Facing a structural shift in its business, British Airways is increasing its liquidity to ride out the economic storm by embarking on a move to raise £600 million ($987 million)in cash while continuing to press for labour support for cost savings.
BAhas launched a £300 million convertible bonds issue and agreed terms with trustees of its defined benefit pension schemes in the UK to release up to £330 million in bank guarantees.
It comes after BA's recent sombre AGM, against the backdrop of union disquiet at its attempts to secure labour savings, at which management reiterated its view structural changes are required.
"Fewer business travellers will choose the premium cabins, and those who do will pay less," Walsh says."In framing our new business plan, we have been clear that our purpose is not just riding out the storm - but giving ourselves a permanent platform on which to build a profitable business for the long term."
BA has already cut capacity 3.5% this summer and 5% in the winter;plans to ground more of its Boeing 757s and 747s in the 2010 summer and winter respectively, and slightly delayed delivery of its Airbus A380s. It also wants to cut full-time equivalent headcount by about 3,700 by March 2010. Walsh says: "There is no point trying to skirt around the fact that we need a fundamental and structural change to our employee cost base."
While BA got a tonic ahead of the AGM as pilots agreed a deal saving the carrier £26 million annually, engineers are the only other staff group toagree a deal. This leaves the greater share of cabin, administration and ground staff still to sign up. Amid the deadlock, these talks are now being facilitiated by the UK arbitration service.
BA's pensions deficit also continues to weigh heavy. Fresh valuations of the deficits are due this autumn, but following the plunge in equity markets, BA chairman Martin Broughton says it is already clear the deficits will have increased. Broughton says "the company will not be able to afford to increase its own contribution" in the current environment, notingthe company and trustees will need to agree a revised funding plan after the actuarial review is completed.