LONDON--British Airways said on Thursday it has struck a deal with its unions to suspend more than 30,000 cabin crew and ground staff in one of the airline industry's most dramatic moves yet to survive the coronavirus pandemic.
With global travel in turmoil as the virus takes hold around the world, BA's owner, IAG, said it would also cut capacity by 90% in April and May, and scrap its dividend, in a desperate bid to survive the worst crisis in its history.
With BA having already agreed a 50% pay cut for its pilots, the deal focuses on cabin and ground crew, engineers and office staff. The Unite union said under the scheme staff would be furloughed on 80% of pay, with no cap on earnings, and without anyone being made redundant.
"Given the incredibly difficult circumstances that the entire aviation sector is facing, this is as good a deal as possible for our members," Unite national officer Oliver Richardson said. "The deal protects the jobs of BA staff and, as far as possible, also protects their pay."
Separately, on Thursday IAG cancelled its final dividend, saving 337 million euros ($366 million). The stock had risen on the jobs plan but closed down 1%.
Hundreds of companies across a range of sectors have scrapped dividends to conserve cash, but the move by IAG marks a particular blow for investors because it was the third highest yielding stock by dividend on the UK's benchmark FTSE 100. With planes unable to fly because of travel restrictions, compounded by a plunge in demand over fears of contagion, airlines worldwide have grounded most of their fleets, and many have said they need government support to survive.
In recent weeks Qantas Airways put two-thirds of its workforce - 20,000 workers - on leave, while Lufthansa applied for short-time work for its crew and ground staff. British budget airline easyJet has said it will lay off its 4,000 UK-based cabin crew for two months.
U.S. airlines are set to receive $25 billion in grants to cover payrolls over the next six months but are still encouraging workweek reductions, unpaid leave and early retirement as they face more cancellations than bookings. The companies are trying to avoid making staff redundant so they can respond quickly to any increase in capacity when a recovery comes.
IAG, which owns 598 aircraft across its network, which also includes Aer Lingus, Iberia and Vueling, had originally said it would cut capacity by 75% in April and May. It is still helping to repatriate customers and to conduct cargo flights delivering medical equipment and food supplies.
In Europe, more than 20,000 flights departed or landed on Jan. 23. Two months later, after Italy emerged as an epicenter for the virus and travel restrictions went into force, flights dropped to fewer than 5,000 per day.
Britain has launched a job retention scheme that covers 80% of salary capped at a maximum of 2,500 pounds ($3,093) a month. BA said it would make use of the scheme, and the union said it would be modified so there was no cap on earnings.
