British Airways owner returns to profit for first time since start of pandemic

International Airlines Group, the owner of British Airways, has returned to profit for the first time since the start of the pandemic and sealed a deal to buy a Spanish rival, becoming the latest airline group to benefit from a resurgence in demand.

IAG on Friday put two years and €10bn of losses behind it as the group reported an operating profit of €1.3bn for 2022, following a €2.8bn loss in 2021.

The Anglo-Spanish company, which is also home to carriers including Iberia and Aer Lingus, forecast that profits this year will climb to between €1.8bn and €2.3bn.

“2022 was a year of strong recovery, driven by sustained leisure demand and markets reopening,” chief executive Luis Gallego said.

The rapid recovery came even though BA, typically IAG’s profit engine, has been slow to recover from the coronavirus pandemic.

The airline was severely criticised for cutting too deeply to permanently reduce its cost base, after about 10,000 staff were laid off in 2020.

BA was then forced to scale back its operations to control disruption during last year’s recovery, as the industry faced a staffing shortage.

The airline reported an operating profit of €303mn last year — less than Iberia — compared with €1.9bn in 2019.

IAG is the latest major global airline to enjoy a notable revival in its fortunes, as consumers’ appetite for travel rebounds following the end of most of the restrictions introduced to control the Covid-19 emergency.

Low-cost airlines in Europe have enjoyed record bookings, Singapore Airlines and Qantas this week reported strong profits and Air France-KLM declared it had “turned the page on Covid”. 

Like many of its rivals, Gallego said IAG had reported “robust” bookings for travel this year, while business travel was “steadily improving”.

But Gallego added that he “remained conscious of global macroeconomic uncertainties”.

IAG expected its stable of airlines to operate 98 per cent of their pre-pandemic flight schedules this year, up from 87 per cent in the last quarter of 2022.

IAG’s full-year profit was a little more than a third of the €3.3bn it reported in 2019, the last year of trading before the pandemic struck, and Gallego said he had “the intention of returning IAG to pre-Covid levels of profit within the next few years”.

The recovery has also allowed IAG to complete its long-running effort to buy Air Europa, after it agreed a €500mn deal for the Spanish airline late on Thursday.

IAG agreed to pay €400mn for the 80 per cent stake in the airline it did not already own, having last year converted a €100mn loan to Globalia into an equity stake. The deal was first struck for €1bn in 2020, but cancelled as the pandemic hit the industry’s finances.

IAG hopes the tie-up, which will be subject to scrutiny from competition authorities, will increase its access to the growing Latin American market, and help turn Madrid airport into another European hub.