So much for a return to clear skies for airlines, with Russia closing its airspace in a tit-for-tat response to the UK’s ban on Aeroflot as part of its package of sanctions on Russia.
Even so, British Airways-owner for International Consolidated Airlines (IAG) is still confident that it can return to operating profit in 2022 with positive net cash flows.
Capacity is expected to get back to roughly 85% of 2019 levels this year, although that requires €3.9 billion of capital expenditure in 2022 to get there, a five-fold increase on last year's spending.
With this in mind, ‘generating free cash flow will be tough,’ said Davy analysts in response to IAG’s full year 2021 results. Those figures showed headline operating losses to 31 December at an eye-watering €2.77 billion, although that was better than analyst predictions that topped €3 billion.
CORPORATE COMPLEXITY
There are many moving parts with the airline, but one thing that is not moving as fast as it should is the rise in the number of bums on seats.
IAG just held a big British Airways sale to try and shift more tickets, and it needs to have a good Easter and summer to try and get more cash flowing into the business to help repair its finances.
The end of UK travel restrictions will help the British holiday season, but corporate travel is arguably more important for IAG.
Business travel has historically been an important market for IAG, but the rise of Zoom and Microsoft Teams has made organisations realise they can have efficient meetings over the internet rather than flying hours to a different country for an hour in a boardroom and a few drinks at the bar.
International Consolidated Airlines will have to become more creative to try and win back the business customer or reconfigure its strategy to encourage more leisure travellers to fly further on its planes.
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