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British Airways Parent Company Accepts €1 Billion Bailout From Spanish Government

British Airways Parent Company Accepts €1 Billion Bailout From Spanish Government

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The parent company of British Airways has accepted a €1 billion Spanish government-backed bailout despite insisting there is no government support waiting for BA. International Consolidated Airline Group (IAG) said on Friday that the Spanish government would back the loans to help support flag carrier Iberia and Spanish low-cost airline Vueling.

IAG’s chief financial officer Steve Gunning said €750 million would be provided for Iberia, while €260 million in loans will be awarded to Vueling. Previously, IAG said it would not request or accept taxpayer-funded bailouts to see the airline group through the Corona-crisis.

Photo Credit: Iberia
Photo Credit: Iberia

The approach taken by IAG is in stark contrast to other European airline heavyweights like Lufthansa and Air France-KLM who have either secured state aid or are actively pursuing multi-billion Euro bailouts. The chief executive of Lufthansa, Carsten Sphor claims state aid is required across the industry to ensure competition isn’t distorted.

But on Tuesday, the chief executive of British Airways told staffers “there is no Government bailout standing by for BA”. The statement coincided with plans released by the airline to slash 12,000 jobs and dramatically alter terms and conditions in what has been described as “illegal and immoral” opportunism.

Analysts suspect British Airways is choosing to eschew government aid to put pressure on Virgin Atlantic and Norwegian. If either airline falls victim to the COVID-19 pandemic, British Airways is set to seize control of valuable slots when air travel demand returns.

The Unite union and BALPA pilots union also suspect British Airways is using the Corona-crisis as an excuse to rehire workers on low-paid so-called ‘zero hour’ contracts with no formal employment rights. The unions have pledged to fight the proposed changes and are planning a legal challenge.

British Airways has refused to say whether it has actually asked the British government for a bailout or other financial support. The government has offered a special job retention scheme to pay wages up to 80 per cent but British Airways intends to lay-off 12,000 workers before this scheme ends.

IAG announced the job cuts at British Airways but similar redundancy programmes are not yet planned at Iberia or Vueling.

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