25th Feb 2022 14:38
(Alliance News) - International Consolidated Airlines Group SA will have to find creative methods to improve its operational performance with the return of business travel uncertain against a backdrop of a pandemic and war in Ukraine.
IAG on Friday reported a narrowed loss for 2021 through a rebound in bookings, fostering confidence in the group flying 85% of its pre-virus capacity in 2022.
For the year, the British Airways-parent posted a pretax loss of EUR3.51 billion, narrowed considerably from EUR7.83 billion in 2020.
IAG's operating loss narrowed to EUR2.77 billion from EUR7.45 billion the year before. Pre-exceptional items, the carrier's operating loss narrowed to EUR2.97 billion from EUR4.39 billion, beating consensus expectations of an EUR3.03 billion loss.
This was on revenue which grew 8.3% year-on-year to EUR8.46 billion from EUR7.81 billion, as passenger revenue rose 5.9% on reduced travel restrictions and a rise in passenger capacity by 7.7% year-on-year to 121.96 billion available seat kilometres, and 36% of 2019 levels.
IAG said the spread of Omicron from late November had a negative short-term effect on its annual operating result, passenger bookings and cancellations, meaning that the group expects a significant operating loss for the first quarter of 2022.
However, the airline operator anticipates a return to profitability in the second quarter, which should lead to a significantly positive year for operating profit and cash flow.
In addition, IAG said capital expenditure in 2022 is expected to be EUR3.9 billion, reflecting the need to re-build capacity towards pre-pandemic levels, the delay of aircraft deliveries from 2021 and certain pre-delivery payments deferred from previous years.
"There are so many moving parts with the airline, yet the one thing that is perhaps not moving as fast as it should is the rise in the number of bums on seats. International Consolidated Airlines' British Airways brand has just held a big sale to try and shift more tickets, and it needs to have good Easter and summer periods to try and get more cash flowing into the business to help repair its finances," said AJ Bell's Russ Mould.
In addition, the outlook for business travel, a key revenue driver for the sector, remains uncertain. The use of video-conference software such as Zoom and Microsoft Teams during the pandemic has made international operations for businesses more efficient, posing a conundrum for airlines to recapture revenue.
A Global Business Travel Association survey, conducted in late 2021, showed managers highlighted their workers would be interested in "bleisure" trips, where business travel is extended to accommodate tourism activities.
"International Consolidated Airlines will have to become more creative to try and win back the business customer or reconfigure its strategy to encourage more leisure travellers to fly further on its planes," Mould added.
By Arvind Bhunjun; [email protected]
Copyright 2022 Alliance News Limited. All Rights Reserved.
Related Shares:
International Airlines