British Airways owner IAG suffers record €7.4 billion loss

Owner of British Airways International Consolidated Airlines
IAG, + 4.48%
pounced on the biggest loss in its history on Friday when it called for the introduction of digital health passes for passengers to resume international travel.

The airline group reported an operating loss of 7.4 billion euros ($ 9 billion), including exceptional items related to fuel and currency hedging, early fleet shutdown and restructuring charges.

Compared to a profit of 2.6 billion euros in 2019, it highlighted the magnitude of the challenges facing the aviation industry as new strains of the coronavirus causing COVID-19 continue to close borders and land planes.

The operating loss of IAG before special items was € 4.4 billion, slightly above the analysts’ expectations.

The group’s total sales fell by 69% to € 7.8 billion over the course of the year
IAG, + 3.00%
– which includes Iberia, Aer Lingus and Vueling – only flew a third of its normal flight schedule in 2020. Capacity for the first quarter of 2021 will be 20% of 2019 levels, compared to 27% in the previous quarter, the company said.

Luis Gallego, Managing Director of IAG, the took over by Willie Walsh in September, said 2020 had been one Year of crisis for the aviation industry, but that the vaccinations have progressed well and the infection rates are “going in the right direction”.

IAG’s shares, which are down 50% last year compared with a 6% decline in the broader FTSE 100, rose 3.92% in early London trading on Friday.

UK airline stocks received a boost earlier this week after Prime Minister Boris Johnson announced his timetable to get England out of its third lockdown.

Read: Airlines and travel stocks rise as the UK enacts lockdown exit plans

EZJ, + 2.97%,
RYA, + 0.82%,
and TUI
TUI1, + 1.83%
All reported a surge in bookings to destinations such as Spain and Greece after Johnson said international travel could potentially resume from May 17, subject to review and if the coronavirus doesn’t re-emerge. However, it is still unclear whether this will include the IAG’s long haul routes.

“Getting people back on the road needs a clear roadmap to lift current restrictions at the right time,” said Gallego of the IAG when calling for international common testing standards and the introduction of digital health passports “to keep our skies safe again to open”.

Read: Europe is moving towards COVID-19 vaccine passports, but not every country is on board

Passenger turnover fell by 75.5% from EUR 22.5 billion to EUR 5.5 billion. In view of the uncertainty and duration of the coronavirus crisis, the IAG
IAG, + 5.26%
failed to provide a profit forecast for 2021, the company said.

“The IAG’s biggest problem is not picking up passengers when the economy reopens. It will be able to benefit from the return of domestic passengers like its smaller counterparts easyJet and Ryanair, ”said Michael Hewson, chief market analyst at CMC Markets UK had before the pandemic. This is where most of the major airlines earn their money, and it can take a little longer for normal service to return to 2019 levels. “

Read: The COVID-19 hotel quarantine from high risk countries will begin in the UK from February 15

The airline group has taken steps to bolster its liquidity, which currently stands at EUR 10.3 billion, following a capital increase of EUR 2.7 billion and a UK commitment to finance exports of GBP 2 billion. “This is higher than it was when the pandemic began,” Gallego said, adding that the group is continuing to cut its cost base to ensure it is performing “in a more competitive position.”

Net debt at the end of 2020 was € 9.8 billion, almost 30% above the previous year’s figure.

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