The owner of British Airways, International Airlines Group, 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 expensive fuel and currency hedges, retiring its planes early and the costs of its 10,000 staff redundancies – a €10bn swing in a year from its €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 by 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.”
Despite the record loss, shares in IAG were up 3.5% on Friday afternoon, making it the top riser on the FTSE 100.
BA has been conducting a trial for a VeriFLY digital health passport and is also in discussions with the International Air Transport Association on its Travel Pass, which it hopes to roll out worldwide after trials in Australia and New Zealand. Sean Doyle, the chief executive of BA, said: “We’re keen to work with the government to set a policy framework to verify whatever is required to travel – proof of vaccinations or a negative test.
“With the momentum we see on bookings for the summer and the demand out there, this could be a very important part of opening up this summer.”
Doyle said there had been a “strong intake” of leisure and short-haul bookings since Monday, when the UK prime minister set out the first possible travel dates for England. Although many in the industry are pessimistic about the future of long-haul flying, Doyle added: “We’ve very confident of a high-level of pent-up demand. The long-haul business, the visiting friends and relatives traffic supported by cargo, made long-haul a larger proportion of flying than short-haul in the last couple of months – it has unique characteristics that keep it relevant and keep it viable for us.”
He said that business travel would take longer than leisure trips but would recover demand: “We know from surveys there’s growing frustration from exclusively working from home and people want to get out and do business face to face.”
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.”
