Brighter outlook for IAG after losses
British Airways’ parent company suffered hefty losses in the first three months of the year as Omicron hit passenger numbers but bosses have provided a brighter outlook.
Pre-tax losses for International Airlines Group (IAG) topped £916 million in the quarter, new figures reveal, although this was an improvement on the £1.2 billion loss in the same period a year earlier.
The group said it saw an improvement in business travel during the period, and the overall proportion of seats filled on flights was better than a year ago at the height of global lockdowns.
IAG chief executive Luis Gallego said the losses in the first three months of the year reflect “normal seasonality, the impact of Omicron and costs associated with ramping up operations”.
Demand is “recovering strongly” and the firm expects to return to profitability during the period from April to June onwards and in 2022 as a whole, he said.
Premium leisure travel is the “strongest performing segment”, Gallego added, while business travel is at its highest level since the start of the pandemic. Flight capacity in the first three months of the year was 65 per cent of 2019 levels, up from 58 per cent between October and December. This is expected to rise to 80 per cent
between April and June, and reach 85 per cent during the following three months.
Capacity on routes across the North Atlantic will be “close to fully restored” between July and September, Gallego said.
Mark Crouch, analyst at social investing network etoro, said: “British Airways owner IAG has posted another big set of losses but predicts a return to profitability in Q2 this year. “This would be no small thing if achieved - the entire airline industry has
been battered by the pandemic, as its current ongoing losses suggest. Many airlines were living on the edge of the abyss at times.”
Sophie Lund-yates, lead equity analyst at investment platform Hargreaves Lansdown, noted: “There’s an argument to say that now the world is largely re-opening, customers could be inclined to splurge on a long-haul trip having been stuck at home for years. The other side of that story though is of course the
cost-of-living crisis.”
BA has cancelled hundreds of flights in recent weeks due to staff shortages and sickness.
Gallego said: “Globally, the travel industry is facing challenges as a result of the biggest scaling up in operations in history, and British Airways is no exception. “The welcome removal of the UK'S stringent travel restrictions, combined with strong pent-up demand, have contributed to a steep ramp up in capacity.” The rate of staff absences at BA in previous
months has been around 7 per cent, compared with 4-5 per cent normally.
Gallego said the airline has enough pilots but is suffering a “big problem” recruiting people in ground handling roles.
An average of 103 days to check the references of new recruits in recent months so they could start work “didn’t help”, he added. “That’s something around 20% higher than the numbers we had before.”