British Airways owner IAG hit by record €7.4bn loss

The owner of British Airways, International Airlines Group, has 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 exceptional items relating to fuel and currency hedges, early fleet retirement and restructuring costs. It compared with a €2.6bn profit in 2019.

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“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 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.”

IAG burned through €4.1bn in cash last year – almost €80m a week. Despite this, the company said that its liquidity stands 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.”

Meanwhile, Gatwick airport also slumped into the red, reporting a £526m pre-tax loss last year, compared with a £211m profit in 2019.

Gatwick said passenger numbers slumped by 78% in 2020 as the pandemic forced the airport to reduce staff levels by 40%, renegotiate contracts and consolidate all its operations into one terminal.

“I remain optimistic that Gatwick will recover,” said Stewart Wingate, the airport’s chief executive. “Before air travel recovery begins … we also need the UK government to provide further support by extending the furlough scheme for a few more months and providing business rate relief, as airports have been afforded in Scotland, for the current financial year.”