IAG: 'Steady' Recovery in Q1 Corp. Travel

British Airways parent International Airlines Group's first-quarter 2022 loss of €754 million ($795 million) was due to normal seasonality, the effect of the Covid-19 omicron variant in January and February—which in particular reduced business demand—and the cost of ramping the business back up, IAG CFO Nicholas Cadbury said Friday during a first-quarter earnings call. 

The loss, however, was partially offset by the end of the quarter by the continuing strong performance of premium leisure and "the solid return of business traffic," Cadbury added, with the continued easing of government travel restrictions, "particularly in the U.K.," resulting in a significant improvement in travel demand, with a "good steady recovery in business travel."

British Airways' premium-class business revenue recovered from 20 percent of 2019 levels in January to 45 percent in March. For Iberia, premium business was about 40 percent recovered in January and 60 percent in March. "The partial recovery in business travel is consistent with the return of many companies to the office, particularly in London, Madrid and the U.S.," Cadbury said.

The total business segment is "around 67 percent" recovered from 2019 levels, IAG CEO Luis Gallego said. "Business traffic is coming back."

Broken down by vertical, banking and finance have recovered to around 65 percent from 2019, according to Gallego, while some investment banks are back to almost 100 percent levels on North Atlantic routes, Cadbury added. In April, BA's business-channel bookings of North Atlantic routes recovered to 90 percent of 2019 levels. The technology and pharmaceutical sectors have recovered "the least," Gallego said, while small and midsize businesses have recovered the most.

IAG reported first-quarter revenue of €3.4 billion ($3.6 billion) with passenger revenue of nearly €2.7 billion ($2.8 billion). Both were significantly up from Q1 2021 figures of €963 million ($1 billion) and €454 million ($479 million), respectively. Available seat kilometers were just over 49,000 compared with nearly 15,000 one year prior.

First-quarter 2022 capacity was at about 65 percent of 2019 levels, Gallego said. The company plans to operate capacity at 80 percent of 2019 levels for the second quarter and 85 percent for the third quarter. IAG also expects to restore a full network on North Atlantic routes by the third quarter, but with a slightly lower capacity of 95 percent compared to three years ago. The company anticipates full-year 2022 capacity to be around 80 percent recovered. 

IAG also expects to be profitable "at the operating level" from the second quarter and for full-year 2022, Gallego said, despite a significant increase in the price of jet fuel. To date, the company has not seen a noticeable effect on demand from the conflict in Ukraine, but many long-haul markets remain shut in most of Asia, he said.

BA's performance also was negatively affected by "well-publicized" disruptions at Heathrow, "with a total impact of around €50 million ($53 million) in the quarter, impacting both revenues and costs," Cadbury added.  

 IAG Q4 2021 earnings