BA owner IAG's profit outlook dependent on Ukraine developments
British Airways owner IAG (IAG.L) expects passenger capacity to grow to 85% of pre-pandemic levels and a return to profitability in 2022 in an outlook it warned is dependent on “no material impact” from war in Ukraine.
International Airlines Group (IAG) announced a full-year operating loss after exceptional items of €2.8bn (£2.3bn,$3.12bn) as it warned that passenger levels were still only 36% of pre-COVID levels last year.
The owner of British Airways and other airlines including Iberia, Aer Lingus and Vueling, reported an operating loss of €278m for the fourth quarter of 2021, compared with a loss of nearly €1.5bn in the same period of 2020.
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The company said it expected to report a "significant" operating loss for the first quarter of 2022 due to normal seasonality, the impact of Omicron on near-term bookings and the impact on operating costs of re-building capacity.
However, IAG expects to return to profit in the second quarter, as demand for the Easter and summer periods “remains strong”, having regained momentum at the beginning of this year.
The company said that revenue had increased 8.3% to £8.5bn in the year to December.
The upbeat forecast came as IAG announced it was avoiding Russian airspace for overflights and cancelled its flight to Moscow on Friday after UK prime minister Boris Johnson banned Russia's flagship airline Aeroflot from the UK.
IAG warned the outlook was dependent on “no material impact from recent geopolitical developments” in Ukraine.
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“This assumes no further setbacks related to COVID-19 and government-imposed travel restrictions or material impact from recent geopolitical developments,” the company said.
Luis Gallego, IAG’s chief executive, said the company is “monitoring events closely to manage any potential impact”.
The airspace over Ukraine and its border with Russia is empty, according to flight tracking websites, with heavy air traffic apparently avoiding the region.
Richard Hunter, head of markets at Interactive Investor, said: “It is difficult to imagine a more traumatic period for the airline industry to navigate in the future than the one it has had to deal with over the last couple of years.
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“Grounded fleets due to the pandemic, a complete overhaul of finances which saw some airlines go to the wall, and then the return to some kind of normality punctuated by further restrictions and variants. In addition, the current geopolitical tensions has seen the oil price rise by more than 30% in 2022 alone, adding further pressure to the cost of doing business.
“Set against these formidable challenges, IAG is beginning to emerge from the exceptional storm.”