BA owner IAG reports €3.5bn loss as it monitors Ukraine developments
Company expects to make significant profit in 2022 unless there are geopolitical or Covid restrictions
- Ukraine invasion: latest updates
Last modified on Fri 25 Feb 2022 07.09 EST
The owner of British Airways, International Airlines Group, more than halved losses to €3.5bn in 2021 and expects to return to profit this year as long as operations are not significantly disrupted by Covid-19 or the invasion of Ukraine.
The company, which made a record €7.4bn (£6.4bn) loss in 2020, said that passenger levels were still only 36% of pre-Covid levels last year.
The company said that the impact of Omicron on traveller confidence has hit bookings in January and February, meaning it will make a “significant” loss in the first quarter. Passenger capacity is expected to be at 65% of pre-pandemic levels in the first three months of the year.
However, it expects to return to profit in the second quarter, driven by an increase in bookings for Easter and summer that will underpin “significantly positive” operating profit and cashflows for 2022. Capacity is expected to hit 85% of pre-pandemic levels across the year.
“This assumes no further setbacks related to Covid-19 and government-imposed travel restrictions or material impact from recent geopolitical developments,” the company said.
Luis Gallego, IAG’s chief executive, said the company is “monitoring events closely to manage any potential impact”.
He said: “We are confident that a strong recovery is under way. We expect a robust summer with IAG returning to around 85% of its 2019 capacity for the full year. Our model enables us to capture revenue and cost synergies while maximising efficiencies, which means we are set up to return to profitability in 2022.”
On Friday, Russia’s state civil aviation regulator banned British airlines from landing at its airports or crossing its airspace. The move follows the UK’s ban on the flights of the Russian flag carrier Aeroflot.
British Airways said it had suspended flights to Moscow, and warned customers that some flights to destinations east of Russia would take longer because of rerouting.
It operated to the Russian capital three times a week but did not fly to any other destinations in Russia or Ukraine – nor did it use Ukrainian airspace. However, the move by Russia will increase escalating fuel costs and pose more headaches for the national carrier’s long-haul services.
A BA spokesperson said: “We apologise for the inconvenience but this is clearly a matter beyond our control. We are notifying customers on cancelled services and are offering a full refund.”
Shares in IAG fell 6% on Thursday after Russia’s invasion of Ukraine, as the price of oil rose to more than $100 (£75) a barrel for the first time since 2014, and fears that the conflict could impact the travel and aviation sector sparked an investor sell down.
The company’s shares received a boost of about 3% in early trading on Friday, as investors took cheer at the news of a return to profitability this year. However, IAG’s shares still remain down a fifth over the past year.
Richard Hunter, the head of markets at Interactive Investor, said: “There is little question that IAG has taken some formidable steps to ensure survival but from the company’s own outlook it appears unlikely that a full return to normality will land until 2023, and even then the company will be markedly different from the one which entered the crisis.”
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