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Aer Lingus Owner IAG Scales Back Summer Ramp-Up To Avoid Disruptions

By Dave Simpson

Aer Lingus owner International Airlines Group (IAG) ICAG.L cut back plans to ramp up short-haul flights to avoid disruption at Heathrow Airport this summer, sending its shares skidding 8% on Friday 6 May after admitting it doesn't have enough staff to cope.

Details

The company, which also owns British Airways, Iberia and Vueling, has struggled with crew absences caused by the Omicron-variant of COVID-19 and a shortage of ground staff. Compounded by IT problems, flights had to be cancelled during the first quarter.

Chief executive Luis Gallego said the issues resulted in a first-quarter operating loss of €754 million, missing average analyst forecasts of a €510 million loss by a wide margin.

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Shares in the company were down 7% at 133 pence in morning trade on Friday 6 May, the worst performing FTSE 100 stock and on course for their worst day since November.

IAG said that it still expected to report operating profits from the second quarter and for the year.

Gallego said that the challenges it was facing were being felt across the industry.

The International Air Transport Association (IATA) said on Wednesday 6 May that insufficient resources at airports to handle growing numbers of passengers needed to be addressed to avoid frustrating consumer demand for travel.

IAG lowered its full-year group capacity guidance to around 80% of 2019 levels from its February forecast of 85% "to give more stability for the summer", Gallego said.

Analysts at Morning Star noted BA is the biggest contributor to IAG's revenue and its problems were a drag on its recovery.

"Issues are being addressed urgently, but could still take a couple of months to resolve," they said.

Recruitment Challenge

Gallego said that IAG was struggling to recruit staff for "below the wing" roles, such as ground handling, and it was taking about 20% longer for new staff to get security clearance.

Most of the BA schedule cuts would be in short-haul to protect its long-haul network, he said, adding the group's other airlines were not seeing the same problems.

The easing of government-imposed travel restrictions, particularly in Britain, resulted in improved travel demand, he said, with no noticeable impact from the war in Ukraine.

"Demand is recovering strongly in line with our previous expectations," he said, adding that business travel was coming back, led by Britain and the United States.

Small and medium-sized enterprises were leading the recovery ahead of large corporates, he said, which in some cases had new policies linked to sustainability that were impacting flying.

IAG CEO Says Omicron, Ramp-Up Costs Caused Worse-Than-Expected Q1 Loss

The above news followed news that the chief executive of IAG ICAG.L said the impact of the Omicron variant of COVID-19 at the beginning of the year and the cost of ramping up capacity caused it to report a first-quarter operating loss short of analyst expectations.

The British Airways-owner reported an operating loss before exceptionals of €754 million, missing average analyst consensus which stood at a loss of €510 million, although the range spanned a loss of €1.15 billion to a loss of €250 million.

"The main reason for the deviation with consensus is the Omicron impact that was mainly in January and February (and) the ramp up costs because we want to be close to 90% of our capacity during the summer," chief executive Luis Gallego told reports on Friday 6 May.

News by Reuters, edited by Hospitality Ireland. Click subscribe to sign up for the Hospitality Ireland print edition.

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