Economists, businesses and social commentators have spoken at great length about how the Covid-19 crisis has shocked the market. Flying between meetings might be a thing of the past for many companies as business goes on as normal by utilising videoconferencing software. Home delivery services are on the increase, whether it is small businesses trying to cope with the lack of footfall or larger companies providing home deliveries for those not wanting to break quarantine. Netflix and other streaming services have seen an increase of users.
The market is changing. The way we operate is changing. These are changes that will linger for long after Covid-19 has become a thing of the past. But, as is a theme above, Covid-19 has done one thing especially well and that is boosting the information and technology and digital services sector.
I work in the aviation sector, arguably the hardest hit by the Covid-19 pandemic. Over the last week:
- British Airways has cut 12,000 jobs
- Virgin Atlantic has cut 3,000 jobs
- Boeing has reduced production by 50%
- Airbus has reduced production by 35%
- GE has cut 10,000 aerospace jobs
- Rolls-Royce set to cut 8,000 aviation jobs
People will travel for business and for pleasure but getting back to the levels seen before the Covid-19 crisis will be a rough, but is it right for companies to reduce their numbers? And how is the move supported by government given those companies listed above have such high profit margins? The BBC today (6th May) released a piece of news regarding Qatar Airways:
“In February, Qatar Airways increased its stake in British Airways owner IAG to 25% as part of its strategy to invest in other carriers.“
This boost in confidence in IAG also comes not long after we have found out that the Spanish government has provided IAG with a substantial €1 billion-euro bailout package. This has, however, been directed toward IAG’s low-cost airlines – Vueling and Iberia. The amount has been agreed, but not yet been processed.
IAG has seen year-on-year profits before the Covid-19 pandemic (as illustrated below) leading to staff threatening strike action in regards to pay. Which raises the question; why was British Airways was so keen on making 12,000 staff redundant?
It is often argued that companies need to make reductions because they need to survive and to stay afloat. A slashing of jobs means that the company can go on. But Covid-19 removes us from what are considered standard levels of business practice and instead shoves us back into the realm of fiscal tightening not seen since the financial crash.
It is precisely because of this debacle that we need companies to put their staff first and continue to keep them in employment. We limped out of the last financial catastrophe with a huge divide between those that have money and have the facilities to store it in offshore accounts or who bet against the market, a practice known as “shorting”. The majority of us don’t have these capabilities and are therefore more likely to suffer as a result in companies clamming up with the money that their employees helped them create.
The money going into hands of employees means that more funds will be diverted to other areas of the economy that have seen a drop because of Covid-19 such as the retail sector, restaurants, pubs, renovations and home improvement that would bring back the fleet of self-employed people who suffered a shock after Rishi Sunak’s emergency Covid-19 budget. People will also be able to pay their mortgages and their rent instead of facing the ridiculous one month deferral period in which landlords are not allowed to kick out tenants.
Unprecedented times call for unprecedented measures. This is one of those times when big businesses need to not stem the flow of money, but approach their workers with a calm and collected resolve to spread money and help stimulate the economy. And maybe even win back some trust and faith from their employees because, when the time came, the companies did the right thing.