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Oil price drop blows hole in IAG profits

The parent of British Airways expects its recovery to take years
April 29, 2020

International Consolidated Airlines Group’s (IAG) first-quarter pre-tax profits were hit by a €1.3bn (£1.1bn) exceptional charge relating to its fuel and foreign-exchange hedges for 2020, following the collapse in the price of oil. The parent of British Airways and Iberia experienced a 13 per cent revenue decline to €4.6bn, recording a pre-exceptional operating loss of €535m compared with a profit of €135m last year.

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Coronavirus has set expectations of a revival in passenger travel years beyond 2020, with Gatwick Airport last week estimating its own recovery to take three to four years. IAG has lowered its passenger capacity for April and May by 94 per cent compared with last year, only operating flights for essential travel and repatriation purposes. “Recovery to the level of passenger demand in 2019 is expected to take several years,” said chief financial officer Stephen Gunning in a statement.

IAG expects its second-quarter operating loss to be even deeper than that recorded in its opening quarter. It had cash and undrawn facilities of €9.5bn at the end of March. But the group has entered redundancy negotiations with British Airways unions, and may lose as many as 12,000 BA employees as part of its crisis response.