British Airways parent IAG on Friday forecast a return to annual profit after cutting COVID-induced losses on easing travel restrictions.
But investors, still concerned by the size of losses, sent shares in IAG diving eight per cent in London morning deals.
IAG, owner also of Spanish carriers Iberia and Vueling, said that its net loss narrowed to €787 million in the first three months of this year. That followed a loss after tax of €1.1 billion in the first quarter of 2021 for the group that also steers Irish airline Aer Lingus.
“Demand is recovering strongly in line with our previous expectations,” IAG chief executive Luis Gallego said in the earnings statement. “Globally the travel industry is facing challenges as a result of the biggest scaling up in operations in history” after countries lifted COVID curbs.
Gallego added that the “welcome removal of UK’s stringent travel restrictions, combined with strong pent-up demand, have contributed to a steep ramp up in capacity”. He said the group expects to be profitable from the second quarter, delivering an annual profit.
IAG had collapsed into annual losses during 2020 and 2021 as the pandemic ravaged travel demand.
In the first quarter of 2022, group revenue more than tripled to €3.4 billion. The first quarter “saw strong business travel recovery, with premium leisure remaining strong”.
At the same time, seasonal low demand, the Omicron COVID variant and rising costs weighed on its performance.
Airlines generally post losses over the period because it covers the seasonally slower months of the year.
IAG added that Russia’s invasion of Ukraine had no major impact on its operations.
Shares collapse
Despite IAG’s positive outlook, the group’s share price sank more than eight per cent to 131.16 pence in London morning deals. That made it the heaviest faller on the benchmark FTSE 100 shares index, which was down 0.8 per cent.
“There is no getting away from the damage inflicted on IAG,” said Hargreaves Lansdown equity analyst Sophie Lund-Yates. “Losses well north of €700 million are a stark reminder of the long road ahead.”
There is no getting away from the damage inflicted on IAG. Losses well north of €700 million are a stark reminder of the long road ahead- Hargreaves Lansdown equity analyst Sophie Lund-Yates
Airlines still bear the scars of a crisis that crushed demand – and sparked vast financial losses and thousands of job cuts worldwide.
British Airways has cancelled thousands of flights in recent weeks owing to staff shortages sparked by COVID absences.
IAG booked a record net loss of €6.9 billion in 2020 on COVID fallout and slashed about 10,000 jobs at British Airways. The group then trimmed losses to €2.9 billion in 2021.