British Airways Owner Expects Turnaround With U.S. Opening Up

(Bloomberg) --

British Airways parent IAG SA said cash flows turned positive in the third quarter and that North Atlantic demand has begun to surge as the U.S. prepares to reopen its border to vaccinated Europeans next week.

Long-haul bookings are now recovering faster than short-haul sales, with the premium leisure segment performing particularly strongly at BA and Spanish arm Iberia, IAG said in a statement Friday. There are some early signs of a recovery in business travel.

IAG is more reliant on usually lucrative U.S. flights than most European carriers, and the London-based company said it expects to post a 3 billion-euro ($3.5 billion) loss for the full year. Rivals Air France-KLM and Deutsche Lufthansa AG, which have benefited from a faster reopening in Europe, both reported surprise profits in the third quarter, with the former predicting a positive result for the 12 months.

Chief Executive Officer Luis Gallego said he expects to operate 90% of pre-Covid capacity next summer and that “we are pretty sure that if we can operate that amount of flights, we will come back to profitability.” North American bookings are almost back to 2019 levels last week, he said on a media call.

Shares of IAG were down 3.3% as of 8:31 a.m. in London, after gaining as much as 2.1%.

The airline group, which also owns Aer Lingus of Ireland and discounter Vueling, reported a third-quarter operating loss of 452 million euros, after analysts had predicted a 567 million-euro shortfall.

‘Pivotal Moment’

Gallego called the full reopening of the U.S. border from Monday “a pivotal moment for our industry” and said that British Airways will serve more destinations in the world’s largest economy than any other transatlantic carrier.

“We’re analyzing the competition we will have there,” he said. “We have some actors that are not there any more. Also we need to take into consideration that a lot of companies are going to have a huge amount of debt.”

Chief Financial Officer Steve Gunning said he expects price competition to be keener on short-haul routes.

Flight-bookings specialist Amadeus IT Group SA also reported its first profit since the start of the pandemic, with CEO Luis Maroto saying he’s confident that commercial momentum will allow a “positive progression toward recovery.”

Gunning said that while a possible order for 200 Boeing Co. 737 Max jets announced in 2019 remains under consideration, IAG is also now considering the A320neo from Airbus SE.

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