The parent company of British Airways and Iberia slumped to a €1.3bn (£1.17bn, $1.54bn) loss in the third quarter of 2020, as the COVID-19 pandemic continues to severely depress aviation.
IAG (IAG.L) on Thursday said it had made an operating loss of €1.3bn in the third quarter, compared with a profit of €1.4bn in the same period of 2019. Revenue in the three month period dropped 83% to €1.2bn. Passenger traffic fell by 88%.
IAG slashed capacity at the start of September in response to new quarantine measures introduced across Europe but the company said demand had been even weaker than expected since then. IAG now expects to fly only around 30% of its total capacity in the fourth quarter. It had hoped to carry between 46% and 60% of last year’s passenger numbers.
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The airline blamed the spread of local lockdowns across Europe and the slow adoption of rapid testing at airports, which, if adopted, could subvert the need for passengers to quarantine.
The worse outlook means IAG no longer expects to break even on a cashflow basis in the fourth quarter.
IAG said it had “strong” liquidity, with €6.6bn of cash and lending facilities to draw on.
Shares slumped 4.5% on the update.
The aviation industry has been devastated by the coronavirus pandemic. Passenger numbers have collapsed while airlines have been left with continued high costs. The International Air Transport Association (IATA) estimates that the global industry will lose $84.3bn this year, with demand down 66% on 2019.
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“It looked for a moment like the worst may be behind the airlines,” said William Ryder, an equity analyst at Hargreaves Lansdown. “But the virus has returned with a vengeance and governments have started to impose increasingly draconian measures to fight it.
“Just how turbulent the future will be for IAG may depend on how many more waves of coronavirus we face. If this is it, and some combination of a vaccine, track and trace and partial herd immunity can prevent a third wave next year, IAG should come through, albeit badly scarred.
“On the other hand, if we’re beginning a pattern of rising infections, restrictions, remission, rejoice, repeat – IAG could be in real danger.”
IAG shares have lost 85% of their value since the start of the year. The company has been forced to lay off thousands of staff and last month raised €2.7bn through a heavily discounted rights issue.
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