British Airways owner IAG hit made a record loss of – €7.4bn in 2020 (cf. +€2.6bn profit in 2019)
International Airlines Group, owner of BA, has reported a record annual operating loss of €7.4bn (£6.4 billion) for 2020. Its passenger capacity last year was only a third of 2019 and in the first quarter of this year is running at only a fifth of pre-Covid levels. The loss included exceptional items relating to fuel and currency hedges, early fleet retirement and restructuring costs. The loss compares with a €2.6bn profit in 2019. IAG is trying to cut its cost base and increase the proportion of variable costs to better match market demand. IAG’s passenger revenues fell 75% from €22.4bn to €5.5bn last year but its cargo business had “helped to make long-haul passenger flights viable” during the pandemic. Cargo revenues increased by almost €200m to €1.3bn and IAG also operated more than 4,000 cargo-only flights in 2020. It is not providing guidance on its finances for 2021. Airlines do seem to understand, at last, that for acceptable Covid safety of air travel, people need to be vaccinated or have proper proof they are not able to spread the virus. IAG spent €4.1bn in cash last year – almost €80m a week (£11.4 million per day). IAG’s market value has halved to £9.6bn since the start of the pandemic. When Covid is less of a threat, low-cost carriers may emerge in stronger shape than airlines like BA.
British Airways owner IAG hit by record €7.4bn loss
Group calls for passenger digital health passes to ‘reopen skies’ as Covid takes toll
By Mark Sweney @marksweney (Guardian)
26 Feb 2021
The owner of British Airways, International Airlines Group, has reported a record €7.4bn loss for last year, and called for the introduction of digital health passes for passengers to enable the airline industry to get back on its feet.
IAG said that passenger capacity last year was only a third of 2019 and in the first quarter of this year is running at only a fifth of pre-Covid levels. The airline group reported a total annual operating loss of €7.4bn (£6.4bn), including exceptional items relating to fuel and currency hedges, early fleet retirement and restructuring costs. It compared with a €2.6bn profit in 2019.
“Our results reflect the serious impact that Covid-19 has had on our business,” said Luis Gallego, the chief executive of IAG. “The group continues to reduce its cost base and increase the proportion of variable costs to better match market demand. We’re transforming our business to ensure we emerge in a stronger competitive position.”
IAG’s passenger revenues plunged 75% from €22.4bn to €5.5bn last year but it said its cargo business had “helped to make long-haul passenger flights viable” during the pandemic. Cargo revenues increased by almost €200m to €1.3bn and IAG also operated more than 4,000 cargo-only flights during the year.
The airline group said that because of the uncertainty over the impact of the pandemic on its business, it would not provide profit guidance for this year and called for an international plan to “reopen the skies”.
Gallego said: “The aviation industry stands with governments in putting public health at the top of the agenda. Getting people travelling again will require a clear roadmap for unwinding current restrictions when the time is right. We know there is pent-up demand for travel and people want to fly. Vaccinations are progressing well and global infections are going in the right direction. We’re calling for international common testing standards and the introduction of digital health passes to reopen our skies safely.”
IAG burned through €4.1bn in cash last year – almost €80m a week. Despite this, the company said its liquidity stood at €10.3bn, higher than at the start of the pandemic. IAG’s market value has halved to £9.6bn since the start of the pandemic.
“These results from IAG really do bring out just how painful the last year has been for the airline industry,” said Jack Winchester, an analyst at Third Bridge. “Investors have been willing to plug IAG’s finances on the assumption of an eventual recovery but when the dust settles we are likely to see that low-cost carriers like Ryanair and Wizz Air have come out of 2020 in far better shape.”
Meanwhile, Gatwick airport also slumped into the red, reporting a £526m pre-tax loss last year, compared with a £211m profit in 2019.
Gatwick said passenger numbers had slumped by 78% in 2020 as the pandemic forced the airport to reduce staff levels by 40%, renegotiate contracts and consolidate all its operations into one terminal.
“I remain optimistic that Gatwick will recover,” said Stewart Wingate, the airport’s chief executive. “Before air travel recovery begins … we also need the UK government to provide further support by extending the furlough scheme for a few more months and providing business rate relief, as airports have been afforded in Scotland, for the current financial year.”
British Airways to get a £2 billion loan, backed by UK Export Finance. It had a £300 million loan earlier
British Airways has been asking for financial help, to get it through the Covid pandemic. Now it has had a new £2 billion funding boost, through a state-backed loan. Its parent company, IAG, has secured commitments for a 5-year loan, underwritten by a syndicate of banks. It is being partially guaranteed by state-backed credit agency UK Export Finance (UKEF) and details are being finalised. The loan has covenants, including perhaps restrictions on dividend payments by the airline to IAG. The money will keep BA going until, it hopes, effective Covid vaccines during 2021 will enable air travel to resume, in high numbers. IAG said it “continues to have strong liquidity with cash and undrawn facilities of €8 billion as at November 30, excluding the UKEF facility.” But it is also looking at other sources of money. BA had previously received £300 million over a year from a Bank of England loan programme for the UK’s biggest companies. It also claimed support from the taxpayer-funded furlough scheme. IAG made a pre-tax loss of £6.2 billion pre-tax loss for the first 9 months of 2020, on revenues down 66% to £6.5 billion. BA is also cutting a quarter of its workforce – so losing 12,000 staff.
British Airways lays off up to 12,000 staff, due to likely air travel decline for years
Madrid-based IAG, the owner of British Airways, says 12,000 of BA’s total staff of 45,000, now face redundancy. The airline is trying to conserve cash to keep going. Passenger numbers are expected to halve compared to 2019. BA had already furloughed more than half (22,626) of its 45,000 workers. In a statement after the close of the Stock Exchange, IAG said: ‘In light of the impact of Covid-19 on current operations and the expectation that the recovery of passenger demand to 2019 levels will take several years, British Airways is formally notifying its trade unions about a proposed restructuring and redundancy programme. The proposals remain subject to consultation but it is likely that they will affect most of British Airways’ employees and may result in the redundancy of up to 12,000 of them.” …”There is no Government bailout standing by for BA and we cannot expect the taxpayer to offset salaries indefinitely.” News that thousands of people will lose their jobs comes weeks after the airline company’s Spanish owners axed a controversial £300million payout to shareholders earlier this month.