The owners of British Airways, IAG, have today announced that they will be operating fewer flights than originally planned for the remainder of 2020, as the COVID-19 pandemic continues to wreak havoc on the industry.
IAG stated that the firm would fly no more than 30% of its usual flights compared to 2019 – following the introduction of stricter coronavirus restrictions.
IAG’s third quarter revenue fell 83% to £1.08bn, and the group made an operating loss of £1.17bn compared with a £1.26bn profit last year. Passenger capacity fell 78.6%, and only 48.9% of seats were filled.
A statement from IAG read: “Recent overall bookings have not developed as previously expected due to additional measures implemented by many European governments in response to a second wave of COVID-19 infections.”
As a result of weaker than anticipated bookings IAG no longer expects to break even on a cash flow basis in Q4.
The shares fell 5.0% following the announcement.
William Ryder, Equity Analyst at Hargreaves Lansdown
It looked for a moment like the worst may be behind the airlines. As lockdowns were relaxed and the first wave subsided many of us rushed to catch the last of the summer sun abroad. Optimism started to feel justified and IAG planned to breakeven in Q4 as recently as 10 September. But the virus has returned with a vengeance and governments have started to impose increasingly draconian measures to fight it. IAG’s bookings have been far below the level expected, and so the group’s losses look set to deepen.
IAG has already lost billions of euros this year, but was expecting (or perhaps hoping) to breakeven on a cashflow basis in the final quarter. That’s not happening anymore. Fortunately IAG has just raised €2.74bn in new capital, so we don’t have any immediate liquidity concerns.
Just how turbulent the future will be for IAG may depend on how many more waves of coronavirus we face. If this is it, and some combination of a vaccine, track and trace and partial herd immunity can prevent a third wave next year, IAG should come through, albeit badly scarred. On the other hand, if we’re beginning a pattern of rising infections, restrictions, remission, rejoice, repeat – IAG could be in real danger.