British Airways must restructure to survive the air travel depression

British Airways must restructure to survive the air travel depression

Over the weekend British Airways became a “national disgrace” for its handling of the pandemic. With flights grounded, the airline has placed many of its staff on the UK Government’s “furlough” scheme. In the short-term this has protected jobs and limited some damage from lost income.

In the longer term, furlough isn’t a solution for the aviation industry. Global lockdowns had dramatic effects on airlines, with many seeing passenger numbers all but fall to zero. As these periods of enforced isolation dragged on, so governments took action to protect airlines and manufacturers. Many have made loans or injected capital, often with conditions to protect jobs or continue green initiatives.

There are important reasons to protect carriers. They act as a form of “soft power”, showing their “flag” nation is open for business by flying from nationally important hubs to key destinations. Near neighbours cement relationships with convenient flights between capitals. Larger countries come together with domestic flights that link geographically distant cities and centres.

British Airways finds itself in an unpleasant position. It is the “flag carrier” for the United Kingdom, with the union flag adorning its tails and its name promoting the country. Yet financial help has been lacking beyond the furlough payments for 22,000 staff. Nor has there been much vocal support from politicians. They have been reduced to selling its artwork, which might bring in enough cash to run the business for another month.

To survive, British Airways has to restructure. The substantial drop in demand is unlikely to recover anytime soon. Social distancing measures are likely to reduce the number of available seats on aircraft, hitting revenues. Costs have been cut by pulling out of Gatwick and dropping most flights. Which ones return will depend as much on how countries reopen as the demand for flights.

Any large-scale redundancy and restructuring program brings pain and suffering for those who lose their jobs, and those left behind. BA could have handled this better and won’t win awards for how it managed the process. However, without significant financial support from Government it has little choice.

About Ross A Hall

A business researcher and writer, I help companies find new markets, form strategies and build successful businesses.

Find out more about my work.

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