Category: Monday Briefing

London Air Travel » Monday Briefing

Welcome to London Air Travel’s Monday Briefing for the week beginning 10 August 2020.

Winter Is Coming

The UK is currently basking in a heatwave. Airlines are however preparing for a long cold winter.

There are early signs of what to expect. Initial indications suggest that BA will suspend many of its thinner long-haul routes such as Durban, Osaka and Pittsburgh for the winter season. Frequencies on long-established routes have been cut, some to less than daily.

At Gatwick, overlapping routes such as Cape Town, Las Vegas and New York JFK have been cut for the winter.

There has been speculation as to whether the move of BA Gatwick short-haul routes to Heathrow may become permanent.

This is of course not the first time there has been speculation about the future of BA at Gatwick. This has been in the case ever since BA abandoned the concept of a second hub operation in the late 1990s.

Keepings Gatwick short-haul routes at Heathrow would vastly improve connectivity at the airport to American Airlines and BA’s transatlantic route network. This is especially so at a time they will need to draw in as much feeder traffic as possible. However, it does leave Gatwick wide-open for easyJet and Wizz Air to expand in the medium term.

Other IAG brands would not be able to take up the slack. Neither Iberia nor Vueling have made any significant in-roads into the UK market under IAG and they could never match the brand recognition of BA in Gatwick’s catchment area. One weakness of IAG is the lack of cross-brand marketing in specific geographies. Aer Lingus did try to set-up a short-haul network at Gatwick in 2009. It did not last long.

Another issue is BA’s long-term exposure to Heathrow’s landing charges which are substantially higher than at Gatwick. IAG CEO Willie Walsh has never hidden his disdain for Heathrow management and their lack of commerciality. Gatwick airport management were praised by Willie Walsh at a recent Transport Select Committee hearing for their relative commercial nous.

In a speech in Dublin last year, Willie Walsh did say he approached Heathrow several years ago (presumably after BA merged with bmi) to move all of BA’s Gatwick long-haul routes to the airport.

Wille recalled when he asked for a deal on landing charges: “I may as well have had two heads. They just didn’t know how to respond to that.”

Heathrow’s recent results announcement also included the following statement:

Our current regulatory model is designed for a stable business with limited upside potential and unlimited downside risk. It is therefore failing to create a long-term balance between risk and reward given the asymmetric risks faced by Heathrow.

We will continue engaging with the CAA to ensure it creates a fair framework that drives the right incentives for investment for the benefit of consumers.

In recognition of the asymmetric risk in the regulatory model that has been exposed by the COVID-19 crisis, but was not allowed for in the allowed regulatory returns, Heathrow has requested that the CAA makes a policy statement setting out that it will amend Heathrow’s Regulated Asset Base to allow Heathrow to recover excess losses over an extended period of time.

Put another way, Heathrow wants to increase its landing charges further, which is likely to rile its airlines.

BA Long-Haul Routes Return

BA slowly adds more destinations to its long-haul network this week.

BA returns to Islamabad from Wednesday 12 August. Delhi and Mumbai follow on Sunday 16 August.

Update: BA will also add one way only flights to London Heathrow from Bengaluru and Hyderabad from Monday 17 August.

Elsewhere at Heathrow, Virgin Atlantic is postponing the return of many routes. Currently, Virgin is flying to Barbados, Hong Kong, Los Angeles, New York and Shanghai. Miami will follow next Tuesday 18 August. However, the return of many other routes has been pushed back.

Finnair Postpones Move To Terminal 5

In a previous article on the move by Japan Airlines and Qatar Airways to Terminal 5, it was stated that timetables indicated Finnair will move to Terminal 5 on Saturday 15 August. This now appears to have been postponed. Finnair will continue to operate from Terminal 2 for now.

Continue reading “London Air Travel’s Monday Briefing – 10 August 2020”

London Air Travel » Monday Briefing

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.

Continue reading “London Air Travel’s Monday Briefing – 3 August 2020”

London Air Travel » Monday Briefing

Welcome to London Air Travel’s Monday Briefing for the week beginning 27 July 2020.

Year Zero

IAG is due to present its half-year results this Friday, 31 July 2020.

Investors have a preview of what to expect. IAG confirmed late Friday afternoon that it is planning a rights issue to raise up to €2.75 billion. According to Reuters which first broke the story, a cast of no doubt handsomely rewarded advisors are working on it, so it seems a near certainty.

IAG will of course report a heavy operating loss. When you are due to report a loss companies often “kitchen sink” the results and get as much bad news out of the way as possible.

When IAG last updated investors in early May, its cash operating costs were said to be €200 million a week and it had up to €10 billion of cash and undrawn credit facilities available.

IAG has since raised $750m by pre-selling Avios to American Express and $750m by mortgaging BA aircraft. This in addition to IAG securing a loan of £300m from the UK government’s Coronavirus Corporate Finance Facility (CCFF). Iberia and Vueling have secured loans totalling €1 billion with a guarantee by the Instituto de Crédito Oficial in Spain.

When American Airlines presented its second quarter results last week, CEO Doug Parker spoke of American’s intention to “shut it down and start from scratch”. American will only reinstate flights and routes where it makes sense. It’s hard not envisage similar sentiments from IAG.

IAG had planned an orderly return to service from July. Whilst this has happened to an extent, it is clear that neither long-haul nor higher yield business travel will return in any meaningful way until well into 2021. The decision by the UK government to impose a mandatory quarantine on passengers returning from Spain will shake confidence in the leisure sector, which has historically been relatively resilient.

Other things to look out for on Friday are changes to the delivery of new aircraft, specifically the Boeing 777-9 which was due to be delivered from 2022.

Also on Friday, we should learn of whether BA pilots have voted to accept a package of measures to mitigate against compulsory redundancies. If history is anything to go, an agreement with ground staff should follow with cabin crew the last by some distance.

BA Art Auction

Speaking of raising cash, BA should find out this week how much it has raised from auctioning selected works from its art collection.

The standout work is “Cool Edge” by Bridget Riley which is valued up to £1.2m. Other more modestly valued works up for auction include:

“Grasshopper Portfolio” by Peter Doig (£10,000 – £15,000)
“Colour Down The Side” by Sir Terry Frost, R.A. (pictured above in the BA arrivals lounge) (£20,000 – £30,000) 
“Scarlet and Bordeaux in Cobalt” by Patrick Heron (£10,000 – £15,000)
“Valium” by Damien Hirst (£5,000 – £7,000)
Eight Landscapes by Julian Opie (£10,000 – £15,000)
“Garden 2” by Marc Quinn (£5,000 – £6,000)
“Scenes From The Passion: (Ash Wednesday) by George Shaw (£10,000 – £15,000)

Continue reading “London Air Travel’s Monday Briefing – 27 July 2020”

London Air Travel » Monday Briefing

Welcome to London Air Travel’s Monday Briefing for the week beginning 20 July 2020.

BA Retires The 747

So it’s time to say adieu to the Boeing 747 at BA.

BA is far from alone in retiring the Queen of the Skies. Qantas will despatch its last Boeing 747 to Mojave on Wednesday. However, never has an airline retired so many of such a significant aircraft in its fleet so suddenly and so unceremoniously.

New York JFK, which used to host up to 8 BA Boeing 747s a day, will probably never see the aircraft again.

Ordinarily, you would expect some special goodbye flights and a hangar event for employees, enthusiasts and journalists. However, with BA contemplating thousands of redundancies and doing everything it can to conserve cash, this is unlikely. In spite of significant media interest, BA did not even offer any executives or staff for broadcast interviews on Friday.

Officially, the planned the retirement is subject to consultation. Assuming a minimum 45 day consultation with trade unions, its “official” retirement should be in early September.

For BA, the retirement of the 747 is more than just a substantial reduction of long-haul aircraft at a stroke. It is also represents a more significant reduction in premium seat capacity.

All Boeing 747 aircraft featured 14 First Class seats. Those aircraft earmarked to replace the 747, Airbus A350-1000, Boeing 787-10, Boeing 777-300 and Boeing 777-9, will have at most 8 First Class seats.

The 86 Club World seat Boeing 747s were second only to the Airbus A380 in terms of the number of Club World seats per aircraft. The 52 Club World seat Boeing 747s also featured more Club World seats than most Boeing 777 and 787 family aircraft at BA, many of which don’t have First Class.

The retirement of the Boeing 747 is not the only fleet decision BA will need to make in the coming months.

According to Bloomberg, the Airbus A380 will be spared an early retirement. Deliveries of Airbus A350-1000 and Boeing 787-10 aircraft will continue as planned. However, BA will need to look at the seating configuration for new aircraft. The planned delivery of the Boeing 777-9 from 2022 may also change.

New and refurbished Boeing 777-300 and new Boeing 777-9 aircraft were both expected to “premium heavy” configurations. That said, whilst long-haul premium traffic is likely to be soft for some time, it did rebound strongly after a precipitous fall during the 2008 financial crisis.

IAG is due to announce its half-year results on Friday 31 July and will no doubt provide an update on group fleet plans then.

Staying with BA, it has restarted long-haul flights at London Gatwick. Flights are now operating to Barbados and Bermuda. Kingston restarts today. St Lucia follows on Saturday 25 July.

BA also resumes short-haul flights from London City to Dublin, Edinburgh and Glasgow today.

At London Heathrow, BA returns to Naples today, Bilbao on Thursday 23 July and Seattle on Friday 24 July . BA will also launch Newquay this Friday.

Virgin Atlantic Restarts Passenger Flights

Virgin Atlantic restarts scheduled passenger flights today.

From this evening, Virgin will fly to Hong Kong. Flights will operate three times weekly until the end of August. Los Angeles and New York JFK follow tomorrow. These will operate three times weekly until the end of July. Los Angeles and New York will operate five times weekly and daily respectively during August.

Barbados and Shanghai will resume on Saturday 1 and Tuesday 4 August respectively. Lagos and Miami are currently due to resume in late August. The relaunch of some routes such as Atlanta, San Francisco and Tel Aviv has been pushed back to September.

Whilst Virgin has now secured additional funding, it is evidently going to face many more months of very difficult trading conditions.

Continue reading “London Air Travel’s Monday Briefing – 20 July 2020”

London Air Travel » Monday Briefing

Welcome to London Air Travel’s Monday Briefing for the week beginning 13 July 2020.

Virgin Atlantic Refinancing

Virgin Atlantic is reported to be close to agreeing on a refinancing of the airline with its two shareholders and its creditors.

Based on reports, principally by Mark Kleinman of Sky News, Delta and Virgin Group will retain their respective 49% and 51% shareholdings in the airline.

Virgin Group is reported to be making a contribution of around £200m. Though, it is not clear how much of this is cash. Some of Virgin’s contribution will in the form of the deferral of brand licence fees. Delta will also agree to defer payments for IT services and revenues it is due under the transatlantic joint-business.

Additional debt funding should be provided by Davidson Kempner Capital Management. According to The Sunday Times this will be secured against Virgin assets, including its Heathrow slot portfolio. However, it will rank behind Virgin’s bondholders who also hold security over Virgin’s Heathrow slots, following the issue of a £220m bond in 2015. These bondholders will also need to approve the refinancing package.

According to Sky News, one of Virgin’s credit card acquirers, Cardnet, has agreed to a deal which will allow it to release withheld card payments from customers. Negotiations are still underway with Virgin’s other card acquirer, First Data.

Sky News also suggests that the overall financing package will require court approval.

The Sunday Times has also claimed that Virgin has pledged to be profitable by 2022 – with business travel unlikely to return in any meaningful form until well into 2021, this is no mean feat.

Virgin is due to resume scheduled passenger flights from next Monday. It would obviously be good from a PR perspective to be able to do so whilst saying its future has been secured, as well as instilling confidence in its suppliers.

BA Returns To Gatwick

BA will this week operate its first scheduled flights at London Gatwick in over three months.

Flights to Bermuda resume this Friday 17 July. Barbados resumes on Saturday 18 July. Kingston follows on Monday 20 July.

As the South Terminal is closed, these flights will depart from the North Terminal.

BA short-haul flights will not resume at Gatwick until September at the earliest.

Also At Heathrow This Week

BA will also add a substantial number of long-haul and short-haul routes at London Heathrow this week.

Scheduled passenger flights to Dallas / Fort Worth and Toronto resume this Thursday. Dubai will follow on Friday.

These destinations have been served by cargo-only flights which provides an indication of which other long-haul destinations are likely to resume next.

Turning to short-haul, flights to Inverness and Newcastle resume this Thursday.

Athens, Basel, Billund, Brussels, Budapest, Dusseldorf, Hamburg, Hannover, Istanbul, Reykjavik, Sofia also resume on Thursday. Prague follows on Friday.

Summer seasonal routes to Crete and Santorini restart at Heathrow on Thursday. Corfu, Dalaman and Mykonos resume on Friday. Kalamata, Olbia, Preveza, Rhodes and Zakynthos follow on Saturday.

BA also continues to serve more Gatwick short-haul routes at Heathrow. Menorca, Seville and Turin operate at Heathrow from Wednesday. Dubrovnik and Porto follow on Thursday. As does Verona on Friday. Funchal, Kos, Tenerife and Thessaloniki launch at Heathrow on Saturday.

Also at Heathrow, Gordon Ramsay’s Plane Food restaurant is due to reopen this Wednesday.

Continue reading “London Air Travel’s Monday Briefing – 13 July 2020”

London Air Travel » Monday Briefing

Welcome to London Air Travel’s Monday Briefing for the week beginning 6 July 2020.

BA Returns To Europe

The departures board at London Heathrow Terminal 5 is starting to look a little busier.

Whilst BA’s schedule is still a fraction of what it should be at the start of the summer getaway – at any one time there are around 20-40 BA aircraft in the air and many without any passengers at all – there are at least signs of what to expect over the coming months.

Many short-haul destinations that have not seen a Chatham Dockyard tail fin since the end of March have now returned, albeit with significantly reduced frequencies. These include Bologna, Toulouse and Valencia.

Summer seasonal routes such as Ibiza and Malaga have also restarted. Again, these will gradually increase during July.

They are joined by many short-haul routes transferred from Gatwick. Alicante and Jersey are now being served from Heathrow with more to follow.

Unsurprisingly, business heavy routes such as Frankfurt and Luxembourg are yet to return.

A small number of long-haul routes are also due to return to Gatwick and Heathrow from late next week. Here is a full summary of where BA is expected to fly in July.

Following the UK Government’s decision to exempt more than 50 countries from the mandatory 14 day quarantine regime for arriving passengers, IAG withdrew its legal action against the Government’s decision to impose a quarantine regime on Friday afternoon.

Airlines Lobby For London – New York Travel Corridor

Travel to the United States is unlikely to resume for many months. The country is at red on the UK government’s traffic light system for international travel.

There is a suggestion in yesterday’s Sunday Times that airlines have been lobbying the UK Government to create a travel corridor between London and New York.

The rationale for this is that the pattern of infection from COVID-19 is far from uniform in the US.

Infections are rising at an alarming rate in states such as Arizona and Florida. They have fallen and flatlined in many East Coast states such as Massachusetts, New Jersey, New York and Pennsylvania. This is so much so that many states have imposed their own quarantine regimes for travellers within the US.

Whatever its merits, a London – New York travel corridor is unlikely to succeed because of politics. There is a visceral mutual loathing between the Trump Administration and New York. President Trump is unlikely to partially lift the US travel ban to help New York, let alone overseas interests.

The same article also suggests that Heathrow airport may, against the wishes of airlines, oppose moves to extend the waiver of “use it or lose it” airport slot rules beyond the end of October.

Self-interest is no doubt at play here. Airlines will have to use their slots, or lease them to other airlines, which secures revenue for Heathrow from landing charges. Airlines such as BA will have no choice but to protect their Heathrow slots at the expense of other London airports.

Continue reading “London Air Travel’s Monday Briefing – 6 July 2020”

London Air Travel » Monday Briefing

Welcome to London Air Travel’s Monday Briefing for the week beginning 29 June 2020.

Willie Walsh: The Worst Is Yet To Come

In just under three months Willie Walsh will, after 15 years, walk through the doors of BA and IAG’s Waterside Headquarters for the final time.

Willie’s retirement was delayed six months to allow for management continuity whilst IAG deals with COVID-19.

In an interview with yesterday’s Sunday Times (we have pulled out some of the main quotes here) he has left no doubt to his successor that the crisis is not over:

“The worst is yet to come. People will survive this initial crisis but next year is going to be really tough, because some airlines are surviving on the back of support they’re getting and they’re not recognising the scale of the change — and they’re hoping things will recover quickly, when I don’t believe they will: 2021 is going to be the toughest year ever for the industry and 2022 is going to be really challenging.”

Many factors may collide. There are regions of the world that have simply not got COVID-19 under control. Border restrictions may remain in place. Corporate customers could continue to ban international travel by employees. Large scale events may continue to be cancelled. Meanwhile, governments will end payroll support programmes and debts have to be serviced.

Whilst there may be pent-up leisure demand, many passengers have already paid for these flights with credit vouchers.

Willie Walsh has long been an advocate of “rational” behaviour and that airlines must not sow the seeds of their demise in the good times. However, no-one in the industry ever anticipated a crisis as great as this.

IAG seems determined to get through the crisis without seeking bespoke state support and not comprising its structure. Luis Gallego will have a full in-tray in September.

UK Government Prepares To Relax Quarantine Regime

The UK is currently governed by press release.

Policy decisions appear to be dictated by what will get favourable coverage on the next days’ newspapers.

The Government announced a mandatory 14 day quarantine regime on arriving passengers, in the face of almost universal opposition and no scientific evidence.

This is due to be reviewed today, with the Government expected to announce the first “travel corridors” to mainland Europe. A Government source speaking to The Times last week conceded it was doomed to fail:

“They realised it was a bad policy before it even came into effect,” the source said. “This is about using the review to effectively ditch the policy without being accused of doing a U-turn.” The source added that ministers had also been taken aback by the scale of the opposition from business groups and Tory MPs, and added it was “clearly unsustainable”.

Comair Business Rescue Plan

Comair, which operates the BA franchise in Africa, is due to publish its Business Rescue Plan tomorrow, assuming it is not delayed.

(Update: An extension to 28 July 2020 has been requested today.)

Staying in South Africa, the deadline for a vote on the South African Airways Business Rescue Plan has been delayed again until mid-July.

Continue reading “London Air Travel’s Monday Briefing – 29 June 2020”

London Air Travel » Monday Briefing

Welcome to London Air Travel’s Monday Briefing for the week beginning 22 June 2020.

Aviations’s Slow And Grinding Recovery

The slow and grinding recovery of aviation continues.

London City airport reopened yesterday, albeit for just one scheduled flight operated by Loganair for BA to the Isle of Man.

Many countries in Europe are relaxing travel restrictions – Politico has an excellent country-by-country guide.

In the US, where many are now carrying on as if COVID-19 never happened, 18 states are reporting rising cases. Some states such as California and Florida are reporting record rates of COVID-19 infections.

The UK still has its mandatory quarantine regime for arriving passengers. Speaking to Nick Robinson on yesterday’s edition of Andrew Marr on the BBC, Professor Baron Peter Piot, Director at the London School Of Hygiene & Tropical Medicine, said of the quarantine restriction:

That only would have made sense at the very beginning, before we have cases, when indeed they were important. Today that’s not going to contribute much and the damage it causes to the country to the economy is going to be enormous. So let’s hope that that rule is dropped as soon as possible and let’s concentrate on what works. 

Talk of “travel bubbles” being established between the UK and other European countries has yet to come to anything. If the experience of Australia and New Zealand is anything to go by, it is nowhere near simple as it is made out to be.

Transport Secretary Grant Shapps will give evidence to the Transport Select Committee as part of its ongoing review of COVID-19 this Wednesday 24 June at 10:30am.

Lufthansa Awaits Its Fate

This week could be pivotal for the future of Lufthansa.

Lufthansa Group’s shareholders will vote this Thursday on whether to accept a €9 billion bailout package from the German government.

As a condition of the bailout, the government will acquire a 20% stake in Lufthansa.

Lufthansa’s single largest shareholder Heinz-Hermann Thiele, who owns 15% of the company, has not confirmed his support for the package and has indicated that the company should explore alternative options.

If attendance at the virtual general meeting is less than 50%, a two-thirds majority will be needed to approve the bailout package, rather than a simple majority. Lufthansa has said if shareholders do not approve the bailout package, it will be forced to start insolvency proceedings. Lufthansa does not appear to be taking any chances and is doing everything to shore up attendees.

Whilst Austrian and SWISS have agreed bailout packages with their respective governments, there is uncertainty as to the fate of Brussels Airlines.

According to report from Reuters, Lufthansa may seek to sell or liquidate the airline. A €300 million bailout from the Belgian government is possible, if Lufthansa is prepared to secure the future of Brussels Airlines.

Lufthansa has struggled to work out what to do with Brussels Airlines since it took control of the airline. It had previously indicated a much closer integration with Eurowings division after changing its management team.

It is hard to envisage Lufthansa liquidating the airline, given the cost and political implications of this in Belgium. When faced with a choice of either liquidating bmi British Midland or handing BA its biggest growth opportunity at Heathrow in decades, it chose the later.

Continue reading “London Air Travel’s Monday Briefing – 22 June 2020”

London Air Travel » Monday Briefing

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.

Continue reading “London Air Travel’s Monday Briefing – 15 June 2020”

London Air Travel » Monday Briefing

Welcome to London Air Travel’s Monday Briefing for the week beginning 8 June 2020.

The UK’s Quarantine Regime Begins

There remains deep frustration and reciprocal incomprehension between all of BA, its trade unions and the government.

The UK’s mandatory quarantine regime on passengers arriving in the UK came into force at midnight. As you can see from official guidance the self-isolation regime is very stringent. Those who must self-isolate cannot leave their home at all, not even to go shopping or to exercise.

Willie Walsh said an interview with Sky News on Friday that the move was disproportionate, irrational, and would “torpedo” its recovery plans.

According to today’s Daily Telegraph, Home Office officials have conceded privately that the regime is not workable in practice. Home Secretary Priti Patel will take questions on the quarantine regime in the House of Commons at 14:30 today.

BA has already delayed again the planned resumption of flights at London City to 21 July and London Gatwick to 1 August. BA’s transatlantic joint-business partner American Airlines has also pushed back the resumption of many routes from London Heathrow until early August.

Heathrow Airport CEO John Holland-Kaye has also told City AM that it could cut a third of its jobs if the quarantine is not lifted.

This is at the same time, according to reports in the Sunday papers, a group of government ministers known as the “save summer six”, are pressing for industries to reopen as quickly as possible.

IAG, easyJet and Ryanair are considering legal action against the government and have sent a “pre-action” letter. This would be way of a judicial review. These cases are not easily won. It would focus on how the government reached its decision, which IAG says was done without consultation, rather than the scientific basis for the quarantine.

A separate organisation representing 500 hospitality businesses known as “Quash Quarantine”, advised by the very effective former Director of Communications at Virgin Atlantic, Paul Charles, may join this action.

BA Braces For A Showdown With Trade Unions

The 45 day consultation on redundancies at BA is due to end next Monday, 15 June.

There remains no progress between BA and both the GMB and Unite who represent cabin crew, engineers and ground staff.

Unite seems particularly riled at BA issuing a notice under Section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992 to trigger a formal consultation on redundancies, rather than discussing voluntary redundancies first.

However, BA points to a employment tribunal case brought by Unite on behalf of a number of former employees of Monarch Aircraft Engineering which found in their favour because a Section 188 notice was not issued.

With the current impasse, it seems inevitable this will end up in court at some point. If the GMB and Unite maintain their current positions, they are going to have to explain why they have wilfully ignored a formal consultation process which is expressly provided for in trade union relations legislation.

There had been signs of progress between BA and its pilots union BALPA.

It appears that BALPA had been able to mitigate the impact of redundancies with voluntary redundancy packages and pilots being able to pursue opportunities outside the airline until demand returns.

This appears to have taken a step backwards as last Wednesday BA issued, to the great frustration of BALPA, an additional Section 188 notice for further redundancies with the number of pilots at risk of redundancy increased from 955 to 1080. This has consternation amongst BALPA’s leadership.

The second notice also includes a notice that if an agreement is not reached, remaining pilots would be rehired by the airline on new terms and conditions. This is a threat facing other groups of staff, which Willie Walsh described in a letter to MPs as “vastly exaggerated and also mischaracterised as decisions that have already been made”.

There are some aspects of BALPA’s existing agreement with BA that are considered sacrosanct, specifically the “scope clause”. Also known as Schedule K, this states that BA aircraft with more than 100 seats and all BA flights at Gatwick and Heathrow must be operated with BA mainline pilots.

BA seems to have been wrong-footed by the political response to redundancies, particularly as it has taken advantage of the government’s payroll protection scheme for furloughed staff.

There is clearly frustration on IAG’s part that the scale of the crisis facing aviation is not understood. IAG is reported to have written to MPs twice last week.

It won’t be known for some months whether the redundancies announced by BA, easyJet and Virgin Atlantic are merely the start of a very substantial increase in unemployment across a number of sectors in the UK.

In terms of where things go from here, historically, it’s always been BA’s approach to ultimately reach an agreement with trade unions, on the basis it has to maintain a long-term relationship with them. This is even when negotiations have become very protracted and some unions have tested the patience of the rest of the airline to the limit.

Continue reading “London Air Travel’s Monday Briefing – 8 June 2020”