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New Surge In Covid-19 Infections Needs More Cost Cuts, Warns New IAG Boss

New Surge In Covid-19 Infections Needs More Cost Cuts, Warns New IAG Boss
The threat from a second wave of the Covid-19 pandemic will leave British Airways staring at a bleak winter with very little travel and therefore the company will have to look at ways to cut even more costs form the business business operations, warned the new boss of British Airways-owner IAG.
While forecasting capacity in the fourth quarter to be at just about 30 per cent of 2019 levels, its demand for governments to adopt pre-departure testing so that it was possible for travellers to undertake quarantine-free travel as stepped up by IAG, even in the face of many European countries imposing Covid-19 restrictions again because of the resurgence of infections.
“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,” Luis Gallego told reporters as he hosted his first quarterly results.
During the July-September quarter, the company had reduced cash operating costs by 54 per cent from its initial plan of cutting 205 million euros ($242 million) per week, IAG said, which was a vital move, according to the company, prior to the expected very low demand for air travel during the winter.
The company as trying to increase the number of heads of variable costs instead of fixed costs, Gallego said, which could for example mean the company implementing more flexible working contracts for staff.
These measures have been forced on IAG because of new blanket lockdown measures imposed by France and Germany. The group can face further trouble if similar moves were undertaken by governments of two of its key markets - Britain and Spain.
“What we see is where we have lockdown, we have a direct impact in the number of bookings and revenue intake,” Gallego said.
Warning of a further collapse in air traffic because of the lockdowns was issued by Air France-KLM. The company also reported a 1.05 billion euro loss on Friday.
Pent up demand for travel was witnessed on routes that reopened, Gallego said, and added that the company was continuing to work with authorities in the UK and US about a plan so that quarantine could be replaced by testing of passengers in London and New York.
The CEO took over from Willie Walsh in September after the company secured shareholder backing for a 2.74 billion euro capital hike to boost its finances.
More action on costs was needed, said Bernstein analyst Daniel Roeska.
“Management will need to significantly lower monthly cash burn to avoid significantly depleting resources by next summer,” he said.
A worse than expected third quarterly loss of 1.3 billion euros was announced by IAG, which also owns Iberia, Aer Lingus and Vueling.

Christopher J. Mitchell

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