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BA’s parent company International Airlines Group released its financial results for the first quarter of the year today, Friday 6 May 2022.
The numbers contain few surprises. IAG reported a loss of €754 million and expects to return to profitability from this quarter.
At the start of the year, IAG and BA had been selling a positive vision of the future to both investors and the wider press.
As has been well publicised, this has not turned out to be the case. Congestion and staff shortages at Heathrow have resulted short notice cancellations and disruption to baggage handling. This cost BA €50 million in lost revenues and additional costs in the first quarter.
IAG and BA management set out some of the steps taken to address these issues:
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Recruitment
IAG say 39,000 people have applied for roles at BA since it started recruiting last October.
Of these, 4,800 candidates have passed their assessment. 3,100 candidates are currently going through referencing before they can receive an airside pass.
This process, which requires full references from the last five years’ employment, is taking longer. This is in part due to many candidates having gaps in their employment history due to COVID-19.
1,600 new employees have started work at the airline. Changes to UK government regulations mean that staff can also start training before security vetting processes are complete.
Recruitment of ground staff is said to be particularly challenging due to a tight labour market in the UK.
IAG also confirmed that BA will use cabin crew from Iberia’s pool of seasonal crew in Spain on a six month contract.
Schedule Reductions
BA has cut capacity for this year to 74% of 2019 levels, compared to 80% as planned.
Over the past week, we have seen tactical cancellations put in place across short and long haul flights at Heathrow throughout the summer season. There are also blanket frequency reductions on routes such as Johannesburg and Miami.
IAG say around 60 BA departures from Heathrow a day are cancelled, but this will decline over the summer. Overall, this will be around 10% of BA Heathrow flights throughout the summer season.
BA’s Heathrow schedule has also been “depeaked” to prevent some of the bottlenecks and capacity pinch points.
Aircraft Wet Leases
IAG confirmed that BA will wet lease around 10 aircraft from airlines such as Iberia Express and Finnair this summer.
Heathrow Airport
There was some criticism of Heathrow Airport, specifically for not reopening Terminal 4 for the start of the summer season.
BA pointed out that Heathrow is the only major airport in Europe not to have reopened all its terminals.
Terminal 4 will reopen in June. This will provide some relief as Qatar Airways will move out of Terminal 5.
Heathrow is also criticised for “unrealistically low” passenger forecasts which has affected resourcing at security screening and the border.
In April, Heathrow forecast 52.8 million passengers this year, compared to a previous number of 45.5 million. Sean Doyle expects this number will be in excess of 70 million.
Heathrow has been downbeat on projections of passenger numbers beyond this summer, predicting a “winter freeze”. IAG did not hide the fact it thinks this is because of current negotiations on passenger charges with CAA.
There have long been tensions between Heathrow and BA, and a degree of mutual frustration on both sides. Whilst the two presented a united front when campaigning for travel restrictions to be lifted last year, it’s quite clear this is over.
Gatwick Short Haul
Little was said about BA short haul at Gatwick, other than revenues are ahead of expectations.
IT System Upgrades
In response to well publicised IT failures, BA’s core operational and customer systems will move to new cloud based systems over the next two years.
The airline’s data centres will also move to cloud based systems.
Fleet Plans
IAG did not any any firm updates on aircraft fleet plans.
It is already known that deliveries of new Boeing 787-10 aircraft to BA are delayed. The Boeing 777X is also significantly delayed.
One positive sign is that whilst IAG will be focused on reducing its debt burden over the coming years, this hopefully will not come at the expense of new aircraft.
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