British Airways Parent Sees Some Hope After $9 Billion Loss
The airline said it can’t provide an outlook as the coronavirus pandemic continues to batter air travel.
(Bloomberg) -- British Airways parent IAG SA said there are grounds for optimism about air travel this summer, after posting its first annual loss in almost a decade.
The airline group reported an operating loss of 7.43 billion euros ($9 billion) in 2020, according to a statement Friday. While Chief Executive Officer Luis Gallego expressed growing confidence that a recovery will take shape, IAG said it can’t provide an outlook for the current year as the coronavirus pandemic continues to batter air travel.
Carriers specializing in long-haul routes have suffered the worst of the downturn, with the International Air Transport Association predicting some inter-continental markets could take years to revive. Airlines such as London-based IAG are counting on so-called Covid passports to help spur a quicker rebound as vaccine rollouts accelerate in countries including the U.K.
“We have seen a big increase in flight and holiday bookings for the summer following the U.K. government announcement,” Gallego said on a media call. “Vaccination development, international common standards and digital health passes will be key.”
Shares of IAG traded 3.1% higher as of 3:16 p.m. in London, taking gains this year to 20% after they lost almost two-thirds of their value in 2020.
IAG’s operating loss included exceptional charges of 3 billion euros against plane retirements, restructuring and fuel-hedging measures.
The company has had to cut jobs, borrow money and sell stock to stay afloat, with BA particularly hard because of its reliance on a trans-Atlantic market that’s still virtually closed.
Comeback Plan
The carrier group had 10.3 billion euros in liquidity at the start of 2021, it said in a presentation. IAG won’t need any additional funding and will be focused on how to capture demand as it returns, Chief Financial Officer Steve Gunning said.
“If there is a strong summer, and there is increasing confidence of that, it’s a case of how quickly you can ramp up capacity and introduce additional seats,” Gunning said on the call.
While countries work on plans to restore flights, short-haul specialists such as EasyJet Plc are expecting a quicker rebound as the U.K.’s inoculation program helps lift leisure bookings.
“A question mark still hangs over when it will be practical for British nationals to take foreign holidays again,” said Jack Winchester, an analyst at Third Bridge Ltd. “This is holding back a dam of pent up demand, and IAG will be desperate to see that unleashed.”
Norwegian Air
Norwegian Air Shuttle ASA separately reported a full-year loss of 23 billion kroner ($2.7 billion). The carrier said it had recognized impairment losses of 12.8 billion kroner on the terminated aircraft purchase contracts, which drove up the loss.
The Scandinavian carrier is restructuring under an examinership process in an Irish court and will offer a detailed plan next week.
Norwegian Air has said it plans to raise new funding in late March or early April, and focus on regional flights with smaller aircraft. The carrier has turned away from the low-cost, long-haul business that put price pressure on major carriers like British Airways, which counds on North America for about 30% of its capacity.
IAG attempted to purchase Norwegian Air in 2018 but dropped the plan after its bids were rejected and losses mounted at the smaller company.
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