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British Airways Owner Reduces Capacity Further But Still Expects to Break Even by End of Year

British Airways Owner Reduces Capacity Further But Still Expects to Break Even by End of Year

International Airlines Group (IAG), the parent company of British Airways and Iberia, as well as Aer Lingus and Vueling, has lowered its capacity forecast for 2020 still further to just 37 per cent of pre-COVID levels measured in available seat kilometres (ASKs). The airline group had previously estimated a drop of 59 per cent and says capacity in quarter three will be cut by as much as 78 per cent.

After experiencing a “significant” increase in new bookings in June as national lockdowns were eased and travel restrictions lifted, the airline group has since seen new bookings level off as quarantines requirements have been imposed and some countries have experienced a resurgence of COVID-19 cases.

Photo Credit: Iberia

The company did, however, say it is encouraged by the “level of pent-up demand that exists for air travel” and positive trends where quarantine rules and border restrictions aren’t in force.

Much of the recovery has been driven by domestic and intra-Europe short-haul flights, while travel restrictions, especially in North and South America, have led to a delayed recovery of long-haul booking activity. There has, however, been a “modest increase” in new long-haul bookings since mid-August.

In quarter four, capacity across all of the IAG airlines is set to fall by 60 per cent compared to 2019. Down from a previous estimate of 46 per cent. In 2021, capacity is now estimated to be down 27 per cent compared to pre-COVID levels, although there remains much uncertainty.

Nonetheless, IAG still expects to break even by the end of 2020 and believes a full recovery will come at some point in 2023. In June, the group said it was losing $223 million a week but cost-cutting measures including thousands of job losses have since reduced those losses.

British Airways is in the process of cutting its workforce by as many as 13,000 employees, with 8,236 workers already having left the business. Iberia and Vueling haven’t announced significant job losses but many workers will remain on a government furlough scheme that has been extended into 2021.

On Monday, shareholders backed a €2.7 billion capital increase in a vote during IAG’s annual general meeting. Despite a revolt by some shareholders, the majority approved a $1.17 million bonus for outgoing chief executive Willie Walsh.

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