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Air travel demand ‘unlikely to fully recover before 2023’, BA owner admits

Written by on 30 October 2020

British Airways owner IAG says demand for air travel is unlikely to fully recover before 2023.

International Airlines Group, which also owns Iberia, Aer Lingus and Vueling, said its total operating loss in the three months to the end of September was EUR1.9bn (GBP1.7bn) – including exceptional items such as fuel hedging and restructuring costs.

For the first nine months of the year, the group had a EUR5.6bn (GBP5.1bn) loss after tax and exceptional items, compared to a profit of EUR1.8bn (GBP1.6bn) at the same time last year.

Image:
Many British Airways planes are not flying as the pandemic continues to restrict demand for travel

Luis Gallego, who took over as IAG’s chief executive officer in September, said the results “demonstrate the negative impact of COVID-19“, but he also blamed “constantly-changing government restrictions”.

Mr Gallego said restrictions, such as quarantine for travellers arriving in the UK from certain countries, “create uncertainty for customers and make it harder to plan our business effectively”.

He joined others, such as Heathrow chief executive John Holland-Kaye, to call for governments to introduce pre-departure and possibly post-flight testing to lessen the need for quarantine.

“This would open routes, stimulate economies and get people travelling with confidence,” he added.

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“When we open routes, there is pent-up demand for travel.

“However, we continue to expect that it will take until at least 2023 for passenger demand to recover to 2019 levels.”

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IAG said there were “no immediate signs of recovery” from the pandemic, adding that it expects capacity in the fourth quarter to be no more than 30% of what it was at the same time last year.

The group said it has cut cash operating costs by 54% and Mr Gallego said “significant progress” had been made on restructuring. Staff numbers have been cut by 10,000, with most of the jobs being lost at BA.

Overnight two other airline groups presented financial results – Japan Airlines and Air France-KLM.

Japan Airlines said it expects a record operating loss of up to 380 billion yen (GBP2.81bn) in the year to the end of March, with demand expected to be at less than 50% by then, due to the pandemic.

Air France-KLM revealed a EUR1.05bn (GBP950m) quarterly operating loss and a 67% drop in third-quarter revenue to EUR2.52bn (GBP2.3bn).

Shares in IAG were up 2.3% in early Friday trading. Over in Paris, Air France-KLM was down 2.7% and in Tokyo, Japan Airlines shares were down 3.7%.