International Consolidated Airlines Group (IAG) presented Group consolidated results for the year to December 31, 2020.
COVID-19 situation and management actions:
- Passenger capacity in quarter 4 was 26.6 per cent of 2019 and for the full year was 33.5 per cent of 2019 and continues to be adversely affected by the COVID-19 pandemic, together with government restrictions and quarantine requirements
- Current passenger capacity plans for quarter 1, 2021 are for around 20 per cent of 2019 capacity, but remain uncertain and subject to review
- 969 cargo-only flights operated in quarter 4
- Additional funding of 3.4 billion euros secured in quarter 4, including £2.0 billion commitment from UK Export Finance finalised in February 2021 and $1.0 billion EETC for British Airways, $0.2 billion sales and leaseback transactions for Iberia and 150 million euros for Aer Lingus backed by the Ireland Strategic Investment Fund (ISIF), with 0.8 billion euros bridge financing facilities repaid
- 2020 capex reduced by 2.3 billion euros, from plans at the start of the year, to 1.9 billion euros, with 0.5 billion euros due to seven aircraft deliveries delayed from Q4-20 into 2021; 2021 capex expected to be lower than 2020
- British Airways reached agreement to defer 495 million euros of pension contributions due between September 2020 and October 2021
- British Airways reached agreement in principle over restructuring plans for cargo employees, following agreement with the other main
British Airways employee groups earlier in 2020
- Group continues to focus on cost reduction, increasing the variability of its cost-base and liquidity initiatives
IAG period highlights on results:
- Fourth quarter operating loss 1,471 million euros (2019: operating profit 93 million euros), and operating loss before exceptional items 1,165 million euros (2019: operating profit before exceptional items 765 million euros)
- Operating loss for the year to December 31, 2020 7,426 million euros (2019: operating profit 2,613 million euros), and operating loss before exceptional items 4,365 million euros (2019: operating profit before exceptional items 3,285 million euros)
- Exceptional charge before tax in the year to December 31, 2020 of 3,061 million euros on discontinuance of fuel and foreign exchange hedge accounting, impairment of fleet and restructuring costs; exceptional charge before tax for quarter 4 306 million euros
- Loss after tax and exceptional items for the year to December 31, 2020 6,923 million euros (2019: profit 1,715 million euros) and loss after tax before exceptional items: 4,325 million euros (2019: profit before exceptional items 2,387 million euros)
- Cash of 5,917 million euros at December 31, 2020 down 766 million euros on December 31, 2019. Committed and undrawn general and aircraft facilities were 2.14 billion euros, bringing total liquidity to 8.1 billion euros. Including 2.2 billion euros proceeds from the UK Export Finance (UKEF) gives total pro-forma liquidity of 10.3 billion euros.
IAG’s leisure brands are well equipped to capture pent-up travel demand, says GlobalData
Following IAG’s announcement of a record 7.4bn euros ($9bn) loss, the group is calling for a quick vaccine and digital heath passport rollout as it looks to capture pent-up leisure demand in 2021;
Gus Gardner, Travel and Tourism Analyst at GlobalData, a leading data and analytics company, offers his view: “IAG’s loss does not come as a surprise. The brands within the group have traditionally focused on business travelers to drive revenue, but the pandemic has starved IAG of its main trade. However, the group is well equipped to capture pent-up leisure demand in the short-haul market as restrictions begin to ease. British Airways and Iberia’s short-haul fleet can be altered to become economy-dense cabins, competing in a stronger position against low-cost carriers.
“Level and Vueling, the group’s own low-cost airlines, will allow IAG to capture price-sensitive consumers and compete head-to-head with others. Even though these are dismal results, the group’s diverse range of brands will mean it can respond very quickly and better meet changing market demands.
“Although the vaccine is beginning to bring hope, the group is right to call for the quick introduction of a digital health passport to reopen the skies. With strict travel restrictions still in place in many countries, the digital passport will provide a safer way for borders to be reopened. Until this happens, with the mammoth number of travel restrictions in place, it is unlikely demand will begin to rebound until later in 2021.
“Transatlantic flying has virtually been non-existent since March 2020, and its recovery will be vital for IAG. US connectivity is extremely important to British Airways, Iberia and Level. With the exit of Norwegian from long-haul, the group will be looking to rapidly increase its market share and emerge as one of the top players.”