International Airlines Group (IAG) reported a EUR -1.067 billion after-tax loss for the first quarter, an improvement of EUR -1.683 billion in the first quarter last year but still reflects badly, it said on May 7. The operating loss was EUR -1.068 billion versus -1.860 billion last year. IAG looks to the UK for May travel relaxations.
IAG’s airlines operated at only 19.6 percent capacity compared to 2019. It is reflected in the passenger revenues, which were at -88.4 percent to EUR 459 million. Cargo contributed positively with revenues of EUR 350 million, up from 246 million last year. This included 1.306 cargo-only flights, up from 969 in Q1 last year. Total Group revenues were EUR 968 million, down 78.9 percent on last year, with long-haul revenues outperforming short-haul consisted with the trend seen in Q4 last year. The group operated 531 aircraft by the end of March, down from 595 last year, which has resulted in 33 percent fewer business seat capacity.
Aer Lingus hit hardest by revenue drop
British Airways was impacted by the lockdown imposed by the UK government in January, resulting in travel bans to and from the country. This disrupted its network to Europe, although routes to main cities saw “steady business travel demand.” Its business to the US was mainly supported by cargo-only flights. BA’s passenger revenues were down to EUR 172 million (-92 percent), with cargo at EUE 231 million (up 57 percent).
Aer Lingus was also dependent on revenues of its cargo services to the US as load factors remained weak. Still, cargo revenues were down by -2.5 percent to EUR 15 million. Pax revenues dropped by 95.7 percent to just EUR 12 million, making it the worst performer within IAG.
In Spain, Iberia business was hurt less by travel restrictions compared to the other airlines in the group. Nevertheless, it suffered from restrictions after cases of the Brazilian Covid-mutation entered Spain. With the US practically closed for traffic, the carrier tried to make the best of its network to Latin America and the Caribbean. Iberia’s passenger revenues were at -73 percent to EUR 199 million and cargo up by 42.9 percent to EUR 86 million.
Low-cost Vueling was forced to operate on domestic routes only as restrictions to its European destinations continued. But even that had its difficulties, as some Spanish regions went into lockdowns, especially Catalonia. Passenger revenues dropped by 84.7 percent to EUR 47 million. LEVEL briefly operated to Chili but had to discontinue the service in January, making Buenos Aires the only route served from Barcelona.
IAG was able to reduce its cash burn to EUR 175 million per week and continued cost reductions, which have been ongoing since last year. It has bolstered its liquidity to EUR 10.5 billion thanks to drawdowns of credit facilities for BA and Aer Lingus, and EUR 1.2 billion coming from a new unsecured bond that was heavily oversubscribed. It also raised EUR 3.6 billion in non-aircraft debt. BA has deferred payments to its pension funds worth GBP 450 million until September. BA, Aer Lingus, and Iberia can tap into a EUR 1.755 billion revolving credit facility that remains undrawn for now. IAG’s net debt grew to EUR 11.6 billion from 9.8 billion. Cash and cash equivalents grew by two billion to EUR 7.9 billion.
Capacity beyond Q2 remains uncertain
From 19.6 percent capacity in Q1, IAG expects only a marginal increase to 25 percent in Q2. It is unable to provide guidance for the remainder of the year, but it could ramp up to 75 percent in Q3 and 80-85 percent in Q4. The higher capacity in the second quarter will push weekly cash burn to some EUR 200 million, which is comparable to the last Q4.
IAG looks to the UK government for travel relaxations, which are expected to be announced later this month. The European Union has also said it is willing to accept travelers from the US if they are vaccinated.
CEO Luis Gallego thinks relaxations will result in significant upward long-haul bookings. Instrumental to the recovery will be the opening of travel corridors between countries that have successfully implemented vaccination, notably between the UK and the US. “The rate at which corridors are opening is slower than we hoped”, Gallego said. “When traveling is possible, the requirements imposed on travelers are having a big impact on travelers.”
Forward domestic bookings in Spain look promising and are over fifty percent higher compared to 2019 levels, with international short-haul up at 25 percent.
Active as a journalist since 1987, with a background in newspapers, magazines, and a regional news station, Richard has been covering commercial aviation on a freelance basis since late 2016.
In 2022, he has gone full-time freelance. Richard has been contributing to AirInsight since December 2018. He is also writing for Airliner World and Aviation News. From January 2023, he will add a part-time role with Dutch website and magazine Luchtvaartnieuws. Twitter: @rschuur_aero.