International Airlines Group, the owner of British Airways, has slashed its flight schedule for the rest of the year and said its operations lost more than €1bn in the third quarter as travel restrictions dash hopes of a recovery.
The group said bookings had been worse than expected because of the rise in new coronavirus cases sweeping its biggest markets, leaving travellers facing lengthy quarantine periods.
IAG’s stable of airlines including BA, Iberia and Vueling now intend to fly just 30 per cent of last year’s schedule in the final three months of the year, down from a previously planned 40 per cent.
The company, which will announce its full third-quarter results next week, said it would record an operating loss, before exceptional items, of €1.3bn for the period — worse than market expectations.
Shares dropped 5 per cent at the open in London on Thursday, although they recovered to settle 2 per cent lower at 98.72p by late morning.
The loss in the third quarter, a period when flights were meant to be ramping back up, is only marginally better than its performance for the second quarter, when global lockdowns were in full force. Revenues slumped 83 per cent to €1.2bn.
Given that the group’s planes were flying on average less than 50 per cent full in the third quarter, “we would expect a significant number of flights to be loss-making”, said Daniel Roeska, analyst at Bernstein.
The airline conglomerate will miss its break-even target for net cash flows from operating activities during the final quarter of the year, a measure closely watched by investors.
“Management will need to significantly lower monthly cash burn to avoid significantly depleting resources by next summer,” Mr Roeska said.
IAG said it was still well capitalised and had €9.3bn in total liquidity by the end of September following a €2.75bn rights issue completed last month.
Airlines have been forced to dial back recovery plans after quarantine rules and a resurgence of Covid-19 infections pushed the industry-wide crisis deep into the typically lean winter months.
EasyJet will fly only 25 per cent of last year’s capacity in the final three months of this year, while Ryanair plans to fly just 40 per cent of last year’s schedule between November and March
Luis Gallego, IAG’s newly installed chief executive, last week shook up management at BA, its biggest airline, replacing Alex Cruz with Aer Lingus chief Sean Doyle.
In a sign of airlines’ desperate desire to reopen the skies, Virgin Atlantic’s chief executive on Thursday questioned the data underpinning the UK government’s reluctance to allow an airport testing programme.
Shai Weiss said the government was relying on a “flawed and outdated” model from Public Health England that suggested testing on arrival would only pick up 7 per cent of virus cases.
He said ministers should consider new research, commissioned by the aviation industry, that claims that testing could pick up about 60 per cent of cases. “We urgently need the introduction of a passenger testing regime here in the UK,” Mr Weiss said.