British Airways chairman and CEO Alex Cruz on Wednesday appeared by video link in front of the U.K. Parliament's Transport Select Committee to update Members of Parliament on the airline's plans to make up to 13,000 staff redundant, telling the committee that the pandemic is "the worst crisis in BA's 100-year history."
BA last week flew around 187,000 passengers, equating to about 25 to 30% of its normal capacity compared with last year, according to Cruz. It reported a loss of $921 million in the second quarter, and Cruz said it was burning through cash at a rate of around $26 million a day.
Cruz added that BA does not see a "short-term coming back of our customers" because "people are still afraid of traveling." He said demand also is being hampered by the U.K. government's weekly changes to its list of travel corridors, the lack of a testing regime for travel and the continuation of the country's high level of Air Passenger Duty, which he claimed is "damaging to regional connectivity."
"There is no data to support that this is a temporary effect for the airline industry. All the data and all the information we have … point towards one thing: things have changed. The airline industry is fundamentally different.
"Please do not lose sight that this is not something that is just going to go away. The impact of this pandemic is something that is going to be with us for many years."
Recalling the impact of the financial crisis of 2007-2008, Cruz said it took around four years for passenger traffic to recover and that the number of business travelers choosing premium cabins "never recovered." He said BA believes the post-pandemic recovery will be a very long one that will cause "fundamental structural changes" to the makeup of its passengers and demand.
"Fewer passengers mean fewer flights, and fewer flights mean fewer people required to service them," Cruz said. "As CEO of British Airways, I have to take responsibility. I cannot ignore the situation. I had to act incredibly fast, and I deeply regret that way too many loyal and hardworking colleagues of mine are having to leave our business, and I understand why MPs are concerned.
"This is an impossible situation. We are having to make incredibly difficult decisions as a result of this pandemic, and it is really only because of Covid-19 that we have had to go through deep restructuring."
When asked for an estimate of how many redundancies will be necessary, Cruz said a realistic figure is "probably around 10,000" but warned that number could change as BA continues negotiations with staff unions to mitigate the impact.
So far, around 7,200 employees have left the business.
He said the airline has already reached an agreement with BALPA and has recently been in negotiations with non-pilot unions, with several different deals agreed in principle that either have been or soon will be put to a ballot. He added that the widely reported so-called fire-and-rehire strategy initially taken by the carrier now is "off the table," although cabin crew are still facing pay cuts of up to 15% under their current contracts.
Cruz himself has taken a 33% salary reduction, while all management-level employees took pay cuts of between 5% and 20%.
However, Howard Beckett, assistant general secretary of the Unite union, claimed Cruz's statement was "misleading" and "needs to be corrected."
"MPs and the select committee need to be aware that Alex Cruz's comments to the committee earlier were not entirely correct," Beckett said. "This is a very important matter, and we would not wish MPs and the select committee to get the wrong impression.
"To be clear, the fire-and-rehire threat still hangs over some BA workers. If Alex Cruz wishes to take this opportunity to say that he is removing this threat from our members, then Unite is more than ready to talk.
"Draft agreements with British Airways will not be finalized by Unite until members have voted on them and agreed to changes in their contracts. Even if agreements are reached and finalized in all of British Airways' sectors, this does not herald industrial peace. Any changes in contracts should have been of a temporary nature and once British Airways returns to profit, the cuts in pay and conditions should be immediately restored."
Cruz told the committee that BA's negotiations with unions have included provisions on how the airline can restore some of the pay and conditions should the airline return to profitability. "That's something we'll have to examine once we actually get to that point."
Source: Business Travel News