LONDON (Reuters Breakingviews) - International Airlines Group boss Luis Gallego won’t be the only airline chief executive bracing for a wretched Christmas. Barely six weeks into the job, the Spaniard revealed that the parent of British Airways and Iberia lost 1.3 billion euros in the third quarter, and would not break even in the next three months due to rising infections and renewed travel restrictions. Dashed hopes are becoming aviation’s default setting.
The hit unveiled on Thursday was worse than the 920 million euro loss that analysts had been expecting. It also showed little improvement from the previous quarter, when strict lockdowns made cross-border travel all but impossible. Revenue of 1.2 billion euros was only 500 million euros higher than the previous quarter, evidence that quarantines imposed on arrivals by nervous governments were having almost the same effect as formal curbs on movement.
With the virus flaring on both sides of the Atlantic – normally IAG’s happiest hunting ground – Gallego had no choice but to ground more planes. Many of the ones that are flying may still end up making a loss, delaying any return to the break-even point. In the last quarter, IAG’s ‘load factor’ – the number of seats filled – was just 48.9%. Other airlines are facing similar short-falls. On a mid-week Lufthansa flight from London to Munich last week, Breakingviews counted 30-odd passengers on a 180-seater plane.
With 9.3 billion euros of cash or credit to hand, including 2.7 billion euros recently coughed up by shareholders, Gallego probably has more than a year’s worth of financial gas in the tank. European rivals Air France-KLM and Lufthansa have slightly plumper cushions but may be more constrained on cost-cutting given they have received multi-billion euro state support packages.
This makes Gallego’s position marginally less uncomfortable than his rivals. His recent ejection of British Airways boss Alex Cruz also appears to have improved relations with the UK government, which is now batting harder for the sector, as shown by this week’s introduction of pre-flight testing at London’s Heathrow airport. But brighter skies are looking as distant as ever.
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