Topline
After posting a huge loss in 2020, IAG has called on European governments to issue digital health passports (which offer proof of Covid vaccinations) to resurrect air travel ahead of the crucial summer season.
Sunlight illuminates the tailfins of British Airways aircraft at Terminal 5 of London Heathrow ... [+]
Key Facts
International Airlines Group (IAG), parent of British Airways and Aer Lingus, incurred a record operating loss of €7.43 billion ($9 billion) in 2020 as the Covid pandemic forced it to only operate one-third of its normal flights.
IAG said revenues plunged by 69% from €25.5 billion ($30.9 billion) in 2019 to €7.8 billion ($9.5 billion) last year.
For the January-March 2021 period, IAG said it expects to fly only about 20% of 2019’s capacity for the same period.
IAG declined to provide a profit guidance for 2021 due to the ongoing uncertainties surrounding the pandemic.
With continuing strict travel restrictions across much of Europe due to the pandemic, airlines are bracing for more losses in its crucial summer season.
But having secured new funding, IAG said it had €10.3 billion euros ($12.5 billion) of liquidity to survive the ongoing crisis.
Key Background
Earlier this week, UK Prime Minister Boris Johnson announced plans to gradually ease a national lockdown, raising hopes that air travel will partially return by mid-May, which lead to a flurry of bookings by Britons. While most airlines and travel operators welcomed Johnson’s plans to relax the lockdown, IAG chief executive Luis Gallego warned that air carriers would need to use “digital health passes” (which would provide proof that travelers have been vaccinated), rather than the current paper checks, to restore some normalcy to air travel. “We're calling for international common testing standards and the introduction of digital health passes to reopen our skies safely," said Gallego. “Health passes are going to be the key to restart… aviation and travel,” Gallego added. The International Air Transport Association (IATA) has urged the European Union to support a common digital European vaccination certificate. While the U.S., U.K. and European Union are considering digital health passports, they have raised alarms from some physicians who worry vaccinations might not guarantee a halt to the spread of the virus, while human rights groups – including UK-based organization Liberty — have raised civil liberties issues. British Airways, which plans to cut some 12,000 jobs – about 30% of its workforce – has been particularly hard hit by the virtual collapse of trans-Atlantic travel.
Crucial Quote
"There's no getting around just how ugly IAG's final results are,” said Laura Hoy, equity analyst at Hargreaves Lansdown, London. "With the coronavirus crisis clearing the skies for over a year, it's not unexpected to see IAG operating as just a shell of its former self. Management has responded in the only possible way — by securing new funding and slashing costs — but ultimately the group is at the mercy of the government's travel restrictions."
Crucial Quote
“A question mark still hangs over when it will be practical for British nationals to take foreign holidays again,” said Jack Winchester, analyst at Third Bridge Ltd., London. “This is holding back a dam of pent up demand, and IAG will be desperate to see that unleashed.”
Tangent
IATA warned earlier this week that the global airline industry is expected to remain “cash negative throughout 2021” and is not expected to be “cash positive” until 2022. IATA estimates that airlines will burn through $75 billion to $95 billion of cash this year (up from its previous $48 billion estimate).
Further Reading
British Airways Needs To Revitalize Its Brand (Forbes)
COVID-19 Cash Burn Continues - Urgent Preparations for Restart (IATA)
