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IAG records an enormous loss as Omicron variant hits demand

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BA owner IAG records an enormous loss after Omicron blows its Covid recovery off target and operating costs escalate

  • The British Airways owner reported a £916m loss within the opening quarter of 2022
  • International Airlines Group (IAG) also operates the Irish flag carrier Aer Lingus
  • Costs were heightened from ramping up operations to deal with rising demand 

International Airlines Group has posted one other massive first-quarter loss after demand for flights was blown off target by Omicron.

The British Airways owner reported a £916million loss within the opening three months of the yr, despite the fact that the airline industry benefited from fewer international travel restrictions than it did the previous yr.

Passenger revenue climbed greater than fivefold year-on-year to €2.66billion as capability increased to around two-thirds of their 2019 volumes, a figure projected to grow to 80 per cent in the present quarter.

Yet ticket sales were depressed by the introduction of a fresh round of assorted cross-border curbs by governments internationally in response to the emergence of the Omicron variant. 

Big loss: British Airways owner International Airlines Group (IAG) reported a £916million loss within the opening three months of the yr, in comparison with £1.2billion in the identical period in 2021

Within the UK, all those landing within the country from late November to mid-February were required to take a PCR test two days after arriving and self-isolate until they received a negative test.

IAG chief executive Luis Gallego moreover blamed the ‘normal seasonality’ of the airline business for the firm’s huge loss, which only declined by 24 per cent from the identical period last yr.

Losses were also heightened by much higher outlays from boosting operations to deal with the discharge in pent-up demand, including supplier costs, expanding staff numbers, landing fees and en-route charges.

Alongside this, there was a surge in fuel prices within the last yr attributable to the worldwide economic recovery from the Covid-19 pandemic, weak output levels, and Russia’s full-scale invasion of Ukraine.

‘Globally, the travel industry is facing challenges because of this of the largest scaling up in operations in history, and British Airways isn’t any exception,’ Gallego remarked.

‘The welcome removal of UK’s stringent travel restrictions, combined with strong pent-up demand, have contributed to a steep ramp-up in capability. The airline’s focus in the intervening time is on improving operations and customer experience and enhancing operational resilience.’

Gallego noted that demand was recovering in step with expectations, with business travel rebounding steadily, but premium leisure holidays remained the best-performing category.

IAG, which also owns Irish flag carrier Aer Lingus and Spanish airline Iberia, currently forecasts seat capability to succeed in 85 per cent of its pre-pandemic volumes within the third quarter when the summer flying season is in motion.

Sophie Lund-Yates, the lead equity analyst at Hargreaves Lansdown, said: ‘Seeking to the remainder of the yr, the outlook makes for reasonable reading. IAG will take longer to get well than its short-haul focused friends, but that doesn’t mean it needs to be discounted. 

‘There’s an argument to say that now the world is basically re-opening, customers might be inclined to splurge on a long-haul trip having been stuck at home for years. 

‘The opposite side of that story, though, is in fact, the cost-of-living crisis. Those that usually travel top quality are likely not going to see much of a change in spending habits, however the situation may perhaps act as a drag on BA’s shorter duration routes.’

IAG shares dived 8.3 per cent to 131.4p on Friday, making it the best faller on the FTSE 100 Index. It also means the group’s share price has plunged by 29.5 per cent previously 12 months. 

Commercial

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