British Airways owner records biggest ever loss - Financial Times

The owner of British Airways has slumped to the biggest loss in its history after the coronavirus pandemic closed borders and grounded its aircraft.

International Airlines Group, which also owns Iberia, Aer Lingus and Vueling, called on governments to introduce health passports to help travel restart after reporting 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, 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.

But as large numbers of people in the developed world are vaccinated, airline executives are hopeful the industry could start to recover in the second half of this year. BA was one of several airlines to enjoy a surge in bookings this week after the UK unveiled a plan to restart international travel in May, subject to a review.

Sean Doyle, BA’s chief executive, said governments should bring in vaccine passports and other digital health apps to help drive a recovery in travel.

“With the sort of momentum we see on bookings for the summer, and the demand that is pent up, this could be a very important part of opening up,” he said.

His comments were echoed by Stewart Wingate, chief executive of London’s Gatwick airport.

“What we would like to see is that sort of certification replace the need for other travel restrictions,” he told the Financial Times.

While the industry waits for passengers to return, IAG said it was still focused on raising cash and cutting costs. The company did not provide a financial outlook, and expected to fly just a fifth of 2019’s schedule in the first quarter of this year.

The airline group is burning through €185m per week, excluding cash coming into the business, and 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 such as fuel and currency hedges, early fleet retirement and restructuring charges. Excluding these items, IAG lost €4.4bn, slightly better than analysts’ expectations.

Revenue fell 69 per cent year on year to €7.8bn as the group flew just a third of its normal schedule in 2020.

Shares were up 3 per cent in afternoon trading in London on Friday.

Gatwick and Norwegian Air Shuttle also posted significant losses on Friday, underlining the breadth of the crisis facing the aviation industry.

The south London airport reported a net loss of £465.5m for 2020, but Wingate said passenger numbers could return to 70 per cent of their normal levels by the end of this year.

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.

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2021-02-26 15:18:04Z
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