The International Consolidated Airlines Group (IAG) announced on Friday their second quarter and half year financial results. The airline conglomerate reported a record second quarter operating loss of €1.365 billion and an H1 loss of €1.9 billion.
Today (July 31, 2020), the International Consolidated Airlines Group (IAG) reported a second quarter operating loss of €1.365 billion before exceptional items compared to an operating profit of €960 million in the second quarter of 2019. For the first half of the year (H1), IAG reported an operating loss before exceptional items of €1.9 billion versus an H1 2019 operating profit of €1.1 billion. Exceptional charges for the first half of 2020 totaled €2.2 billion and include de-recognition of fuel and foreign currency hedges and a fleet impairment charges related to the early retirement of 32 Boeing 747s and 15 Airbus A340-600s. The company’s statutory H1 2020 loss after tax and exceptional items totaled €3.81 billion compared to an H1 2019 profit of €806 million. As of June 30, 2020, IAG had €6.02 billion in cash and undrawn general and aircraft credit facilities of €2.1 billion, bringing the Group’s total liquidity to approximately €8.1 billion. In Friday’s announcement, IAG’s Chief Executive Officer, Willie Walsh said,
“In quarter 2 we’re reporting a record operating loss of €1,365 million before exceptional items compared to an operating profit of €960 million last year. Total operating losses including exceptional items related to the early retirement of British Airways’ Boeing 747s and Iberia’s Airbus A340s came to €2,177 million. We operated 1,875 cargo-only flights using passenger aircraft in quarter 2 which was an important cash contributor to the Group. All IAG airlines made substantial losses. As a result of government travel restrictions, quarter 2 passenger traffic fell by 98.4 percent on a capacity reduction in the quarter of 95.3 percent. We have seen evidence that demand recovers when government restrictions are lifted, Our airlines have put in place measures to provide additional reassurance to their customers and employees onboard and at the airport.
“We continue to expect that it will take until at least 2023 for passenger demand to recover to 2019 levels. Each airline has taken actions to adjust their business and reduce their cost base to reflect forecast demand in their markets, not just to get through the crisis, but to ensure they remain competitive in a structurally changed industry. IAG continues to take action to strengthen its balance sheet and liquidity position including more than halving its operating cash costs and significantly reducing its capital spending. At the end of June liquidity stood at €8.1 billion. Based on our current capacity planning scenario, we would reach breakeven in terms of Net cash flows from operating activities from quarter 4 2020. Subject to shareholder approval at our AGM on September 8, IAG will undertake a capital increase of up to €2.74 billion which will enhance the Group’s resilience, balance sheet and liquidity position. We’re delighted that our largest shareholder, Qatar Airways, has already committed to support the proposed capital raising. This will best position IAG to continue executing its strategic objectives and capitalize on its existing market leading position and future growth and consolidation opportunities.”
On July 24, 2020 IAG signed a multi-year renewal of their partnership with American Express which included a payment of €830 million, a large portion of which was for Avios pre-payment. IAG currently plans to increase capacity to 26 percent in the third quarter and 54 percent in the fourth quarter compared to 2019. The company has also deferred delivery of 68 new aircraft that were scheduled to be delivered between 2020 and 2022. Additionally, IAG has cut 2020 CAPEX by €1.5 billion and the carrier’s fleet capital expenditure is covered by committed financing. Regarding the previously announced acquisition of Air Europa, IAG is currently in negotiations with Globalia for a potential restructuring of the deal in light of the global COVID-19 pandemic.
In trading Friday afternoon, shares in the International Consolidated Airlines Group SA (LSE: IAG) were down 7.43 percent to €1.857 (2:04 PM BST).