British Airways owner IAG posts near EUR8bn loss


International Consolidated Airlines PLC (LON:IAG), the owner of airlines British Airways and Iberia, posted losses of nearly EUR8bn in 2020 as COVID-19 restrictions cut passenger revenues by 75%.

Passenger flights during the year dropped to a third of 2019’s total and fell again to 27% in the final quarter of the year as more pandemic restrictions were imposed.

For the current quarter, IAG said it expects to be running at 20% of 2019 passenger capacity but given the current uncertainty that estimate might change.

The one bright spot was cargo where revenues during the year rose by EUR200mln to EUR1.3bn, according to the FTSE 100 group

Luis Gallego, chief executive, said: “Cargo helped to make long-haul passenger flights viable. We operated 4,003 cargo-only flights in the year.”

Total revenues for the year reflected the absence of passenger flights and dropped 69% to EUR7.8bn which was almost matched by losses, which soared to EUR7.8bn and included one-off charges for fuel hedges and foreign exchange of EUR3bn.

At the operating level, there was a EUR10bn swing into a loss of EUR7.4bn against a profit of EUR2.6bn a year ago.

All of the group’s four airlines were in the red during the year with BA posting a loss of EUR3.9bn and Iberia EUR1.4bn.

British Airways has cut 10,000 jobs or a quarter of its workforce while Irish carrier Aer Lingus shed 10% of its staff.

Employee costs for the year decreased by EUR2.1bn, said IAG.

BA also recently deferred EUR495mln of pension contributions due between September 2020 and October 2021 to save cash.

IAG added it has cash of EUR5.9bn at the year-end and with other sources of funds including a UK export finance facility had liquidity of EUR10.3bn

The liquidity provides some comfort said brokers and helped the share price rise 4.4% to 194.5p.

Peel Hunt said revenues were higher than expected and underlying operating losses lower. Net debt was also broadly in line with its forecasts at EUR9.76bn, compared to consensus of EUR11,35bn.

“We anticipate that long-haul, to which the group is significantly exposed, will take the longest to recover, and that business travel will not recover fully,”

Meanwhile, Liberum said there is ‘clear evidence’ of pent-up demand, with bookings responding swiftly and materially to changes in international travel restrictions.

“This is evident across both long haul and short-haul. However, it remains to be seen if a material volume of flying this summer will be permitted, allowing this demand to be fulfilled and some cash to be generated.”

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