British Airways is back in the black as air travel takes flight

IAG roared into the black again last year as demand for air travel recovered from the pandemic slump.

The group, which also owns British Airways, Aer Lingus and Iberia, posted a £1.1 billion profit for 2022, compared to a loss of £2.4 billion in 2021 when revenues more than doubled from £7. 5 billion to £20 billion.

The results are another boon for British industry and come just a day after jet engine maker Rolls-Royce reported a 57 per cent increase in profits to £652 million, while defense giant BAE, which makes parts for the Eurofighter Typhoon aircraft, also saw a profit increase of 5.5 percent. percent to £2.48 billion.

IAG said demand in Europe had recovered ‘to a greater extent’ than in other parts of the world, with capacity in the region exceeding pre-pandemic levels, boosted by strong passenger demand to destinations such as the Canary and Balearic Islands .

The group also said capacity had surged in 2022 as most countries eased their Covid-19 travel restrictions, prompting airlines to scramble to get more planes back in the air to meet customer demand.

IAG reported that capacity reached 87 percent of 2019 levels in the last quarter of last year.

The group’s net debt fell from £10bn to £9.2bn after rising by more than £3.5bn during the pandemic, while racking up losses of £9bn in 2020 and 2021.

But problems remain, most notably the cost of jet fuel, which rose sharply in 2022 and was 30 percent higher than pre-pandemic levels when global oil prices surged after the outbreak of war in Ukraine.

The company also refrained from reinstating its dividend despite returning to profit, despite speculation earlier this week from Heathrow boss John Holland-Kaye that the airline group could resume payments in its results.

But IAG remained optimistic and expects a larger profit in 2023 of between £1.6bn and £2bn as air traffic continues to recover and capacity improves.

Boss Luis Gallego also said the group saw “robust advance bookings” for flights and planned for the company to return to “pre-Covid profit levels” within a few years.

In a separate announcement, the group revealed plans to buy the 80 per cent share of Spanish airline Air Europa, which it did not already own, for £353 million in cash.

Gallego said the purchase would allow the group to grow its hub in Madrid and provide “a gateway to Latin America and beyond, with benefits for customers, employees and shareholders.” But the lack of a dividend and the huge mountain of debt unnerved investors, and shares fell 6.5 percent, or 10.68 pence, to 154.76 pence.

“IAG has an important role to play in rebuilding its balance sheet after the pandemic ripped through revenue and forced the group to take substantial borrowing,” said Richard Hunter, head of markets at Interactive Investor.

He also said “somewhat worryingly” that IAG did not expect its debt to be significantly reduced by the end of this year, so investors would likely wait for dividend payments to resume.

Aside from the lingering impact of the pandemic, IAG and other travel agencies are now facing cost-of-living pressures as customers increasingly opt for cheaper travel or avoid travel altogether as they tighten their belts.

Continued pressure on the industry was exposed last month when low-cost carrier FlyBe went bankrupt.