before retirement. You can read a full summary of IAG’s update here. Announcing a rights issue of €2.75 billion was not how he had intended to leave IAG – which had set out to deliver sustainable financial returns over economic cycles and consistent returns to shareholders.
Both Air France-KLM and IAG have similar medium-term goals – permanent restructuring and careful management of cash flow. Though Air France-KLM has the benefit of a bespoke aid package of €3.4 billion and €7 billion from the Dutch and French governments. IAG has no such benefit from any European government. It won’t be known for many years which airlines made the right call in 2020 and which airlines stored up problems for the future.
IAG now has significant debt which has to be repaid shortly. To give 3 examples of previously reported debt for BA:
In March, BA extended its US dollar Revolving Credit Facility from June 2020 to June 2021. At the time, the amount available under the facility was $1.38 billion. At 30 June, BA has drawn down $792 million of the facility, leaving $588 million undrawn.
In April, BA issued commercial paper of £300 million through the UK government’s Coronavirus Corporate Finance Facility which is repayable in April 2021.
In May, BA entered into a syndicated mortgage loan of $750 million secured on specific aircraft. The loan is repayable within 12 months and has now been fully drawn down.
It’s worth adding that, as has been widely reported, BA plans to retire the Airbus A318 fleet which operate London City – New York JFK. However, as these aircraft have been provided as security for this loan, BA cannot scrap or sell them yet.
Whilst Willie Walsh seems optimistic that BA’s core market to North America will rebound, like the events of 9/11, COVID-19 is going to shape BA’s strategy for much of this decade.
BA Route Additions
A number of BA routes have returned over the weekend.
Scheduled passenger flights have restarted from London Heathrow to Nairobi.
On short-haul, flights have restarted from London Heathrow to Luxembourg, Lyon, Moscow Domodedovo and Vienna. Frankfurt restarts today.
BA has also reinstated wide body flights to Madrid. Flights BA460 and BA461 will be operated with Boeing 777 aircraft on Saturday, Monday and Thursdays.
Summer seasonal routes to Bastia, Bodrum, Figari Kefalonia and Pula have returned. Gatwick short-haul routes to Bari, Bordeaux, Catania, Genoa, Lanzarote and Pafos have restarted at Heathrow. Malta follows today.
The restart of Marrakech, Milan Linate and Salzburg has been delayed until September at the earliest.
Also at Heathrow, China Southern Airlines will relocate from Terminal 2 to Terminal 5 from Wednesday 5 August.
At London City, BA CityFlyer has returned to Bergerac and Nice. The restart of Mahon is delayed to Friday 7 August. BA’s franchise partner SUN-AIR plans to resume flights from London City to Billund on 1 September 2020.
BA149 – The Last Flight To Kuwait
If BA chooses to mark the retirement of the Boeing 747, there is one event that will be erased from its history.
Just over thirty years ago today, flight BA149 departed London Heathrow for Kuwait, en route to Chennai and Kuala Lumpur.
It would prove to be the most controversial BA flight in history and the facts surrounding it remain unresolved today.
In spite of reports of escalating tensions between Kuwait and Iraq on the day of departure, BA had been advised the flight was safe to operate.
After landing in Kuwait in the early hours of the morning on 2 August 1990 following a delay at London Heathrow, the runway was attacked by Iraqi forces and the aircraft was evacuated. BA passengers and employees were held hostage by Iraqis. Women and children were allowed to return home in late August.
The remaining hostages were dispersed to various sites and some were used as “human shields”. The hostages witnessed many atrocities by Iraqi soldiers. The last remaining passengers and employees were released in December 1990. The Boeing 747 aircraft was subsequently destroyed following the liberation of Kuwait.
A central allegation in a BBC2 drama documentary “The Last Flight To Kuwait” in 2007 was that the UK government allowed the flight to operate to enable intelligence operatives on board the aircraft to enter Kuwait. This is a claim the UK government has always denied. No passenger list for the flight has ever been released.
You read the full story behind flight BA149 here.
Also of note this week:
Air New Zealand’s in-flight magazine Kia Ora returns in print and online. (Air New Zealand)
BBC Radio 4’s “In Business” takes a look at the impact of Gatwick on Crawley. (BBC Radio 4)
Gridpoint Consulting analyses Heathrow airport’s half-year results. (Gridpoint Consulting)
The Washington Post interviews Ed Bastian, CEO of Delta Air Lines today at 11:30 ET / 16:30 BST. (Washington Post)
Late post publication updates:
[Reserved for updates throughout the day]
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