British Airways owner IAG swings to €7bn loss as Covid-19 decimates travel industry
British Airways owner International Consolidated Airlines (IAG) sunk to a full year after tax loss of nearly €7bn (£6.1bn) in 2020, its worst ever.
IAG, which owns Aer Lingus and Iberia along with British Airways, reported a statutory loss after tax of €6.92bn, an operating loss of €7.4bn and a passenger revenue revenue decline of more than 75 per cent to €5.5bn.
Despite the massive loss, shares in the airlines group rose 3.1 per cent as markets opened this morning to 192p.
A large portion of the huge losses at IAG are made up of a €3bn in fuel hedging losses on fuel, that was never delivered as the airline was unable to use it, and writedowns on its fleet value.
The airline group said it wouldn’t provide profit guidance for 2021 because of the unpredictability of the Covid-19 pandemic.
But it said that it would fly at just 20 per cent of 2019’s capacity in the first quarter of 2021, with travel restrictions still in effect around the world.
The British Airways owner said in the final quarter of 2020 it made an operating loss of €1.47bn, swinging from a €93m profit in the same period in 2019.
It also took on an extra €3.4bn of funding during the period, including a £2bn loan guaranteed by UK Export Finance. That takes IAG’s total liquidity to €10.3bn.
Despite the incredible damage inflicted by the pandemic, Brewin Dolphin investment manager Richard Flood said that IAG was among the best-placed airlines.
“The group is much less exposed to business travel than some of its peers, which is expected to take longer to return; has access to ample liquidity; and will likely benefit from reduced capacity from competitors on key routes”, he said.
“Although there is no guidance for 2021 from IAG, it looks to be among the aviation industry’s survivors.”
It blamed the falling revenue primarily on the Covid-19 virus snuffing out travel demand in general, but also on national governments’ constantly changing restrictions and travel rules, which were often applied at short notice and further hit demand for people who were otherwise willing to travel.
Luis Gallego, IAG’s chief executive said:
“Our results reflect the serious impact that Covid-19 has had on our business. We have taken effective action to preserve cash, boost liquidity and reduce our cost base. Despite this crisis, our liquidity remains strong.
“At 31 December, the Group’s liquidity was €10.3bn including a successful €2.7bn capital increase and £2 billion loan commitment from UKEF. This is higher than at the start of the pandemic.
“In 2020, our capacity decreased by 66.5 per cent while our non-fuel costs went down 37.1 per cent thanks to the extraordinary effort across our business. 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.