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BA-owner, easyJet make drastic cuts to try to survive coronavirus

The owner of British Airways and easyJet, Europe’s no.3 and no.4 airlines, said they would ground aircraft on an unprecedented scale in a battle to survive the travel restrictions and European lockdowns now convulsing the industry.

Britain’s government said it would discuss how to protect the industry from the coronavirus pandemic after easyJet on Monday joined Virgin Atlantic in calling for government help as people across the world stop travelling.

“European aviation faces a precarious future and it is clear that coordinated government backing will be required to ensure the industry survives and is able to continue to operate when the crisis is over,” easyJet’s CEO Johan Lundgren said in a statement.

BA-owner IAG stopped short of asking for government backing, however. IAG’s CEO Willie Walsh has long-opposed any government help for airlines.

He was due to retire later this month, but it was announced on Monday that he would defer his retirement for a few months to provide stability during this challenging time.

IAG said it would cut its flying capacity by at least 75% in April and May, while easyJet said it could ground the majority of its fleet on a rolling basis. The airlines are the no.3 and no.4 European carriers on a passenger number basis.

Both airlines said they had strong balance sheets, providing details on their cash positions and credit facilities.

IAG, which also owns Iberia and Aer Lingus, said it had total liquidity of 9.3 billion euros, while easyJet said it had 1.6 billion pounds of cash plus an undrawn $500 million revolving credit facility.

Both airlines said they could not provide profit guidance for their current financial years. IAG also detailed cost cuts including a freeze on discretionary spending, working hours reductions and a temporary suspension of employment contracts.

Meanwhile Air France KLM will park its biggest airliners and slash service by up to 90% over the next few days in response to the impact of the coronavirus, it said on Monday, sending its shares down 16% in early trade.

It said it had identified measures to save 200 million euros ($223 million) in 2020 and ways to cut its capital expenditure by 350 million euros.

“The deterioration of the environment linked to the epidemic and the sharp reduction in its activity … lead the group to forecast a sharply deteriorated financial trajectory,” it said in a statement.

The company said it welcomed recent expressions of support from governments in France and the Netherlands.

Air France KLM said it would cut back flights over the next few days, with the number of available seat kilometres (ASK) potentially falling by 70%-90%.

It will ground Air France’s fleet of Airbus 380s and KLM’s Boeing 747 fleet.

The group has more than 6 billion euros in cash and cash equivalents, it said, after both airlines drew on two revolving credit facilities last week.

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