Qatar Airways has agreed to invest hundreds of millions of dollars into International Airlines Group (IAG) whose airlines are struggling to survive the coronavirus pandemic.
Qatar Investment
IAG plans to raise $3.3 billion dollars from investors which include Qatar Airways. Qatar is in the same oneworld alliance with British Airways and Iberia. IAG also owns:
- Aer Lingus
- Level and
- Vueling.
Qatar Airways is the largest shareholder of IAG with an ownership stake of 25.1%. Qatar would provide a capital increase of $817 million while it seeks two seats on the IAG Board of Directors. This will be subject to a shareholder vote in September. Investment banks are underwriting the rest of the rights issue that could double the number of IAG stock shares.
In addition to the increase of investments, IAG has established a path to reduce costs across all of its airline divisions:
IAG reported a record operating loss of approximately $1.7 billion in the first half of 2020. In addition to the operating loss, IAG also took an early aircraft retirement hit of $2.6 billion for Iberia’s A340 and British Airways 747 fleets. IAG also intends to defer half of its new aircraft deliveries through 2022.
The staff situation doesn’t look any better. British Airways had already announced job cuts that could affect 12,000 employees which is over a quarter of its workforce.
“Our industry is facing an unprecedented crisis and the outlook remains uncertain,” CEO Willie Walsh said in a statement. “However, we strongly believe that now is the time to look to the future and strengthen IAG’s financial and strategic position,” he added.
The passenger traffic at IAG is still weak as they look to reinstate their flight schedules. However demand remains weak, there are countries with travel restrictions along with the possibility of a second wave of the pandemic. The UK has reintroduced quarantine measures for passengers arriving from Spain. IAG had hoped to be back to 50% of flight capacity but they are still at the 20% level compared to the same time last year.
Farewell To The Queen
One of the victims of the fall of bookings at British Airways is the immediate retirement of the Boeing 747 – The Queen of the Skies. I wrote a farewell article last week complete with historical liveries, you can read that article here.
The End of Flights BA1 And BA2
British Airways operated a very unique pair of flights from London City Airport (LCY) to New York (JFK). BA1 flies westbound and BA2 flies the route eastbound using one specially configured Airbus A318 aircraft. The flight numbers are a throwback to the London to New York service using the Concorde supersonic aircraft. The A318 is equipped with an all-business class seating of just 32 seats. The flight originated as a flight from the heart of London directly to JFK with a stop at Shannon, Ireland. This stop allowed passengers to clear US immigration while the aircraft was topped off with fuel for the headwind flight across the Atlantic Ocean. British Airways has decided to end the pair of flights and retire their one and only Airbus A-318.
Final Thoughts
No doubt these are rough skies for the airline industry. IAG like other airlines has to make significant adjustments in its structure along with investments to stay viable. Unfortunately, there will be losses of aircraft and services that are iconic such as the Boeing 747 and the unique London City Airport to JFK service. If there is a second wave of the pandemic this fall, IAG could quickly be flying into some stiff headwinds. Flying as we used to know it probably won’t return until there is a proven and distributed vaccine.
