British Airways owner IAG demands travel rule shake-up as €1.14bn loss posted

Airline group calls for travel corridors without restrictions to boost industry

British Airways aircraft taxi on the runway with the office buildings of the City of London in the background. IAG, owner of British Airways and other European airlines, posted an operating loss of €1Show more

British Airways owner IAG demanded government action to help restart foreign travel on Friday after reporting a €1.14 billion ($1.58bn), loss in the first quarter of the year.

IAG, which also owns Spain’s Iberia and Aer Lingus of Ireland, said authorities needed to assist in “four key areas” to support airlines as they begin their economic recovery from the Covid-19 crisis.

IAG called for travel corridors without restrictions between countries with successful vaccination programmes, such as the US and UK, affordable testing to replace quarantine initiatives, well-staffed borders using contactless technology and digital passports for passengers.

“These measures will enable a safe reopening of our skies. Travel underpins a global industry that supports 13 million jobs in Europe alone,” Luis Gallego, chief executive of IAG said on Friday.

The demands came as the airline group posted an operating loss – before exceptional items – of €1.14bn for the first three months of the year and forecast only minimal pick-up in passenger demand to 25 per cent capacity for the April to June quarter.

“We are flying only the flights that can be cash generative,” Mr Gallego said. “We’re absolutely confident that a safe restart to travel can happen as shown by the scientific data. But government action is needed.”

Britain was on Friday poised to unveil its traffic-light system to resume international travel from May 17, with the number of approved destinations likely to be minimal as Prime Minister Boris Johnson seeks to protect gains made by a rapid vaccination campaign.

The government changed its travel advice this week to declare that Portugal, Israel and several Spanish and Greek islands no longer posed an "unacceptably high" risk to British travellers.

Meanwhile, the European Travel Commission was optimistic about travel resuming this summer but warned that the industry would not recover fully from the pandemic until 2024.

In a report summarising the situation as “not great, not terrible”, the ETC said vaccinations and EU plans for a digital health pass would help to fulfil “pent-up demand” for foreign holidays.

IAG said it was flying at only 20 per cent capacity in the three months to the end of March, but it reduced its weekly cash burn to €175 million and said it had strong liquidity of €10.5bn at the end of the first quarter.

Group revenue collapsed 79 per cent to €968m in the first quarter, while passenger numbers dived 87 per cent compared to a year earlier.

"We're doing everything in our power to emerge in a stronger competitive position," Mr Gallego said.

IAG said it would not provide 2021 profit guidance "given the uncertainty over the timing of the lifting of government travel restrictions and the continued impact and duration of Covid-19".

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said the BA owner was still in emergency mode, battening down the hatches as global travel remains in limbo, pushing bookings to a fraction of usual levels.

“IAG can do little but hold on tight through the continued turbulence and hope government policy will allow it navigate out of the crisis,” Ms Streeter said.

“But there are still threatening grey skies ahead, not least with the spiralling of cases in India which could knock confidence in the travelling public."

This is why IAG is calling for fresh travel corridors, Ms Streeter said, as well as other measures to help restart travel.

"There is concern that huge queues at transport hubs, including Heathrow, will also deter passengers from making bookings, and the airline highlights the need for contactless technology at borders to help reduce bottlenecks," she said.

One bright spot of activity, Ms Streeter said, was that IAG ramped up its cargo-only flights to make up for lost passenger demand, with 1,306 flights taking to the skies, generating a record level for the first quarter of €350m in revenue.

“The pivot to meet the demand for cargo transport has also meant more passengers can be taken for the ride, extending the long haul network despite overall drop in demand for tickets," Ms Streeter said.

"A lot is riding on the summer season, and although IAG looks like it will avoid a wash out with popular holiday destinations getting the green light, the lucrative long haul passenger business still remains elusive."

Meanwhile, Adam Vettese, an analyst at multi-asset investment platform eToro, said IAG has spent the past 14 months fighting for survival with coronavirus leaving scarring that might take years to heal.

“The first quarter trading update shows how deep a hole it is in, with net debt increasing €1.8bn to an eye-watering €11.5bn over the past year," Mr Vettese said.

“Even though foreign holidays are returning, it will be months – or even years – before demand returns to pre-Covid levels. And it will take even longer for airlines’ finances to recover from this crisis.”

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