BA owner ‘worried’ over Heathrow’s readiness for summer

IAG returns to profit, making £1.1bn in 2022, as travel industry bounces back from Covid

The British Airways owner, International Airlines Group (IAG), has said it remains “worried” over Heathrow’s preparedness for summer, despite assurances from the airport as travel continues to rebound for a second year.

Airlines were forced to cut flights and limit passenger numbers in 2022 peak season at Britain’s biggest hub, and although Heathrow has said it will not implement a similar cap this year, IAG and BA bosses said the UK’s largest airport was underplaying demand.

Luis Gallego, the chief executive of IAG, said: “We’re worried about Heathrow, you know, because we have strong demand.

“We have all the resources that are needed to operate the capacity in our summer schedule. But to be honest I think that aviation, we always say, is an ecosystem and we need everybody doing what they they have to do.”

The BA chief executive, Sean Doyle, said Heathrow had underestimated passenger numbers by 10 million in 2022, leading to disruption. He said: “The problem with underforecasting volume is that you don’t plan appropriately. So I think we need to have a very realistic forecast about the recovery and resource accordingly. British Airways is doing that and everybody else should do it as well.”

The latest warnings came amid a row over the level of landing charges set by the regulator, the CAA, which Heathrow this week denounced as “getting it wrong”. The Heathrow chief executive, John Holland-Kaye, said airlines such as BA were making huge profits and increasing fares while the airport continued to report a loss.

IAG on Friday bounced back to a €1.25bn (£1.1bn) profit in 2022 and said the figure could almost double in the year ahead as leisure and business travel recovers further from the coronavirus pandemic.

The group ran up losses of almost €11bn through 2020 and 2021 as Covid damaged the aviation industry, but said revenues almost tripled to €23bn last year as the lifting of restrictions fuelled a holiday and travel boom.

However, Doyle rejected Heathrow’s depiction of their relative financial situation and said the London hub should “throw a few facts on the table”. He said, despite the headline losses, the airport’s operating profit was now 76% of 2019, and charges were now at £31 per passenger. “Everything we’re seeing is actually that Heathrow have recovered ahead of the airlines in terms of their finances.”

IAG confirmed it would not pay dividends for 2022 or 2023.

Gallego said that for the group, whose other airlines include the Spanish carrier Iberia, 2022 “was a year of strong recovery, driven by sustained leisure demand and markets reopening”.

“At this point of the year we continue to see robust forward bookings, while also remaining conscious of global macroeconomic uncertainties,” he said.

IAG forecasts operating profits of between €1.8bn and €2.3bn this year. It also announced a €400m deal to finally acquire Air Europa, the Spanish regional carrier that it has been attempting to buy for some years.

The group said capacity reached 78% of pre-Covid levels last year – reaching 87% of 2019 levels in the final quarter – with a strong recovery in the holiday market, while business-related travel is “steadily improving”.

However, with the Russia-Ukraine war driving oil prices higher, the company said aviation fuel unit prices are up 30% compared with 2019, with costs rising from €1.78bn to €6.1bn year on year.

Total costs for IAG almost doubled from €11.2bn to €21.8bn between 2021 and 2022. Despite that jump, Gallego said the airline group remained confident in returning to pre-Covid-19 levels of operating profit within the next few years.

“As a long-haul specialist, IAG has been one of the last names in the sector to gain momentum following the pandemic,” said Sophie Lund-Yates, the lead equity analyst at Hargreaves Lansdown.

“Of course, aviation has flown straight into another hurdle in the form of a cost of living crisis. So far it seems pent up demand for travel is keeping things propped up, but there is a limit to how long this can continue.”


Gwyn Topham and Mark Sweney

The GuardianTramp

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