BA stalls as turbulence whips up a record loss

If you want to know what it looks like to press the pause button on an entire industry, look no further than the latest numbers from IAG. The owner of British Airways laid bare the chilling effects of the pandemic on its business with full-year results that must have had investors adopting the brace position. It’s no secret the airlines have had an historically bad year, but it doesn’t make reading the scorecard any easier.

The gory details included a record €7.8bn (£6.8bn) pre-tax loss, and a 75pc plunge in passenger revenue to just €5.6bn, as flights were grounded and the world went into lockdown. Stripping out one-off items still resulted in an operating loss of €4.4bn, and it declined to give financial forecasts for this year. There were similarly dire numbers out from Gatwick and Norwegian, emphasising the industry’s plight.

Those hunting for bright spots might alight on a 17pc jump in IAG’S cargo revenue, but at €1.3bn a year, this is loose change for a group of its size.

Remarkably, the group’s liquidity is now better than it was at the start of the pandemic, with some €10.3bn to draw upon, in part thanks to a €2.7bn capital raise and a £2bn UK Government-backed loan confirmed a few days ago – just don’t call it a bailout. IAG’S recently departed boss Willie Walsh was scornful of the need for state bailouts of airlines – the likes of which we’ve seen on the Continent with Air France-klm and Lufthansa. IAG points out this is a commercial loan underwritten by banks, partially guaranteed by UK Export Finance. This distinction may seem fuzzy to the 10,000 IAG workers who were let go last year.

Those measures, plus the use of furlough schemes, helped cut employee costs by 35pc last year. Indeed, IAG has reduced its weekly cash burn from €215m last quarter to €185m in this one. That still sounds like a lot of money to keep planes mostly not flying, but it has built up a buffer and the Government is making noises about getting international travel up and running by the summer.

Moreover, IAG claims there is pent-up demand to go around. Bookings of BA Holidays – including long-haul destinations – shot up 560pc on Tuesday, the day after the PM laid out his roadmap back to normality. BA customers are optimistic about taking a holiday and the airline is desperate to carry them. Shares bounced 3pc yesterday but let’s not forget the stock is still 48pc lower than where it was a year ago.

There are more roadblocks in the roadmap ahead. Luis Gallego, IAG boss wants to see “international common testing standards and the introduction of digital health passes to reopen our skies safely”. IAG is trialling its Verifly digital system on flights between Europe and North America, and the boss of Gatwick reckons vaccine passports are “pretty much an inevitability”.

EU leaders seem to be following this direction of travel, with Angela Merkel saying this week: “We have all agreed that we need vaccine certificates.” But a five-hour call of the EU 27 leaders ended with no actual decisions made. They need to hurry up. Until they do, a recovery for the sector remains out of its hands. In IAG’S case, it is not better to travel hopefully; it needs to arrive at a way out of this crisis, and soon.

Staff need a halfway house

Lloyds Bank, HSBC and Standard Chartered said last week they would be axing floor space and offering workers more choice about where they work. At the same time, the boss of Goldman Sachs poured scorn on the idea that remote working was the new normal, and an executive at Credit Suisse said he was worried about “fatigue” among home workers.

Yet Lloyds revealed that threequarters of its staff had expressed a desire to work from home three days a week or more. Clearly these people have not been too ground down by balancing their laptops on ironing boards or having their children screaming in the next room.

The temptation may be to slash space to save money. But after a year of WFH, some form of secondary space in which to work is appealing to many. Metro Bank suggested this week it would make better use of space in its branches to house workers. Hotel chains such as Accor are offering rooms for day rent, and co-working sites are springing up.

This “third way” would invigorate idle properties, keep commercial property afloat and breathe life into town centres. It would also satisfy the essential need to simply leave the house. The workplace could end up being more inventive, varied and fun than it might otherwise have been.

‘Bookings of BA Holidays – including long-haul destinations – have shot up 560pc’