“The shock announcement of mass redundancies at P&O, as the company struggles with deep losses is another reminder of the devastation Covid has wreaked on the travel industry. From airlines to cruise companies, hotel chains to tour operators, it’s been a hugely challenging two years, with many companies faced with taking on a huge burden of extra debt to try and stay in business.
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P&O's Woes
P&O has faced woes before, and financial problems stretch back two decades when once popular routes were scrapped. That was blamed on low-cost airlines and channel tunnel bookings eating into the once steady stream of holidaymakers heading on its vessels to the continent every summer.
But the pandemic plunged the operator into a fresh crisis. It had to deal with mass cancellations as lockdowns were enforced and then cope with the fluctuating travel restrictions and quarantine rules, which have continued to dent bookings. It wasn’t alone in experiencing a sharp reversal of fortunes. Brittany Ferries, which now runs some of P&O’s old Portsmouth routes, suffered a 57% drop in turnover in 2020. But it’s managed to stay afloat thanks to a 45-million-euro financial package from the French Government, in addition to state backed loans totalling 117 million euros.
Although P&O benefited from furlough support and a freight support grant, it failed to secure a £150 million bail out from the UK government.
The parent company Dubai based DP World has deep pockets but clearly is not willing to keep subsidising the loss making venture without fresh drastic cost-cutting.
The nature of the redundancy announcement is unlikely to help it win back customers, with staff reportedly refusing to leave ship. This could fast turn into a severe reputational headache for the company, with a big union fight looming ahead.’’
Article by Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown
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