cut its flight schedule for the remainder of 2020, as it flew to a loss and warned that the coronavirus-related travel slump had deepened more than expected.
Shares in the airline fell nearly 2% in London trading.
The back story. IAG, which runs airlines including British Airways, Iberia, and Aer Lingus, previously cut its flight schedules in September. At the time, the FTSE 100 constituent said it expected to fly at 40% of last year’s capacity in the fourth quarter, down from a previous guidance of 54%.
Airlines have been among the companies worst-hit by the economic impact of the coronavirus pandemic. In September, IAG launched a rights issue at a heavy discount and raised €2.74 billion ($3.24 billion) from shareholders in a bid to bolster its balance sheet.
Plus:Ryanair Cuts Winter Schedule, But It’s in Better Shape Than Most Airlines
What’s new. IAG said on Thursday that it would slash its flight schedule in the fourth quarter to no more than 30% of last year’s capacity. The airline said that the decision comes as overall bookings haven’t improved as expected, blaming additional government restrictions on travel amid a second wave of Covid-19 infections in Europe.
The company revealed that as a result of the new cut to capacity, it no longer expects to break even next quarter in terms of net cash flows from operating activities.
Releasing preliminary third-quarter results in an unscheduled update, IAG said that its total revenue declined to €1.2 billion from €7.3 billion in the same period last year—an 83% slump. The airline nosedived from an operating profit of €1.4 billion in the third quarter of 2019 to a €1.3 billion loss in 2020.
Also:EasyJet Is Cutting Flights Over Quarantine Rules. It’s More Bad News For Airlines.
Looking ahead. IAG’s decision to cut flight schedules follows that of other carriers, like
so a further reduction was on the cards. But the fact that the company won’t break even next quarter—a measure closely watched by the market—is particularly bad news.
The airline continues to burn cash but its balance sheet remains relatively strong. At the end of September it reported a total liquidity of €6.6 billion, and the €2.74 billion it received this month from the rights issue will help the company stay airborne.