As the COVID-19 pandemic continues to take a devastating toll on the aviation industry, British Airways have announced their CEO, Alex Cruz, will be stepping down from his leadership role. British Airways owners International Airlines Group (IAG) are reshuffling their top management positions and Alex Cruz, who has headed up the airline since 2016, is to be replaced by Sean Doyle, CEO of the also IAG-owned Aer Lingus. The replacement will come into immediate effect, with Cruz staying on as a non-executive chairman during this “period of transition.” The move marks a return to BA for Sean Doyle, who previously worked with the airline since 1998. Luis Gallego, CEO of IAG, called the pandemic “the worst crisis faced in our industry,” adding that “these internal promotions will ensure IAG is well placed to emerge in a strong position.” Gallego himself has just replaced IAG’s longtime leader Willie Walsh, who retired only last month. This latest announcement is one in a series of changes the new boss has made. In his statement, Gallego thanked Alex Cruz for his work, adding: “[Alex] worked tirelessly to modernise the airline in the years leading up to the celebration of its 100th anniversary. Since then, he has led the airline through a particularly demanding period and has secured restructuring agreements with the vast majority of employees.”
The worst crisis
Alex Cruz’s departure is far from the only aviation industry casualty of the pandemic. During Cruz’s leadership, British Airways announced they would be cutting 12,000 staff in response to the COVID crisis, amounting to around a quarter of the airline’s total workforce. In May, UK-based airline EasyJet announced plans to cut up to a third of their workforce and, despite entering the pandemic in a strong position with consistent productivity, their CEO Johan Lundgren last week announced the airline was on track to make its first annual loss in twenty-five years - possibly amounting to over £800Mn. Other recent alarming statistics from the International Air Transport Association indicate airlines are going to go through a daily cash burn of $300,000 a minute. “The crisis is deeper and longer than any of us could have imagined,” said Alexandre de Juniac, IATA’s Director General and CEO. “For the second half of the year, we expect, on average, for airlines to burn through cash at about $300,000 per minute for a total of $77 billion. And that’s on top of the $51 billion cash burn in the second quarter.”
While this level of loss is striking, it’s not unexpected given the dip in both domestic and international travel the pandemic has created globally: the latest IATA data reveals that global passenger traffic in August was down 75% compared to a year ago. Similarly, domestic traffic was under half what it was in 2019, and international traffic was at just 12% of what it was this time last year.
“Reach a compromise, get a deal done now, and save jobs.”
Over in the United States, airlines and their representatives have been locked into discussion with Congress for weeks, attempting to negotiate more financial support in order to avoid further mass lay-offs. Back in March, the CARES Act relief bill allocated $25Bn to the US airline industry, prohibiting job cuts until relief expired on October 1st. Almost two weeks on from this expiry date, proposals for further government aid have fallen through, and airlines say they will be forced to begin mass layoffs if an agreement with the government is not reached. Last week, American Airlines CEO Doug Parker said they “will begin the difficult process of furloughing 19,000 of our hardworking and dedicated colleagues,” if a solution isn’t found soon. United airlines also announced another 13,000 job cuts - the majority of which would be flight attendants - writing in a staff message: “[w]e implore our elected leaders to reach a compromise, get a deal done now, and save jobs.” In the case of a stimulus deal being reached, however, these airlines say their furlough decisions could be reversed. United, American and Southwest airlines have also recently cut tens of thousands of flights amid ongoing travel disruptions, reducing their respective routes by between 30-50%, indicating just how widespread and devastating the ongoing conditions of the pandemic have been in the United States. In an attempt to reassure travellers and kickstart their business again, companies such as American Airlines are launching a testing initiative for certain routes, including an onsite, rapid COVID-19 testing service called CareNow, administered at Dallas Fort Worth airport. While these rollouts of quick-turnaround testing remain limited for now, this could go some way to getting travellers safely back on flights and airlines back on track to recovery.
‘Flights to Nowhere’
Elsewhere in the world, airlines are having to get creative as they race to make up lost revenue. In August, Taiwan’s Eva Air established the concept of a ‘flight to nowhere,’ in which passengers board a plane, show their passports and even dine on the aircraft, but ultimately end up back at the same destination they left from. Singapore Airlines and Japan’s ANA have also adopted the idea, which has proved popular. This past weekend, Australia-based Qantas’ own seven-hour ‘flight to nowhere’ departed from (and arrived back into) Sydney airport. Tickets for the journey reportedly sold out within ten minutes when they first went on sale, proving that customers are not only missing holiday destinations, but the means of transport they use to get there too.
Where to next?
For the aviation industry, the COVID-19 pandemic has been the perfect storm, one they will struggle to negotiate for at least the next year or so. This latest news of Alex Cruz’s departure as CEO of British Airways demonstrates airlines are trying everything to recover as quickly as possible. In the absence of further government stimulus and financial aid, it seems certain the economic fallout from COVID-19 will continue to damage the aviation sector long into the future. In a recent conversation with CNBC, Qatar Airways CEO Akbar Al Baker said the “worst was not behind any airline,” and that a second wave could potentially damage the industry even more. While the disruption and fallout carry on, airlines will also continue to adapt, innovate and make whatever changes they deem necessary, whether through manager-level reshuffles, rapid pre-flight testing programs or even through opening more ‘flight-to-nowhere’ routes.