IAG eyes return to profit in Q2 and good summer for its airlines
IAG, the owner of British Airways and Iberia, is anticipating a good summer and expects a return to quarterly operating profits in the second quarter of 2022.
The airline group, which also owns Aer Lingus, Vueling and LEVEL, said the Omicron variant of COVID-19 had a short-term impact on bookings at the end of 2021 and the first two months of 2022, but that it has had a minimal impact on bookings for Easter and summer.
“We are confident that a strong recovery is underway,” IAG chief executive Luis Gallego commented in the financial results published on February 25, 2022. “We expect a robust summer with IAG returning to around 85% of its 2019 capacity for the full year.”
Gallego added on Omicron: “Demand slowed down for very near-term trips following the emergence of Omicron in late November. However, bookings have remained strong for Easter and summer 2022 having picked up in the New Year.”
For 2021, IAG reported a statutory operating loss of €2.77 billion ($3.1 billion), compared to a 2020 loss of €7.45 billion ($8.3 billion).
It said all its airlines improved their operating result in the fourth quarter, with Iberia making an operating profit of €82 million ($91.7 million) “as it seized opportunities to strengthen its position on routes to Latin America and the Spanish domestic market.”
Overall, it expects a “significant operating loss” for the first quarter of 2022, traditionally a weak quarter, but also due to Omicron and increased costs as it ramps up operations.
“IAG expects its operating result to be profitable from quarter two, leading both operating profit and net cash flows from operating activities to be significantly positive for the year,” it predicted.
IAG is currently planning for passenger capacity for 2022 to be around 65% of 2019 capacity in quarter 1 and around 85% of 2019 capacity for the full year. That compares with 58% in the fourth quarter of 2021.
Meanwhile, the airline group said its capital expenditure was lower than expected in 2021 due to Airbus and Boeing aircraft delivery delays. Its capex in 2021 was €0.7 billion ($0.78 billion), much lower than the €1.7 billion ($1.9 billion) it had initially expected at the start of 2021.
For 2022, though, capex is set to jump to €3.9 billion ($4.4 billion) and 25 new aircraft are set to be delivered, as the group rebuilds capacity and delayed deliveries are caught up.
IAG halted plans to acquire Air Europa via Iberia in December 2021. It paid €75 million to Air Europa parent Globalia as settlement for terminating the deal.
Gallego said IAG was still negotiating to find a way to do a deal with Air Europa, which it believes will boost its Madrid hub. However, Gallego said there may be a spanner in the works.
“The last info we have is that Air Europa is considering alternatives from other European carriers,” he said, adding that he had no further information but he believed that would be a mistake for Air Europa.
Updated with comments on Air Europa
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