BA owner IAG dives to fresh €2bn loss
British Airways owner IAG today plunged to a €2bn (£1.7bn) half year loss as continued travel restrictions continue to batter the airlines group.
In the second quarter, the FTSE blue chip said that its airlines flew at a combined capacity of 21.9 per cent. For the coming period, it expects this to rise to 45 per cent.
Shares in the firm were down 3.8 per cent after the first hour of trading today.
Although eye-watering, the losses are roughly half those that IAG made in the same period in 2020, when the pandemic first grounded flights around the world.
Chief executive Luis Gallego said that Vueling and Iberia were the group’s best performing carriers, due to fewer restrictions in Latin America and mainland Europe.
He also welcomed the UK government’s recent decision to exempt fully vaccinated people from the EU and US from quarantining on arrival in the UK, describing it as an “important first step in reopening transatlantic travel”.
The transatlantic market is key to BA in particular, with the carrier operating 35 per cent of all capacity on the lucrative routes, according to analysts Cirium.
But compared to pre-pandemic levels, its capacity on the routes is down 84 per cent year-on-year.
Due to the ongoing uncertainty over travel restrictions, IAG said that it was not providing any further profit guidance for 2021.
It added that it had liquidity of €10.2bn, while it is currently burning cash at a rate of €190m per week.
Keith Bowman, equity analyst at Interactive Investor, said: “IAG has taken considerable action since the start of the pandemic to conserve cash, bolster its finances and wait out the worst crisis in the industry’s history.
“Vaccination rates across much of the world continue to rise and governments such as those in the UK and US remain eager to ease restrictions.
“In all, and while an 80 per cent-plus gain in the share price since late October 2020, and just prior to vaccination development success, should not be forgotten, a consensus analyst fair price estimate of 237p per share has to date left overall market opinion pointing towards a ‘buy’.”
But Laura Hoy, equities analyst at Hargreaves Lansdown, said the pandemic would “leave scars that will follow the group well into the future”.
“You can’t dress up the fact that IAG is in a terrible position right now. Management’s done a terrific job making the most of the situation—operating costs have come down significantly and cargo revenue is at an all-time high. But IAG’s in the business of flying people around the world, a tricky place to be in a global pandemic.
“Long-haul traffic will be last to recover, and IAG’s position within Europe means it’s at the mercy of many of different government restrictions. The group doesn’t expect passenger demand to return to pre-pandemic levels until 2023 at the earliest, leaving no choice but to continue paring down operations.”