New IAG boss warns of more cuts as COVID crisis drags on

IAG has stepped up its demand for governments to adopt pre-departure testing to allow quarantine-free travel as Europe locks down again. (AFP)
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Updated 31 October 2020

New IAG boss warns of more cuts as COVID crisis drags on

  • Company has already slashed cash operating costs by 54 percent during July-September ahead of a winter with very little travel

LONDON: The new boss of British Airways-owner IAG warned 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.

Forecasting fourth-quarter capa- city at just 30 percent of 2019 levels, IAG also stepped up its demand for governments to adopt pre-departure testing to allow quarantine-free travel as Europe locks down once again. “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. IAG said that it had cut cash operating costs by 54 percent from original plans to €205 million ($242 million) per week during July-September, a vital move ahead of a winter with very low travel.
Gallego said that he was 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.




Luis Gallego, CEO of British Airways-owner IAG.


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

HIGHLIGHTS

● New CEO Luis Gallego presents first quarterly results.

● Says sticking to predecessor’s restructuring plan.

● Warns France, Germany lockdowns will further depress travel.

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 was needed. “Management will need to significantly lower monthly cash burn to avoid significantly depleting resources by next summer,” he said.
IAG, which also owns Iberia, Aer Lingus and Vueling, was publishing further details on its third quarter after it announced a worse than expected quarterly loss of €1.3 billion last week.
It said that the total operating loss for the quarter was €1.9 billion, including exceptional items relating to fuel hedges and restructuring costs at British Airways (BA) and Aer Lingus.
Staff numbers have already been cut by 10,000 at the two airlines, with most of the reductions at BA.


US sanctions Chinese and Russian firms over Iran trade

Updated 29 November 2020

US sanctions Chinese and Russian firms over Iran trade

  • Four companies accused of ‘transferring sensitive technology and items’ to missile program

LONDON: The US has slapped economic sanctions on four Chinese and Russian companies that Washington claims helped to support Iran’s missile program.

The four were accused of “transferring sensitive technology and items to Iran’s missile program” and will be subject to restrictions on US government aid and their exports for two years, Secretary of State Mike Pompeo said in a statement.

The sanctions, imposed on Wednesday, were against two Chinese-based companies, Chengdu Best New Materials and Zibo Elim Trade, as well as Russia’s Nilco Group and joint stock company Elecon.

“These measures are part of our response to Iran’s malign activities,” said Pompeo. “These determinations underscore the continuing need for all countries to remain vigilant to efforts by Iran to advance its missile program. We will continue to work to impede Iran’s missile development efforts and use our sanctions authorities to spotlight the foreign suppliers, such as these entities in the PRC and Russia, that provide missile-related materials and technology to Iran.”

The Trump administration has ramped up sanctions on Tehran after withdrawing from the Iran nuclear deal in 2018.

Earlier this week, Pompeo met Kuwaiti Foreign Minister Sheikh Ahmad Nasser Al-Mohammad Al-Sabah, when the campaign of pressure on the Iranian regime was also discussed.

“I want to thank Kuwait for its support of the maximum pressure campaign. Together, we are denying Tehran money, resources, wealth, weapons with which they would be able to commit terror acts all across the region,” he said.

It is not yet clear how the incoming administration of Joe Biden will deal with Tehran and whether it wants to revive the nuclear deal which would be key reviving the country’s battered economy. The Iranian rial has lost about half of its value this year against the dollar, fueling inflation and deepening the damage to the economy.

Iran’s economy would grow as much as 4.4 percent next year if sanctions were lifted, the Institute of International Finance (IIF) said last week. 

The economy is expected to contract by about 6.1 percent in 2020 according to IIF estimates.