British Airways to cut up to 12,000 jobs in survival fight

Bloomberg

IAG SA will slash the work force at its flagship British Airways by almost 30% in a painful restructuring aimed at shrinking the airline group for a downturn that could last for years.
IAG shares fell as much as 6% on Wednesday, after the airline group said that as many as 12,000 jobs will be lost at the UK’s former state-owned airline. A 1.3 billion-euro ($1.4 billion) charge from fuel and currency hedges added to the group’s first-quarter operating loss, according to a statement.
With its planes on the ground, IAG said operating results are likely to be “significantly worse” in the current period because the virus has pushed down demand.
The harsh steps are likely to be repeated by other airlines in days and weeks to come, after flight restrictions aimed at fighting the coronavirus threw the
industry into its steepest downturn ever.
Carriers are in desperate need of cash, with peers such as Air France-KLM and Deutsche Lufthansa chasing multibillion-euro bailouts. IAG has so far avoided tapping government-supported fundraising plans.
“In the last few weeks, the outlook for the aviation industry has worsened further and we must take action now,” British Airways CEO Alex Cruz said in a letter to employees. “Any money we borrow now will only be short-term and will not address the longer-term challenges we will face.”
Planemaker Airbus SE said on Wednesday it burned through 8 billion euros in cash in the first quarter, and said it would have a better grasp on the scale of the crisis by June. Boeing Co was expected to report results on Wednesday.
British Airways now leads a stable that includes Spanish flag carrier Iberia, Ireland’s Aer Lingus and discount brands Vueling and Level. Like other European carriers, the company was hit with a double-whammy from fuel-hedging contracts that failed to protect the company against a sudden drop in oil prices.
European airlines typically hedge most of their fuel costs to protect against a sudden jump in one of their biggest expenses. But because of the way some of the contracts are structured, the unexpected drop has forced many of them to hand cash over to banks even as many ask governments for multibillion euro taxpayer bailouts.
Lufthansa and Ryanair Holdings have already said they’ve lost money on hedging contracts, with more revelations expected with quarterly results.
IAG doesn’t expect passenger demand to recover to 2019 levels for “several years.” The company said its operating loss before exceptional items was 535 million euros in the period ended on March 31.
Now its fleet is almost fully grounded, sapping revenue further. With cash and undrawn credit lines totalling 9.5 billion euros, the carrier is undertaking painful cuts to stretch its resources during the downturn. The carrier’s market value has plunged by about two-thirds this year, to $5 billion.
The job cuts are also a blow for the UK government, which is paying part of the wages of furloughed workers in the hope of preventing a sharp spike in unemployment as the country remains in lockdown.