British Airways owner downbeat as rivals see summer rebound

British Airways owner downbeat as rivals see summer rebound
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(July 30): British Airways parent IAG SA issued a cautious assessment of its prospects for the rest of the summer as travel curbs hold back demand while rival Air France-KLM predicts a return to profit this quarter.

IAG, which also owns Spain’s Iberia and Aer Lingus of Ireland, reported a second-quarter operating loss of 1.05 billion euros (US$1.3 billion) that was slightly worse than estimated by analysts, and said it’s too early to provide a financial outlook for the rest of the year.

Chief Executive Officer Luis Gallego said a reopening of the U.K. border to American visitors is a positive development but that IAG will offer only 45% of 2019 capacity this quarter, usually the busiest for European airlines. Air France-KLM earlier predicted a return to profit in the period after second-quarter earnings beat estimates, saying it may offer 70% of its usual seats.

“We operate in different markets,” Gallego said. “We have a strong presence in the North Atlantic and also the South Atlantic. We have flexibility to go up in case restrictions are lifted, and we see pent-up demand.”

Shares of IAG fell as much as 4.3% and were trading 3.1% lower at 176.02 pence as of 8:06 a.m. in London, where the company is based. Air France-KLM added as much as 2% before trading 1.4% higher.

Sanford C. Bernstein analyst Daniel Roeska said in a note that “further U.S. reopening remains the most important catalyst” for IAG. He wrote that Air France-KLM’s operational recovery is ahead of expectations, with occupancy levels “looking quite respectable.”

Long-haul exposure

British Airways relies on U.K. and U.S. routes that have been slower to reopen following coronavirus lockdowns than those within continental Europe, while Iberia’s long-haul network is oriented toward South America, where flights are also restricted.

Gallego said there are some bright spots, with Spanish domestic capacity exceeding 2019 levels and BA’s top leisure destinations also thriving, while cautioning that the focus right now remains on preserving cash and positioning for the recovery.

BA got a partial reprieve this week with news that fully vaccinated arrivals from the U.S. and European Union need no longer self-isolate in England from Aug. 2.

Though that could help spur a revival of trans-Atlantic travel, the Biden administration has maintained border closures and isn’t expected to ease them any time soon. The U.S. last week advised citizens to avoid flying to Britain, citing the spread of the delta variant.

Frequently modified rules have also discouraged people from making short-haul journeys. Changes introduced this month finally opened up quarantine-free travel to more than 100 medium-risk locations for Britons with two Covid shots, boosting traffic to European holiday destinations.

Air France-KLM posted a second-quarter loss before interest, taxes, depreciation and amortization of 248 million euros.