BA owner IAG says return of travel to US will help get back to profit
The British owner of Airways, IAG, is counting on the “pivoting” reopening of the US border on Monday to boost its recovery and help a return to profitability next summer after reporting further significant losses.
The group, which also owns airlines such as Vueling, Iberia and Aer Lingus, is now forecasting a loss of € 3 billion (£ 2.6 billion) in a full year, with passenger capacity expected represent around 60% of 2019 levels this quarter.
But IAG chief executive Luis Gallego said Monday’s full reopening of the transatlantic travel corridor is a “pivotal moment for our industry.”
The CEO said that by next summer he expects the group to be able to operate up to 90% of its 2019 capacity – and that if that happens, “we’ll come back to profitability.”
The United States has banned British and European travelers for more than 18 months, with companies having to obtain complicated visas to allow employees to enter the country. BA has traditionally relied heavily on the profitable North Atlantic market and its frequent business trips, and its long suspension has contributed to IAG’s huge losses.
Gallego told reporters that almost all IAG transatlantic flights were full by Monday, with November and December pre-bookings above 2019 levels.
He said new bookings rates in the United States had climbed 167% since the reopening announcement on Nov. 8, with new bookings in the North Atlantic already at 96% of 2019 levels.
Business and first-class “premium” travel recovered faster, “with some companies expressing a preference” to spend these more expensive tickets, the CEO said.
BA cut around 10,000 jobs, or around a third of its workforce, in 2020. Gallego today confirmed reports that British Airways has started the process of recruiting additional cabin crew for next summer, in order to meet the expected demand.
The CEO said, “The demand is there. What we’re seeing for next summer is that we can operate up to 90% of the capacity that we were flying in 2019, and we’re pretty sure if we can operate that number of flights, we’ll be back. to profitability. “
“At British Airways we have enough pilots, but we are going to hire cabin crew and have started the process so that we can have the ability to fly the full capacity,” he added.
The bosses told reporters that long-haul flights benefit from a “healthy” fare environment and lead in revenue. But it faces pressure to cut ticket prices for European short-haul flights over the winter, as low-cost airlines, including Ryanair and Wizz Air, both cut back in an attempt to fill the planes.
Both of these airlines said they made a profit in the third quarter, while IAG still has a long way to go.
The group generated cash for the first time since Covid struck in the three months ending in September, but still recorded a loss of € 452m for the quarter – an improvement over the loss of 1.9 billion euros reported for the same period last year.
Its net debt stood at 12.1 billion euros at the end of October, including access to 10.6 billion euros in liquidity. The company said this cash buffer would allow it to withstand any further restrictions coming back during the winter.
Shares fell 2.6%, or 4.4 pence, to 165.4 pence early in trading on the update. IAG stock rose sharply in 2021, but remains down around 53% from 2019.
Liberum analysts said they “still see IAG as a structural winner, with a clear road to recovery.” They argued: “The relative underperformance relative to its profitable peers reflects IAG’s greater exposure to markets with tight restrictions.”
Richard Hunter, Interactive Investor, said: “The situation is slowly improving at IAG, but investors still need to focus on the long term.”