When IAG reported a £6bn loss back in February, it was no surprise given the impact on the travel sector over the last 12 months. For the year, passenger revenue fell 75.5% from €22.47bn to €5.5bn.
With the government roadmap out of lockdown pointing towards improved passenger levels during 2021, will the airline's Q1 results see an upturn? And what will the latest numbers mean for the IAG share price?
IAG share price stays grounded
The whole aviation industry was hit hard as Covid-19 swept across the world, and the damage done during 2020 has become clearer, with passenger demand dropping more than 70% compared with 2019. This has continued into 2021, with January figures remaining just as low as those last year. Despite the potential of overseas travel picking up over the summer, customers have been less enthusiastic in commiting to holiday bookings so far.
For Q1, IAG had estimated that capacity plans would be around 20% of 2019 levels, in essence meaning that the first quarter is going to be worse than Q4, which helps explain why the IAG share price has gone nowhere since those end-of-year results were released.
On a positive note, the IAG share price is still well up from the lows of 2020, when it dropped below 100p, as investors react to the impressive vaccination figures in the UK, and the gradual removal of lockdown restrictions. As news filtered through that the EU were looking to loosen restrictions for passengers that had been vaccinated, or coming from low-risk countries, the IAG share price rose 3% this week.
The UK’s trade minister Liz Truss has said that she doesn’t think it will be long before restrictions are loosened, but that people looking to book a holiday should be cautious: “I would encourage people to wait until we make that announcement.”
Short-haul set to have advantage
IAG, parent company of British Airways, Aer Lingus and Iberia, hasn’t offered any guidance for this year, and with the international travel outlook still uncertain with the surge in cases in places like India, short-haul appears to have an advantage over long-haul carriers in the here and now.
Its main problem will be getting the same levels of long-haul business travel that it had before the pandemic. This is where most big carriers make their money, and it's here that normal service may well take a little longer to return to the same levels as 2019.
There has been talk in the last few days of a transatlantic travel corridor being opened with the US, where vaccination levels are running at similar levels. This would be very welcome, and should offer a boost for Q2, at a time when the long-haul market may take longer to resume than the short-haul market.
IAG is set to release its latest figures on Friday at 7am. What will the Q1 results mean for the IAG share price?
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