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Welcome to London Air Travel’s Monday Briefing for the week beginning 27 July 2020.
Year Zero
IAG is due to present its half-year results this Friday, 31 July 2020.
Investors have a preview of what to expect. IAG confirmed late Friday afternoon that it is planning a rights issue to raise up to €2.75 billion. According to Reuters which first broke the story, a cast of no doubt handsomely rewarded advisors are working on it, so it seems a near certainty.
IAG will of course report a heavy operating loss. When you are due to report a loss companies often “kitchen sink” the results and get as much bad news out of the way as possible.
When IAG last updated investors in early May, its cash operating costs were said to be €200 million a week and it had up to €10 billion of cash and undrawn credit facilities available.
IAG has since raised $750m by pre-selling Avios to American Express and $750m by mortgaging BA aircraft. This in addition to IAG securing a loan of £300m from the UK government’s Coronavirus Corporate Finance Facility (CCFF). Iberia and Vueling have secured loans totalling €1 billion with a guarantee by the Instituto de Crédito Oficial in Spain.
When American Airlines presented its second quarter results last week, CEO Doug Parker spoke of American’s intention to “shut it down and start from scratch”. American will only reinstate flights and routes where it makes sense. It’s hard not envisage similar sentiments from IAG.
IAG had planned an orderly return to service from July. Whilst this has happened to an extent, it is clear that neither long-haul nor higher yield business travel will return in any meaningful way until well into 2021. The decision by the UK government to impose a mandatory quarantine on passengers returning from Spain will shake confidence in the leisure sector, which has historically been relatively resilient.
Other things to look out for on Friday are changes to the delivery of new aircraft, specifically the Boeing 777-9 which was due to be delivered from 2022.
Also on Friday, we should learn of whether BA pilots have voted to accept a package of measures to mitigate against compulsory redundancies. If history is anything to go, an agreement with ground staff should follow with cabin crew the last by some distance.
BA Art Auction
Speaking of raising cash, BA should find out this week how much it has raised from auctioning selected works from its art collection.
The standout work is “Cool Edge” by Bridget Riley which is valued up to £1.2m. Other more modestly valued works up for auction include:
“Grasshopper Portfolio” by Peter Doig (£10,000 – £15,000)
“Colour Down The Side” by Sir Terry Frost, R.A. (pictured above in the BA arrivals lounge) (£20,000 – £30,000)
“Scarlet and Bordeaux in Cobalt” by Patrick Heron (£10,000 – £15,000)
“Valium” by Damien Hirst (£5,000 – £7,000)
Eight Landscapes by Julian Opie (£10,000 – £15,000)
“Garden 2” by Marc Quinn (£5,000 – £6,000)
“Scenes From The Passion: (Ash Wednesday) by George Shaw (£10,000 – £15,000)
In case you missed it:
BA suspends planned launch of London Heathrow – Portland. (London Air Travel)
BA launches London Gatwick – Montego Bay. (London Air Travel)
BA extends flexible rebooking policies to 30 September 2020. (London Air Travel)
Qatar Airways and Japan Airlines move to London Heathrow Terminal 5. (London Air Travel)
Also of note this week:
Today’s “You and Yours” on BBC Radio 4 looks at why so many former Flybe routes have not been taken up by other airlines. (BBC Radio 4)
The Civil Aviation Authority is this week expected to publish details of which airlines have not provided refunds for cancelled flights, which could ultimately lead to enforcement action. (Daily Telegraph)
Joe Mohan, formerly Vice President of Alliances and Partnerships of American Airlines, writes for GridPoint Consulting (founded by former IAG Director of Strategy Robert Boyle) on the potential value of JetBlue’s partnership with American Airlines. (GridPoint Consulting)
The Times reviews Virgin Atlantic’s return to scheduled passenger flights. “Maybe we needed to give travel the It’s a Wonderful Life treatment – to really feel that it had gone for good – to rediscover our awe for falling asleep on one continent and waking in another.” (The Times)
Late post publication updates:
[Reserved for updates throughout the day]
Ryanair has reported a loss for the quarter to 30 June 2020 of €185m. Capacity will remain substantially reduced and it describes the possibility of a second wave of cases as its biggest fear. (Ryanair)
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