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Summary
- The International Consolidated Airlines Group reported a record €7.43-billion loss in FY 2020, compared to a profit of €2.61 billion in FY 2019.
- IAG undertook multiple Covid-related management actions to boost liquidity and address cost challenges, including an additional funding of €3.4 billion in Q4 2020.
- The company did not provide a 2021 profit outlook due to ongoing uncertainty.
Global airline company International Consolidated Airlines Group SA (LON:IAG) reported a record operating loss of €7.43 billion for the financial year ending 31 December 2020 due to liquidity challenges amid Covid-induced travel restrictions. It had previously reported an operating profit of €2.61 billion in FY 2019.
The British Airways owner reported its operating loss before exceptional items for FY 2020 at €4.37 billion, compared to an operating profit before exceptional items of €3,285 million in the previous year.
It also reported an operating loss of €1.47 billion in Q4 2020, sharply down from an operating profit of €93 million the year before.
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Covid mitigation measures
The group undertook several management actions to buffer against the pandemic related headwinds, with a focus on cost reduction, liquidity initiatives and increasing the proportion of variable costs from its cost base.
The company received an additional funding of €3.4 billion in Q4, which included a £2.0 billion commitment from UK Export Finance pledged in February this year. The funding also included a US $1.0 billion EETC for IAG-owned airline British Airways.
Moreover, the group had secured funding of US $0.2 billion sales and leaseback transactions for Iberia and €150 million for Ireland’s Aer Lingus, which was funded by the Ireland Strategic Investment Fund.
Want to know more? Do read: British Airways’ Owner IAG Says Air Travel Demand Unlikely to Fully Recover Before 2023
The group said its passenger capacity was severely affected by multiple factors due to the pandemic, quarantine rules and government restrictions. Its Q4 passenger capacity last year accounted for 26.6 per cent of 2019, while for the whole FY 2020, it accounted for about 33.5 per cent of the previous year. The group’s passenger revenues fell by 75.5 per cent to €5.5 billion from €22.47 billion in 2019.
The group’s Q1 2021 passenger capacity is expected to be around 20 per cent of the 2019 capacity, however, due to ongoing uncertainty about how the situation may evolve, the guidance was subject to review.
Despite announcing record losses, the group still plans to acquire Spanish carrier Air Europa, for a halved deal value of €500 million, reported in January 2021. The transaction details include a payment deferral period of six years.
Want to know more? Do read: International Consolidated Airlines Group (LON:IAG) to acquire Air Europa
The multi-airline company did not provide a profit guidance for FY 2021 due to the uncertainty surrounding duration and impact of the Covid-19 crisis.
Share performance
International Consolidated Airlines Group’s (LON:IAG) shares rose sharply by about 13 per cent in the last five days following the UK government’s plans to ease lockdown restrictions and re-start travel. Its shares were trading at GBX 194.55, up by 4.46 per cent as of 26 February at 9:36 am GMT+1.
