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Aer Lingus Parent Company Boss Warns Of More Cuts As COVID-19 Crisis Drags On

Published on Nov 1 2020 10:00 AM in General Industry tagged: Trending Posts / Aer Lingus / IAG / International Airlines Group

Aer Lingus Parent Company Boss Warns Of More Cuts As COVID-19 Crisis Drags On

The new boss of Aer Lingus owner International Airlines Group (IAG) has warned that he may have to strip even more costs from the business as a second wave of COVID-19 leaves its airlines staring at a bleak winter with very little travel.

IAG has forecast fourth-quarter capacity of just 30% of 2019 levels.

"Talking about my priorities, I think first of all we need to continue with the restructuring process that we have in place, we need to continue reducing our cost base," IAG CEO Luis Gallego told reporters as he hosted his first quarterly results.

IAG said that it cut cash operating costs by 54% from original plans to €205 million per week during July-September, a vital move ahead of a winter with very low travel.

Gallego said that he is looking to make more of IAG's costs variable, rather than fixed, which could mean, for example, more flexible working contracts for staff.

He is being forced to act after France and Germany imposed new blanket lockdown measures. Any similar moves in Britain and Spain, IAG's key markets, would spell further trouble for the group's prospects.

"What we see is where we have lockdown, we have a direct impact in the number of bookings and revenue intake," Gallego said.

Air France-KLM also warned of a further collapse in traffic due to the lockdowns as it reported a €1.05 billion euro loss on Friday October 30.

Gallego said that where routes opened IAG saw pent up demand for travel and it continues to work with UK and US authorities on a plan to allow testing to replace quarantine between London and New York.

The CEO took over from Willie Walsh in September after the company secured shareholder backing for a €2.74 billion capital hike to boost its finances.

Bernstein analyst Daniel Roeska said that more action on costs is needed.

"Management will need to significantly lower monthly cash burn to avoid significantly depleting resources by next summer," he said.

Quarterly Loss

IAG, which also owns British Airways, Iberia and Vueling, was publishing further details on its third quarter after it announced a worse than expected quarterly loss of €1.3 billion euros last week.

It said that the total operating loss for the quarter was €1.9 billion euros, including exceptional items relating to fuel hedges and restructuring costs at Aer Lingus and British Airways. Staff numbers have already been cut by 10,000 at the two airlines, with most of the reductions being at BA.

News by Reuters, edited by Hospitality Ireland. Click subscribe to sign up for the Hospitality Ireland print edition.

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