British Airways-owner loses €1bn in 3 months as CEO says: 'We're ready to fly'

·4-min read
A British Airways Airbus A319 lands at Newcastle Airport in Newcastle Upon Tyne, UK, on April 9th 2021. (Photo by Robert Smith/MI News/NurPhoto via Getty Images)
A British Airways Airbus A319 lands at Newcastle Airport in Newcastle Upon Tyne, UK, on April 9th 2021. (Photo by Robert Smith/MI News/NurPhoto via Getty Images)

British Airways parent International Consolidated Airlines Group (IAG.L) counted the cost of COVID, reporting mounting losses for the first three months of 2021 as travel was restricted.  

The company reported a €1bn ($1.2bn, £877m) pre-tax loss for the first quarter as England entered a third national lockdown with similar measures across the devolved nations.  

It posted a €1.9bn operating loss last year when the UK was almost a month into its first national lockdown. 

IAG said on Friday it flew 20% of 2019 capacity in the months to the end of March and expects to fly 25% of its 2019 capacity in the coming months due to "limited progress" in restoring markets.

The company said that it is ready for take-off but called on the government to include four measures to "enable a safe reopening" of travel. 

The four measures include, restriction-free travel corridors between countries, "affordable, simple and proportionate" testing to replace quarantine, "contactless" transit through airports and digital health passes and vaccine documentation.

Luis Gallego, the chief executive of IAG, said: "We’re doing everything in our power to emerge in a stronger competitive position. We’re absolutely confident that a safe restart to travel can happen as shown by the scientific data. We’re ready to fly but government action is needed."

IAG, which also owns Spain’s Iberia and Aer Lingus, reduced its weekly cash burn to €175m — beating previous guidance of €185m. It had strong liquidity of €10.5bn at the end of Q1, IAG said. 

Shares in the company were down just over 0.1% on Friday morning in London. 

Chart: Yahoo Finance
IAG shares on Friday. Chart: Yahoo Finance

The UK government is expected to announce which countries will feature on a "green list" for the resumption of travel from mid-May and the European Union is planning a reopening from June. 

The global airline industry has been hammered by the coronavirus pandemic, but rising outbreaks in India and Brazil have dented hopes of a gradual recovery boosted by optimism over COVID vaccine programmes and economies reopening. 

READ MORE: European stock markets rise with FTSE 100 hitting new pandemic high

In April, the International Air Transport Association (IATA) upgraded its deficit estimates for 2021 from $38bn to $48bn for global airlines as the new variants spread across the world. 

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: "IAG can do little but hold on tight through the continued turbulence and hope government policy will allow it to navigate out of the crisis. But there are still threatening grey skies ahead, not least with the spiralling of cases in India which could knock confidence in the travelling public."

IAG posted an operating loss of €1.47bn in Q4, which saw the company slump to a full-year of €6.9bn after tax. Most of that loss came from €3bn on hedging losses on fuel that was never delivered, as the airline owner was unable to use it, and write-downs on the value of its fleet.

"After a pretty awful 2020 that saw the airline post a £6bn loss, the IAG share price has made some progress this year, however since the company posted its full year numbers back in February the shares have struggled to gain much in the way of altitude, and today’s Q1 update looks set to heap further gloom on its Q2 prospects," said Michael Hewson, chief analyst at CMC Markets.

The company is also exposed to the wider international travel markets, unlike domestic carriers like EasyJet (EZJ.L) and Ryanair (RYA.L). 

"As an international carrier IAG is uniquely exposed to markets for international travel, and while it does have a domestic base, with its Iberia and Aer Lingus brands, which could well benefit from a pickup in short haul flights, long haul is where the bigger margins can be usually found."

Experts believe that travel corridors and vaccine passports are the next step for airlines in a post-pandemic travel world. 

"The recent talk of a US/UK travel corridor for vaccinated people is very welcome news if it comes to pass, and it is here that IAG will be pinning a lot of its hopes this year." 

Watch: British Airways CEO Says Vaccination Rates Offer a 'Great Opportunity' for UK-US Travel

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