The British flag carrier is planning to cut nearly 30% of its personnel
As a response to air traffic reduction due to Covid-19, on 28 April, British Airways announced its plans to reduce its 42,000-strong workforce by 12,000.
Despite being justified by a direct and indirect pandemic impact on the business, as well as by the fact that the British flag carrier does not think the traffic will return to normal until 2023, the restructuring has been criticised by the general public and unions.
A justifiable move
Besides a drastic reduction of the number of air passengers, the Covid-19 pandemic also had a very significant impact on oil prices, sending them into negative territories in April. This is particularly bad news for airlines such as British Airways, practising fuel hedging which, to put it simply, is a bet on oil prices increasing.
As a result, the British flag carrier can logically be worried about its future and the restructuring makes sense from a financial point of view.
Despite this, the airline has not yet requested a government bailout, which would become harder to justify after the layoffs anyway, unlike a large number of other European flag carriers such as Lufthansa or Air France-KLM. According to the company, the reason behind this is that such a request would lead to loss-making carriers such as Virgin Atlantic getting taxpayers’ help, which it deems unacceptable.
However, it is possible to assume that it is simply a way for the slightly more financially solid British Airways to weaken competitors and strengthen its leading position on the British full-service market in the long term.
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By GlobalDataA move considered opportunistic
If British Airways is not the only airline to announce actual cuts instead of simple furloughs, none of its competitors are planning layoffs to the same scale yet. Indeed, SAS recently announced 5,000 layoffs and EasyJet assumes it will only have to reduce its workforce by one-sixth, for instance.
Considering that the British Airways cuts are likely to primarily affect legacy contracts and air staff with higher salaries, it is understandable to see the layoffs described as opportunistic by the unions.
Furthermore, these cuts will offer the airline the perfect justification to reduce its operations on less profitable routes and on those, in which it competes with easyJet, giving it the opportunity to boost its revenues once the situation comes back to normal.
