LONDON – International Airlines Group (IAG), which runs airlines such as British Airways (BA), Iberia (IB), and Aer Lingus (EI) has reported a €1.3bn loss for the third quarter of this year.
In the group’s trading update, IAG stated that it would be operating around 30% of normal capacity between now and December. The reintroduction of travel restrictions by European governments has been IAG’s main blame for such intense losses.
On top of this, this number exceeds the initial forecast of a loss of €920m and is significantly lower than the €1.4bn of profit made in Q3 2019. Additionally, revenues at the group dropped by 83%, meaning that with such capacity reductions taken into account, the group will not be reaching breakeven during the fourth quarter.
Furthermore, load factors across the airlines in the institution dropped by nearly 39% to 48.9%, putting pressure on the new IAG CEO Luis Gallego, who took over from Willie Walsh last month.
The third-quarter results may have been something that was relatively expected, even since the Summer hasjust gone.
The Group announced back in July that it had raised £2.5bn to strengthen the balance sheets following losses of £3.8bn in the first half of this year. In the Q3 results, IAG stated that financials in the current environment were “highly uncertain” due to the continued effects of the pandemic, which started in March.
Airlines in IAG have called on governments to allow the introduction of COVID-19 testing on passengers, which has recently been announced at London Heathrow (LHR).
Reshuffling To Thrive in the Future?
On top of these financial reports, we have seen the reshuffling of the executive cabinet of IAG. Around 10 days ago, BA’s CEO Alex Cruz stepped down from the role, although the reasoning behind it was unclear.
He was replaced by former Aer Lingus CEO Sean Doyle, who is now taking the reigns of the UK’s national flag carrier. As mentioned previously, we have also seen Iberia’s CEO Luis Gallego become the leader for the Group as a whole.
Moreover, at BA in particular, there have been up to 12,000 job cuts witnessed as well as the early retirement of its flagship Boeing 747-400s to make way for the Airbus A350-1000s as well as Boeing’s 777 and 787 Dreamliners.
Continued Uncertainty Away from COVID?
On the BA side of IAG, there is another challenge away from COVID-19 that will make things ever more uncertain. BREXIT.
The UK Transport Secretary Grant Shapps acknowledged to The Independent last week that flights between the UK and the European Union could be grounded from January 1 next year. This is due to no further agreement being made between London and Brussels over the current long-standing “open-skies” agreement under European law.
Such effects will also carry over to the likes of IB, EI, Vueling (VY) and others as those airlines provide significant services into the UK alone.
Even if the pandemic comes to a close, IAG will have to put continued pressure on the UK and EU Governments to bring such political dogfighting to an end and come up with a deal that will not make the industry collapse further than it needs to.
Overall, it remains clear that the financials released by IAG today shows what is considered to be the bigger picture.
Dealing with two issues at the same time will continue to place pressure on the financial integrity of not just British Airways, but also the entire industry as a whole.
It will be interesting to see how IAG aims to side-step both of those issues, and whether if anything, the UK Government can come up with a sustainable aviation strategy that can first of all get passengers back in the skies but also flying in the long-term as well.
Featured Image: The tails of the International Airlines Group. Photo Credit: Business Traveller.