IAG cuts further capacity as losses continue to mount

Total revenue at the group – which owns British Airways, Aer Lingus and Iberia – declined by 83 per cent to €1.2 billion over the past three months, compared to €7.3 billion last year. Overall IAG lost €1.3 billion over the period, compared to a €1.4 billion profit last year.

Passenger capacity, expressed in available seat kilometres, declined by 78.6 per cent in the quarter. Passenger traffic, measured in terms of revenue passenger kilometres, declined by 88 per cent. Seat load factor declined by 39 points to 49 per cent.

Stephen Gunning, chief financial officer with IAG, said: “Recent overall bookings have not developed as previously expected due to additional measures implemented by many European governments in response to a second wave of Covid-19 infections, including an increase in local lockdowns and extension of quarantine requirements to travellers from an increasing number of countries.

“At the same time, initiatives designed to replace quarantine periods and increase customer confidence to book and travel, such as pre-departure testing and air corridor arrangements, have not been adopted by governments as quickly as anticipated.”

In response to the high uncertainty of the current environment, IAG now plans for capacity in quarter four of this year to be no more than 30 per cent compared to 2019.

As a result, the group no longer expects to reach breakeven in terms of net cash flows from operating activities during the next three months.

The group has previously hoped to fly around 40 per cent of its planned capacity.

IAG added, as of September, it had total liquidity of €6.6 billion, comprised of €5.0 billion of cash, cash equivalents and interest-bearing deposits and €1.6 billion of undrawn and committed general and aircraft facilities.

In addition, €2.74 billion of gross proceeds from the capital Increase were received in early October for a total pro-forma liquidity of €9.3 billion.