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British Airways owner IAG calls for global health passports as airline group reports record £6.5billion loss

Simon Freeman
·3-min read
 (IAG)
(IAG)

THE boss of British Airways owner IAG today called for the introduction of internationally-recognised digital health passports “to reopen our skies safely” after reporting a record loss of €7.4 billion (£6.5billion) in 2020.

The owner of the UK flagship carrier reported losses in the fourth quarter of £1.28 billion as it continues to be “adversely affected” by the Covid-19 pandemic, combined with government restrictions and quarantine.

Passenger revenue fell 75% to £4.8billion from £19.6billion in the 12 months earlier. Cash burn for the airline group was a whopping £3.6billion - almost £70 million a week.

Luis Gallego, who took over as IAG’s chief executive in October last year, today called for the introduction of globally-recognised testing standards and health passes to: “reopen our skies safely”.

He told investors: “The aviation industry stands with governments in putting public health at the top of the agenda. Getting people travelling again will require a clear roadmap for unwinding current restrictions when the time is right.

“We know there is pent-up demand for travel and people want to fly. Vaccinations are progressing well and global infections are going in the right direction. We’re calling for international common testing standards and the introduction of digital health passes to reopen our skies safely.”

Last year’s overall loss compares to a profit of £2.3 billion profit in 2019. It was blamed on just over £2.6billion hedging losses on fuel bought but not used, writedowns on the value of its fleet and restructuring costs.

Its main problem will be getting the same levels of long-haul business travel

BA has cut some 12,000 staff and scrapped its entire fleet of Boeing 747-400 Jumbos.

The company secured £2.45bn of liquidity through a UK government-backed loans and the deferall of pension contributions.

Jack Winchester, analyst at Third Bridge, said: ““These results from IAG really do bring out just how painful the last year has been for the airline industry. While they cut capacity by two thirds through the year, it was still not possible to fill planes profitably.

“Investors have been willing to plug IAG’s finances on the assumption of an eventual recovery, but when the dust settles we are likely to see that low cost carriers like Ryanair and Wizz Air have come out of 2020 in far better shape.

“Although travel agents have seen a spike in bookings, since Boris Johnson’s recent roadmap was announced, a question mark still hangs over when it will be practical for British nationals to take foreign holidays again. This is holding back a dam of pent up demand, and IAG will be desperate to see that unleashed.

“While the UK’s infection rates are falling and vaccination rates are climbing, things aren’t yet moving as quickly in Europe, and this is vital to the health of IAG. Legacy carriers will also be keen to see business travel return but this doesn’t look likely until at least a few years, according to our experts.”

Michael Hewson, chief market analyst at CMC Markets, said: “While these numbers are undoubtedly bad, they aren’t surprising either. IAG’s biggest problem however is not a pickup in passengers on an economic re-opening. It will be able to benefit from the return of domestic passengers like its smaller peers EasyJet and Ryanair.

“Its main problem will be getting the same levels of long-haul business travel that it had before the pandemic. This is where most big carriers make their money, and it is here that normal service may well take a little longer to return to the same levels they were in 2019.

“One thing seems certain, the ‘World’s Favourite Airline’ is likely to be a much slimmed down version when we come out of the other side of the pandemic.

Given the uncertainty on the impact and duration of COVID-19, IAG is not providing profit guidance for 2021.