International Airlines Group, the owner of British Airways, has slumped to the biggest loss in its history after the coronavirus pandemic closed borders and grounded its aircraft.
IAG, which also owns Iberia, Aer Lingus and Vueling, reported a full-year operating loss after exceptional items of €7.4bn, the worst since its formation 10 years ago.
The loss is one of corporate Britain’s heaviest in 2020. Oil majors Royal Dutch Shell and BP are the only FTSE 100 companies to have lost more money over the period, according to Refinitiv data, although not all companies have reported yet.
The pandemic has ripped through IAG’s business model, which is geared towards highly profitable corporate customers and long-haul routes. Border restrictions are in place across many of its airlines’ key markets including the UK and US, and the immediate outlook for the industry is still bleak.
IAG, which expects to fly just a fifth of 2019’s schedule in the first quarter of this year, said it was focused on raising cash and cutting costs. The company did not provide an outlook, blaming continued uncertainty a year into the Covid-19 crisis.
But as large numbers of people in the developed world are vaccinated, airline executives are hopeful that the industry could move into recovery in the second half of this year. Some airlines and travel companies reported a surge in bookings this week after the UK unveiled a plan to restart international travel in May, subject to a review.
Luis Gallego, IAG’s chief executive, said infection rates “are going in the right direction” and governments should bring in vaccine passports to help restart travel. “We know there is pent-up demand for travel and people want to fly,” he said.
Revenue fell 69 per cent year on year to €7.8bn as the group flew just a third of its normal schedule in 2020.
IAG has built up €10.3bn in liquidity to help it survive the collapse in passenger numbers, including raising €2.75bn from shareholders in the autumn and from government support. However, the race to raise cash has left it increasingly indebted. Net debt stood at €9.8bn at the end of 2020, up nearly 30 per cent on the previous year.
The group is unlikely to need to raise more cash from shareholders imminently but “another rights issue can’t be ruled out in the medium term”, said Mark Simpson, an aviation analyst at Goodbody, given the uncertain outlook.
The full-year loss included exceptional items including fuel and currency hedges, early fleet retirement and restructuring charges. Excluding these items, IAG lost €4.4bn, slightly better than analysts’ expectations.
Shares rose 4.6 per cent in early trading in London on Friday.
Gatwick Airport and Norwegian Air Shuttle also posted significant losses on Friday, underlining the breadth of the crisis facing the aviation industry.
Norwegian reported a net loss of NKr16.6bn ($1.9bn) in the fourth quarter, during which it flew just 15 of its fleet of 131 aircraft. The low-cost airline is the biggest casualty of the aviation crisis so far, and has been forced to seek protection from creditors in Ireland and Norway and renounce long-haul flying.
Gatwick, where passenger numbers fell 80 per cent in 2020, posted a net loss of £465.5m for the 12-month period.
Stewart Wingate, the south London airport’s chief executive, said “minimizing the need for cost prohibitive testing and disruptive quarantine measures” will be vital when the UK government restarts travel.
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2021-02-26 10:29:07Z
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