British Airways owner IAG warns of coronavirus hit to 2020 profit
British Airways-owner IAG today said that it was “not possible” to give an accurate forecast for its full year profit as the coronavirus outbreak continued to disrupt the airline group’s operations.
The firm said the net impact of current cancellations had lowered its capacity across the whole year by two per cent as the airline predicted cuts to its short-haul network in the coming days.
Shares in IAG fell eight per cent as markets opened.
The figures
IAG’s operating profit fell 5.7 per cent in 2019, down to €3.3bn from €3.5bn in 2018, slightly ahead of its forecast in September, when the firm said a pilots strike would result in a €215m hit.
The firm saw total revenue increase 5.1 per cent to €25.5bn, an increase on last year’s €24.3bn.
The airline group’s net debt saw a slight increase to €1.4bn, a 0.2 per cent increase on 2018’s level.
Earnings per share fell over 40 per cent across the year, touching down at 86.4p, a long haul from last year’s 142.7p.
Why it’s interesting
Airlines have been amongst the businesses worst hit by the coronavirus outbreak, which has spooked passengers and led to the cancellation of services worldwide.
British Airways has already suspended its flights to mainland China, and has reduced its daily service to Hong Kong from two flights to one.
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Now that the virus looks to have spread into Europe, the firm is anticipating a fall in capacity on its Italian routes, but did not predict the extent of the reduction.
Richard Flood, investment manager at Brewin Dolphin, said: “International Airlines Group (IAG) has reported a solid set of figures for 2019. However, the results have been completely overshadowed by the impact on trading in recent weeks as a consequence of the Coronavirus.
“Importantly, IAG is financially very strong with €7bn in the bank to see it through what will undoubtedly be a tough patch for the airline group.”
Last week global aviation body the International Air Transport Association (IATA) said that the coronavirus outbreak will cost the world’s airlines a combined $29.3bn in revenue, a reduction of five per cent on December’s estimates.
The vast majority of the cost – $27.8bn – will be borne by carriers based in the Asia-Pacific, with Chinese domestic airlines losing $12.8bn alone.
What IAG said
Outgoing chief executive Willie Walsh said: “These are good results in a year affected by disruption and higher fuel prices. We demonstrated our robust and flexible model once again through additional cost control and by reducing capacity growth to reflect market conditions.
“We’ve increased investment in new aircraft, customer products and operational resilience and this has seen our airlines improve their customer performance scores this year”.