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Iberia reports an operating loss of €1.4 billion in 2020

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Following a catastrophic 2020 for the airline industry, companies are now evaluating the aftermath of the world pandemic to set the basis for a decisive 2021.

This year, mass vaccination programs – especially in the rich world – and the subsequent ease of travel restrictions are expected to help many airlines bounce back from the effects of COVID-19. However, a high level of unpredictability derived from new Coronavirus variants and the unequal inoculation of the vaccines will put at stake the resiliency of the sector.

Such is the case for Spanish flag carrier Iberia that has posted a €1.4 billion operating loss in 2020 after experiencing a 60% decrease in its revenues, which accounted for just €2.256 billion. And while its low-cost brother airline Vueling lost €875 million with a 76.6% decline in revenues (€574 million in total), both carriers have proved their ability to adjust their operations to the circumstances.

Despite the inevitable 65.5% reduction of their seat by kilometer offer, Iberia was still able to outperform the occupancy rates of the whole group (63.8% – 20.8 points less compared to 2019), reaching an average of 70.1%. This broadly responds to the company’s focus on domestic routes, a strategy that also Vueling followed by connecting mainland Spain with the islands, and that ultimately led the budget airline to operate on an average 70.9% occupancy rate.

On the other side of the coin, Iberia was not able to profit from its cargo operative as much as its northern counterparts. Such business increased by 25% (€890 million in total) for British Airways and by 63% (€88 million) for Aer Lingus, while contracting 17.6% for Iberia, representing €240 million.

These cargo operations were well intended to compensate for the lack of international passengers particularly in long-haul, but against “conventional wisdom, long-haul travel [hasn’t been] the weakest segment” lately for IAG, the holding’s CEO, Luis Gallego has said. In fact, “it has outperformed international short-haul since September” thanks to the Visiting Friends & Relatives (VFR) phenomenon.

While North American destinations have behaved weakly due to the ongoing restrictions, other leisure routes have spiked in Latin America, West Africa, and the Indian sub-continent.

The VFR traffic is currently a strong segment,” Mr. Gallego added, suggesting that its contribution to long-haul demand during winter has benefited Iberia with its operations to the Caribbean while reinforcing BA’s presence in the UAE, Indian Ocean, and other tropical destinations.

british airways b747-400
British Airways’ Boeing B747-400. Photo by Cole McAndrew | AeroNewsX

Being part of the IAG Group, Iberia’s and other Spanish companies’ fate seem to be all interdependent. As such, Mr. Gallego’s vision is clear: “there is a strong willingness to travel once the restrictions are lifted, but the demanded return is tied to the level of restrictions we have on place.

This call for governments to display restriction de-escalations plans for this summer explains the disposition of the holding to boost capacity to save its companies from another destructive season. According to IAG’s CFO, Steve Gunning, “BA could ramp up to 70% of 2019 by the summer” while “Vueling can [do it] much quicker and probably get up to almost 100% of capacity.

Parallelly, the conglomerate has demanded the introduction of health passports and other digital applications to speed up travel processes. Nonetheless, it still foresees a fifth of the 2019 capacity for the first quarter of 2021, while expectations for Easter remain “very low.” Iberia, as well as the rest of the family members, has heavily benefited from state temporary employment regulation programs reducing its costs up to 41.1%. On the other hand, the Barcelona-based carrier has axed its operational costs by 45.9%, and British Airways, which has reported a loss of €3.88billions – has done so with a reduction of 44.3%.

These measures have contributed to the totaling €730 million that the whole group has saved from governmental support, without mentioning the significant job cuts executed by BA, accounting for more than 12,000 positions.

air europa b787-9

In 2020, Madrid-based Iberia decided to retire the less-efficient 15 Airbus A340-600, following the early retirement of the 32 Boeing B747-400 belonging to British Airways. Similarly, IAG received 34 brand-new aircraft and postponed the delivery of another 68. As for the acquisition of Spanish company Air Europa, Iberia expects to renegotiate the rescue program with state-run entity “SEPI” after sealing the deal with a 50% reduction over the original €1 billion price tag.

The post Iberia reports an operating loss of €1.4 billion in 2020 appeared first on AeroNewsX.

Source: https://aeronewsx.com/iberia-reports-an-operating-loss-of-e1-4-billion-in-2020/?utm_source=rss&utm_medium=rss&utm_campaign=iberia-reports-an-operating-loss-of-e1-4-billion-in-2020

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