U.K. Minister Warns British Airways Over Aggressive Job Cuts

(Bloomberg) --

The U.K. government warned British Airways it risks losing valuable airport landing slots after deciding to let go 12,000 staff while claiming government money to protect jobs during the coronavirus pandemic.

An aviation debate in Parliament on Wednesday was dominated by concerns about the former flag-carrier’s plans to slash its workforce.

Transport Minister Kelly Tolhurst, responding to questions from lawmakers, agreed that BA had breached the public’s trust by instituting the job cuts while accepting state wage subsidies and said she’d consider asking the Civil Aviation Authority about taking away airport landing slots if it doesn’t reverse the measures.

“Businesses get the benefit of being shareholders in the good times and must share the burden in the bad times,” Tolhurst said. “I’m quite willing to look at anything that could open up and increase the competition in our aviation sector.”

Tolhurst cautioned that the government is currently prevented from intervening in distributing landing slots.

“However, we want airport landing and take-off slots to be used as effectively as possible for U.K. consumers,” she said. As the aviation market recovers, she wants to “ensure that the slots-allocation process encourages competition and provides connectivity, so that is something I will be looking at.”

Like airlines worldwide, British Airways parent IAG SA is slashing costs to contend with an historic drop in travel due to the virus. Carriers in Europe have signaled plans to eliminate more than 50,000 positions since the onset of the crisis, including 10,000 on Wednesday at Germany’s Deutsche Lufthansa AG.

Furlough Program

Airlines that predominate in the busy London market -- British Airways, Virgin Atlantic Airways Ltd., EasyJet Plc and Dublin-based Ryanair Holdings Plc -- account for almost half of the cutbacks, with BA’s the most aggressive.

Airlines, like other British companies, have benefited from temporary furlough programs that subsidize salaries to help minimize job cuts. IAG has separately accessed 300 million pounds ($377 million) from the Coronavirus Corporate Finance Facility.

In a letter to employees seen by Bloomberg, British Airways Chief Executive Officer Alex Cruz said the carrier group was burning 178 million pounds a week without any revenue coming in, forcing it to preserve cash. He also wrote that debt taken on would have to be repaid over a short term, so sales that are generated following a return to flying are swallowed up.

“Demand for flying in the coming years will be nothing like it has been,” Cruz said. “There will be fewer customers, flying to fewer destinations. That is the commercial reality. We anticipate the BA of tomorrow will be a smaller company, and one that needs to be even more efficient as it fights for every customer it carries against our competitors.”

Unions and lawmakers have questioned the extent of the job cuts at British Airways, and it has come under criticism over work rules governing remaining employees.

“Does the minister agree BA should pay a price for a ‘breach of faith,’” Tolhurst was asked by lawmaker Jerome Mayhew. “Yes,” Tolhurst answered.

She said it’s up to the company to set employment terms, while promising to “do what I can in my capacity as aviation minister to mitigate or limit the number of job losses.”

©2020 Bloomberg L.P.