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British Airways owner IAG posts near €8bn loss

International Consolidated Airlines PLC (LON:IAG), the owner of airlines British Airways and Iberia, posted losses of nearly €8bn in 2020 as COVID-19 restrictions cut passenger revenues by 75%.

Passenger flights during the year dropped to a third of 2019’s total and fell again to 27% in the final quarter of the year as more pandemic restrictions were imposed.

For the current quarter, IAG said it expects to be running at 20% of 2019 passenger capacity but given the current uncertainty that estimate might change.

The one bright spot was cargo where revenues during the year rose by €200mln to €1.3bn, according to the FTSE 100 group

Luis Gallego, chief executive, said: “Cargo helped to make long-haul passenger flights viable. We operated 4,003 cargo-only flights in the year.”

Total revenues for the year reflected the absence of passenger flights and dropped 69% to €7.8bn which was almost matched by losses, which soared to €7.8bn and included one-off charges for fuel hedges and foreign exchange of €3bn.

At the operating level, there was a €10bn swing into a loss of €7.4bn against a profit of €2.6bn a year ago.

All of the group’s four airlines were in the red during the year with BA posting a loss of €3.9bn and Iberia €1.4bn.

British Airways has cut 10,000 jobs or a quarter of its workforce while Irish carrier Aer Lingus shed 10% of its staff.

Employee costs for the year decreased by €2.1bn, said IAG.

BA also recently deferred €495mln of pension contributions due between September 2020 and October 2021 to save cash.

IAG added it has cash of €5.9bn at the year-end and with other sources of funds including a UK export finance facility had liquidity of €10.3bn

The liquidity provides some comfort said brokers and helped the share price rise 4.4% to 194.5p.

Peel Hunt said revenues were higher than expected and underlying operating losses lower.  Net debt was also broadly in line with its forecasts at €9.76bn, compared to consensus of €11,35bn.

“We anticipate that long-haul, to which the group is significantly exposed, will take the longest to recover, and that business travel will not recover fully,” 

Meanwhile, Liberum said there is ‘clear evidence’ of pent-up demand, with bookings responding swiftly and materially to changes in international travel restrictions.

“This is evident across both long haul and short-haul. However, it remains to be seen if a material volume of flying this summer will be permitted, allowing this demand to be fulfilled and some cash to be generated.”


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