British Airways owner calls for digital health passes to be introduced

British Airways owner IAG slumped to £6.8billion annual pre-tax loss as lockdowns and travel restrictions hampered its efforts to get back up and running again.

IAG’s revenues collapsed by 69 per cent from £22.2billion to £6.8billion over the period as the fallout from the Covid-19 pandemic hit the company hard. 

The group, which also owns Aer Lingus and Iberia, said capacity for last year was just 33.5 per cent of 2019 levels, and only 26.6 per cent in the final three months of the year.

Around 10,000 British Airways staff have lost their jobs in the last year, equating to a quarter of the workforce. Five hundred Aer Lingus jobs have also been axed. 

Hit hard: British Airways owner IAG has been hammered by the pandemic and lockdowns

IAG chief executive Luis Gallego said the results ‘reflect the serious impact that Covid-19 has had on our business.’

He added: ‘The group continues to reduce its cost base and increase the proportion of variable costs to better match market demand. We’re transforming our business to ensure we emerge in a stronger competitive position.’

A year before the pandemic hit, IAG raked in an annual pre-tax profit of £2billion. Job support measures provided by various national governments amounted to £640million for the year, IAG said.

Getting people travelling again will require ‘a clear road map for unwinding current restrictions when the time is right’, he said.

He added: ‘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.’

In a bid to cut costs, the group said it had implemented pay cuts, ‘wage support’, furloughing, staff numbers and a ‘temporary reduction in hours worked.’

IAG said it had also cut ‘non-essential’ discretionary spending and negotiated price cuts for supplier costs.   

IAG said: ‘Included within the restructuring provision is an amount of €72million that relates to the voluntary and compulsory redundancies arising in British Airways, Aer Lingus and LEVEL from the restructuring plans related to COVID-19. 

Rocked to the core: The travel industry has been among the worst hit during the pandemic

On the up: Shares in IAG performed strongly this morning, but remain down on a year ago

‘While the majority of employees affected by these restructuring plans had left the Group as at December 31, 2020, there remains a small portion of employees expected to leave the Group over 2021.’

A hefty slice of IAG’s 2020 losses stemmed from exceptional items, notably hedging – committing to fuel at a specified price – and retiring aircraft early. 

Richard Flood, investment manager at Brewin Dolphin, said: ‘This morning’s results from IAG demonstrate the huge impact of Covid-19 on the airline industry. 

‘However, the group took a range of self-help measures to see it through the turbulence of last year and, as we approach the re-opening of economies and potentially more travel, IAG is in a comparatively strong position. 

‘The group is much less exposed to business travel than some of its peers, which is expected to take longer to return; has access to ample liquidity; and will likely benefit from reduced capacity from competitors on key routes. 

‘Although there is no guidance for 2021 from IAG, it looks to be among the aviation industry’s survivors.’

Meanwhile, Julie Palmer, partner at Begbies Traynor, said: ‘This industry is one that is watching the global vaccine roll-out even closer than others and its success has lifted hopes of international travel returning soon, but for now, IAG needs to weather the storm and wait for clearer skies if it’s going to stand any chance of recovery.’

Shares in IAG are up 3.09 per cent or 5.75 points to 192.00p this morning. A year ago, the share price was 381.44p.