Aer Lingus owner IAG expects a return to profit from the second quarter of this year as it restores flights closer to pre-pandemic levels after reporting a multi-billion loss euros for the second consecutive year.
The group, which also owns British Airways, Iberia and Vueling, said it expected passenger capacity to reach 85% of pre-pandemic levels this year, after collapsing to just 36% of levels of 2019 last year.
This resulted in a net loss of €2.97 billion, compared to a loss of €4.39 billion in 2020. Aer Lingus recorded an operating loss of €347 million for the year to end December.
In the fourth quarter, Aer Lingus saw its passenger capacity return to 44.3% compared to 2019. British Airways capacity returned to 52.7% while Iberia was at 75.3%.
IAG, which said it is now avoiding Russian airspace following the invasion of Ukraine, forecasts a “significant” operating loss for the first quarter of 2022 due to normal seasonality, wave impact of Omicron coronavirus on short-term reservations and the cost of reconstruction capacity.
But, he expects second-quarter operating profits, causing both that metric and free cash flow from operating activities to be “significantly positive” for the year.
He said Omicron affected bookings in January and February, but had a minimal impact on bookings for Easter and summer 2022.
“We are confident that a strong recovery is underway,” chief executive Luis Gallego said.
The group’s forecast assumes no further setbacks related to Covid-19 and government-imposed travel restrictions or the material impact of “recent geopolitical developments” which it is watching closely.
IAG shares are down 19% from a year ago. They fell 6% on Thursday after Russia’s invasion of Ukraine sent oil prices soaring, with Brent rising above $105 a barrel for the first time since 2014 on fears of energy supply disruptions global.
Moreover, without access to Russian airways, experts say airlines must divert flights south while avoiding areas of tension in the Middle East – adding significant costs at a time when they are still reeling from the pandemic.
The stock was up 2.4% in early trading this morning.
IAG, which operates 533 aircraft between 279 destinations, has been slower than some of its peers to recover, due to its exposure to the slow-to-open UK market, the long closed route between the UK and the US and a smaller freight division.
Passenger capacity in the fourth quarter was 58% of 2019 levels, compared to 43% in the third.