IAG financial results published: €10.8bn of liquidity, 340 BA flights per day in August, BP joins Avios

IAG, the Spanish parent company of Iberia, Aer Lingus, Vueling and British Airways, published its half year financial results this morning.

There are some interesting bits and pieces, including hints of future Avios tie-ups.

BPme Rewards will partner with Avios

The biggest news from a loyalty perspective is the announcement of further Avios collection partnerships in the UK and Spain.

IAG has announced that Avios will be partnering with BPme Rewards in the UK, which means you will once again be able to earn Avios from petrol purchases.

Avios earning opportunities from petrol have changed a lot in the past five years. Up to a few years ago you could earn Avios at Shell, Esso and Tesco-branded filling stations. Of these three, only Esso is left via its low earning rate for Nectar points, transferable to Avios as of February this year. You also have the small network of Sainsbury’s petrol stations of course.

BP left Nectar in 2019 to start its own loyalty program. At the time, it suggested that it would not pursue partnerships for transferable points.

It now seems like BP has changed its mind. An announcement must be imminent, given IAG’s decision to mention it in its results.

We will take a closer look at BPme Rewards, BP’s loyalty scheme, on Monday.

Turning to the real business of flying ….

British Airways flew just 14.1% of capacity in Q2

Despite optimism about travel restrictions easing early on in the quarter, the combined IAG airlines operated just 21.9% of 2019 capacity.

At British Airways this was even lower, with just 14.1% of 2019 capacity flown – just 0.7% higher than in the first quarter this year.

This was, clearly, not the spring that British Airways or IAG were hoping for. The announcement of the traffic light system sparked hopes of an accelerated recovery, with IAG expecting capacity to increase to 25% across all airlines.

Government ministers had different plans, however. Despite introducing the traffic light system in early May, a number of last-minute changes meant led to a roller-coaster of travel restrictions including for popular destinations such as Portugal, which came off the Green list just three weeks after it was put on.

The good news is that restrictions have now settled into a slightly more predictable pattern. More countries continue to become accessible every three weeks, particularly now that Amber list countries have effectively gone Green for those who are double vaccinated.

Overall, IAG expects to more than double its group-wide capacity in the third quarter to approximately 45% this Summer.

In many cases, British Airways will offer as much as 40% more capacity on shorthaul Summer holiday routes than in 2019, with up to 340 daily flights in late August (versus 150 in early June).

This should help to make up for the slower recovery of long-haul travel.

Maximum capacity this year is 75%

Even with a strong summer and late summer season, IAG will still only be able to fly a maximum 75% of 2019 capacity in the fourth quarter this year.

This is largely due to the retirement of aircraft last year as well as staff restructuring, which means that all IAG airlines are significantly smaller than they were in 2019. For British Airways, this means that there are:

• 18% fewer aircraft than in 2019, with the remaining long haul aircraft significantly smaller in terms of seats
• 15% fewer pilots than in 2019
• 30% fewer cabin crew than in 2019

British Airways will not be able to return to 2019 capacity for some time yet and will need to drive recruitment across all roles. Even with the most optimistic travel rebound forecasts British Airways is likely to operate at reduced capacity well into 2022 and 2023.

Aircraft capacity will continue to be a significant bottleneck with IAG expecting just 10 more aircraft deliveries this year across all its airlines. This is – clearly – not enough to replace even the 31 747s retired by British Airways last year.

Cash is not a problem

The good news is that IAG is, financially, in a strong position. Perhaps more accurately, it is not about to run out of money.

Liquidity at 30th June was €10.8 billion across the group. ‘Liquidity’ means cash in the bank plus bank loans and other financing facilities which have been agreed but not drawn yet. This is up from €8.1 billion at the end of 2020.

The cash loss from operations was €1.3 billion for the last six months. Whilst IAG retains substantial amounts of debt – an astounding €20 billion – no major facilities are due for repayment until November 2022. There is no real ‘crunch’ until 2026 when almost €3 billion becomes due.

That said, there is no guarantee that the cash burn will now reduce. On current capacity plans, IAG’s operating costs will jump from €190 million per week to €270 million per week in Quarter 3 as it brings back aircraft and staff. If ticket sales do not rise in parallel, losses will obviously increase.

Other bits and pieces

• The Aer Lingus launch of US flights from Manchester is still scheduled for September, with on-going plans to join the transatlantic joint venture with AA, Finnair, BA and Iberia

• British Airways expects to return to Heathrow Terminal 3 at the end of Q3 (ie September)

• Vueling is flying more Spanish domestic routes than it did in 2019

Want to know more?

Click here for an IAG PowerPoint presentation on the half-year results. It is relatively low on financial jargon, unlike the headline results document.

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How to earn Avios from UK credit cards (December 2021)

As a reminder, there are various ways of earning Avios points from UK credit cards.  Many cards also have generous sign-up bonuses!

There are two official British Airways American Express cards with attractive sign-up bonuses:

You can also get generous sign-up bonuses by applying for American Express cards which earn Membership Rewards points, such as:

Run your own business?

We recommend Capital On Tap for limited companies. You earn 1 Avios per £1 which is impressive for a Visa card, along with a sign-up bonus worth 10,500 Avios:

You should also consider the British Airways Accelerating Business credit card. This is open to sole traders as well as limited companies and has a 30,000 Avios sign-up bonus:

Click here to read our detailed summary of all UK credit cards which earn Avios. This includes both personal and small business cards.

(Want to earn more Avios?  Click here to visit our home page for our latest articles on earning and spending your Avios points and click here to see how to earn more Avios this month from offers and promotions.)