British Airways 2021 Financial Results

BA’s parent company International Airlines Group has released its financial results for 2021.

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British Airways Airbus A350-1000 G-XWBA Aircraft, London Heathrow
British Airways Airbus A350-1000 G-XWBA Aircraft, London Heathrow (Image Credit: British Airways)

IAG, the parent company of Aer Lingus, BA, Iberia, LEVEL and Vueling, released its annual results today, Friday 25 February 2022.

As expected, the group made a substantial operating loss of €3 billion for the year.

BA made by far the biggest loss of any airline in the group, with an operating loss of £1.9 billion. Its recovery significantly lags Iberia and Iberia Express, which were both profitable in the last quarter of 2021. 10 years ago the relative fortunes of the two airlines was the reverse.

IAG was keen to point out that it sees 2022 as a year of recovery and a return to profitability. This presupposes no new COVID-19 variants will result in travel restrictions. The results were published against a backdrop of considerable geopolitical uncertainty following Russia’s invasion of Ukraine.

Ukraine Situation

IAG CEO Luis Gallego confirmed that following the decision by the UK government to withdraw the foreign carrier permit of Aeroflot, BA has suspended flights to Moscow.

Irrespective of the decision by the Russian government to ban UK registered aircraft from its airspace, BA flights to Asia will be re-routed to avoid entering Russian airspace.

Given many BA routes to Asia are still suspended this will have a limited impact in the short term. However, this will affect flights to Tokyo Haneda which were due to resume in late March.

BA’s Recovery In 2022

BA’s capacity in 2022, measured by Available Seat Kilometres, will be around 80% of 2019 levels.

As a percentage, this is the lowest of any IAG airline. This will be mainly accounted for by markets to mainland China & Hong Kong which are expected to remain closed well into this year.

Premium business traffic, defined as bookings in Club & First cabins, is still substantially down at BA, at just 20% of 2019 levels in January.

BA CEO Sean Doyle was keen to continue his narrative of a positive future for the airline, for both colleagues and customers.

There was no indication of any new initiatives beyond what has been previously announced such as catering improvements. No specific detail was given on any other improvements to services on the ground and in the air.

BA’s Club Suite will feature on 68 Heathrow based long haul aircraft by the end of the year.

Little was said beyond what is already known about BA’s plans to restart short haul flights at Gatwick. The enthusiasm for its return was described as “encouraging”.

With BA consolidating all short haul routes at Heathrow, the airline has seen the benefit of which ones complement the long haul network. Many former Gatwick routes such as Naples will stay at Heathrow to benefit from connections to transatlantic flights.

In response to criticism of call waiting times at contact centres, Sean said the airline is half way through implementing a new telephony system.

New Aircraft Deliveries

IAG airlines will take delivery of 25 new aircraft this year.

This includes 10 short haul and 15 long haul aircraft. Long haul deliveries will include 4 Airbus A350 and 3 Boeing 787-10 aircraft deferred from 2021.

Nothing was said about aircraft deliveries beyond this year, other than the group has not cancelled any existing orders.

There was absolutely no mention at all of IAG’s possible order for Boeing 737 MAX aircraft. The group has previously insisted this is a possibility as competition between Airbus and Boeing for short haul aircraft must be maintained.

Flight Vouchers

IAG CFO Steve Gunning confirmed there are no less than €1.2 billion of unredeemed flight vouchers in circulation.

This balance appears to be slow to unwind. Steve indicated that the expiry date of these vouchers may be extended beyond 2023.

Consumers generally appear to see flight vouchers as a “sunk cost” and use them as part payment, rather than full payment, for flights.

Air Europa Deal

IAG CEO Luis Gallego confirmed that following the termination of its original deal to buy Air Europa the airline is exploring offers from other European airline groups.

IAG and Air Europa were to explore alternative structures that could satisfy all sides and competition regulators, but this now appears to be a non-starter.

IAG Loyalty

IAG was quick to scotch any suggestion that the group may follow other airlines and explore the disposal of all or part of its Avios loyalty programme.

IAG cited the fact that other airlines such as Air Canada had disposed of loyalty programmes to raise cash, only to buy them back later.

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