MIAMI – International Airlines Group (IAG) experienced an “inflection point” in Q3, cutting its operational deficit by over three-quarters to €452m.

IAG financial results point to strong liquidity of €10.6bn at the end of Q3, which was up from €8.1bn at end of December 2020. The amount includes €7.6bn in cash and committed and undrawn general and aircraft facilities of €3bn.

In short, the group has ceased losing cash. Iberia (IB) and Vueling (VY), the company’s Spanish airlines, did best, with IB making a profit and VY breaking even. British Airways (BA) and Aer Lingus (EI) are still losing money, although at a lower rate, according to the group’s announcement today.

British Airways Boeing 777 departing LHR Photo: Milan Witham / Airways

IAG Hits a Critical Juncture


Passenger capacity in Q3 was 43.4% of 2019 levels, up from 21.9% in Q2, according to the group’s nine-month financial report. For the fourth quarter, current passenger capacity plans call for about 60% of 2019 capacity.

The group recorded a €452m (US$527m) operating loss in the third quarter, compared to a €1.92bn loss in the third quarter of 2020. The operational loss for the nine months ending in September was €2.49bn, compared to €5.98bn in 2020.

British Airways reported a €386m loss in Q3 due to the UK’s travel bans. It is, however, a significant improvement above the €1.020bn loss in Q3 last year. Total sales increased to €1.093bn, with passenger revenues up to €721m.

In addition, until mid-July, EI was subjected to travel restrictions that prohibited any non-essential traffic. The Irish carrier lost €80m in the third quarter, compared to €-249m in 2020. EI revenues totaled €131m.

Vueling Airbus A320-200 EC-MLE. Photo: Fabrizio Spicuglia/Airways

Iberia, Vueling Cut Losses


Iberia, which made a €21m operating profit in Q3 compared to a €252m deficit in 2020, is the best example of IAG’s turning point. The reason is that the Spanish carrier was less affected by travel restrictions in Spain and on trips to Latin America.

Total IB revenue increased to €845m, 46.8% lower than in 2019. Still, the operating margin increased to a healthy 2.5%.

On its part, low-cost VY concluded the third quarter with a profit of €230m, compared to a deficit of €230m the previous year. Revenues increased to €466m, while load factors increased to 80%.

Aer Lingus EI-DEI Airbus A320-214. Photo: Alberto Cucini/Airways

Total IAG Q3 Revenues


For the period, total revenues increased to €2.7bn from €1.2bn, with €1.9bn coming from passengers and €405m coming from cargo, both of which contributed significantly to IAG’s position.

Although the company operated fewer freight-only flights, it compensated for this by co-sponsoring more passenger and cargo flights. Other revenue increased as a result of BA vacations and reward programs.

We can surmise then that revenues will improve for IAG, as EI is to restore capacity to 50% this winter and to 104% of 2019 levels by next summer, according to the IAG report. 

Additionally, IB is to increase capacity to 77% this winter and 105% next summer, but it hopes to have fully restored its North American capacity by next April. As Argentina and Brazil open up, Latin America should be back at 85% in Q2 2022.

Finally, long-haul low-cost LEVEL will ramp up capacity to 9% this winter and to 312% next summer as it resumes service on four North Atlantic routes.

LEVEL EC-MOU Airbus A330-202. Photo: Misael Ocasio Hernandez/Airways

Comments from IAG CEO


Commenting on the latest figures Luis Gallego, IAG’s chief executive officer, said, “All our airlines have shown improvements with the group’s operating loss more than halved compared to previous quarters. In Q3, our operating cash flow was positive for the first time since the start of the pandemic and our liquidity is higher than ever.”

Gallego added, “The full reopening of the transatlantic travel corridor from Monday is a pivotal moment for our industry. British Airways is serving more US destinations than any transatlantic carrier and we’re delighted that we can get our customers flying again.”

It is clear that as demand recovers, IAG’s capacity is set to continue to improve, increasing from 50% in September to 68% in December, according to IAG, with IB and VY reaching 75%. At current fuel prices and exchange rates, the group also expects its operating loss to lower in the fourth quarter, with a pre-exceptional operating loss of roughly €3bn.


Article sources: IAG, airinsight.com, capital.com. Featured image: Iberia EC-LEU Airbus A340-600. Photo: Pablo Gonzalez /Airways