IAG delays management changes, cuts capacity

International Airlines Group ( IAG ), the parent company of carriers British Airways and Iberia, has announced it will delay management team changes as it prepares to respond to challenges presented by the COVID-19 pandemic with 75% cuts in capacity for April and May. Iberia Chief Executive Luis Gallego will continue in his role for the next few months; Willie Walsh will continue to act as IAG chief executive, and Javier Sanchez-Prieto will remain in place as Vueling chief executive. “We have seen a substantial decline in bookings across our airlines and global network over the past few weeks and we expect demand to remain weak until well into the summer,” Walsh said. “We are therefore making significant reductions to our flying schedules. We will continue to monitor demand levels and we have the flexibility to make further cuts if necessary. We are also taking actions to reduce operating expenses and improve cash flow at each of our airlines. IAG is resilient with a strong balance sheet and substantial cash liquidity.” The rapid spread of the novel coronavirus along with associated government travel restrictions and advisories, are having a significant, negative impact on the demand for global air traffic on almost all routes operated by IAG’s airlines, the company said in a press release. To date IAG has suspended flights to China, reduced capacity on Asian routes, and cancelled all flights to, from and within Italy, in addition to making various changes to its network. The U.S. announcement last week that restricts entry by foreign nationals who have been in countries in the Schengen Area, U.K. and Ireland has added to the uncertainty on North Atlantic routes. In addition, many other countries have banned or are restricting inbound travel including Argentina, Chile, India and Peru. Spain has also been the subject of travel advisories, for example by the U.K. Foreign and Commonwealth Office (FCO). IAG said it is also implementing further initiatives in response to the challenging market environment. Capacity, in terms of available seat kilometers, in the first quarter of 2020 is now expected to be reduced by around 7.5% compared to last year. In April and May the group plans to reduce capacity by at least 75% compared to the same period in 2019. IAG is also taking actions to reduce operating expenses and improve cash flow. These include grounding surplus aircraft, reducing and deferring capital spending, cutting nonessential and non-cyber related IT spending, freezing recruitment and discretionary spending, implementing voluntary leave options, temporarily suspending employment contracts and reducing working hours. Given the continued uncertainty of the potential impact and duration of the pandemic, it is still not possible to give accurate profit guidance for the full year 2020, IAG said in the press release. IAG said it has strong liquidity with cash, cash equivalents and interest-bearing deposits of 7.35 billion euros ($8.2 billion) as of March 12. In addition, its undrawn general and committed aircraft backed financing facilities amount to 1.9 billion euros ($2.1 billion), resulting in total liquidity of 9.3 billion euros ($10.3 billion).

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