British Airways-owner International Consolidated Airlines (IAG) reported resilient full year results with operating profit slightly above forecast, but that’s not what anyone cared about as it continued to warn over coronavirus.
IAG shares dropped 5.4% to 487p, continuing its heavy selloff since last Friday, as it warned weak demand due to the outbreak will lead to further flight cancellations on Asian and European routes.
Though it did say it will redeploy some of that freed up long-haul capacity to routes with stronger demand, like India, South Africa and North America.
FIRM FULL YEAR NUMBERS
The virus update detracted from what was otherwise fairly decent results in the face of industry pressures like higher fuel prices and pilot strikes.
Passenger revenue in the year to 31 December was up 5% to €22.47bn. Operating profit before exceptional items of €3.28bn was down 5.7% on the previous year, but still a few million ahead of the company’s previous forecast.
Net debt rose 17.7% to €7.5bn, but at 1.4x its net debt to EBITDA ratio was still well within the company’s 1.8x ceiling.
Crucially the company also has strong cash liquidity to get it through weakness in trading, a lack of which eventually caught Thomas Cook out.
BALANCE SHEET CHECK
Just like in previous hard times for the airline sector, the difference between strong and weak balance sheets will ‘separate the winners from the losers’, according to AJ Bell investment director Russ Mould.
He said, ‘Airlines drowning in debt will look very vulnerable in the current situation.
‘International Consolidated Airlines makes the point that it has a strong balance sheet and substantial cash liquidity to withstand the current weakness.’
