Sustained leisure travel demand as borders reopened following the pandemic helped propel British Airways parent International Airlines Group back into the black last year.
The company reported an operating profit of €1.2 billion against a loss of €2.7 billion in 2021 as 87% of pre-pandemic 2019 capacity was restored.
IAG projected a further recovery in profits in 2023 to between €1.8 billion to €2.3 billion, based on current foreign exchange rates and jet fuel forward prices as capacity returns to 98% of 2019.
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“However, we are mindful of uncertainty in the macro environment and fuel and non-fuel cost inflation,” the group added.
The impact of Covid-19 and related travel restrictions was “significantly less” than in 2021 when many countries were still in lockdown or had severe travel restrictions in place.
Passenger carryings across the group, which also includes Aer Lingus, Iberia and Vueling, jumped to 94.7 million from 38.8 million the previous year as capacity was rebuilt.
IAG said: “The strong recovery in demand and traffic was reflected in the group’s passenger load factor, which reached 81.8% for the year, down just 2.8 points from 2019. The recovery increased across the year, with the passenger load factor in quarter 1 at 72.2% and quarter 4 rising to 83.2%.
“Capacity operated out of London Heathrow airport was lower than originally planned at the start of the year. British Airways’ capacity was capped by Heathrow and along with limited access to South Asia, capacity reached 70.3% of 2019 levels. In addition, there was an impact from the Omicron variant of Covid-19 in January and February.”
The start of transatlantic flights by Aer Lingus from Manchester airport in late 2021 helped the Irish carrier restore long-haul passenger capacity to similar levels to 2019 by the end of last year.
IAG chief executive Luis Gallego said: “2022 was a year of strong recovery, driven by sustained leisure demand and markets reopening.
“At this point of the year we continue to see robust forward bookings, while also remaining conscious of global macro-economic uncertainties.
“We are transforming our businesses, with the intention of returning IAG to pre-Covid levels of profit within the next few years, through major initiatives to improve customer experience and operational performance.
“Our unique group structure allows us to maximise revenue and cost synergies, and invest capital to achieve strong returns, whilst continuing progress towards net zero by 2050.”
He added: “With the acquisition of Air Europa now agreed but subject to regulatory and other approvals which could take around 18 months, we are intending to welcome another leading airline to the group.”
Julie Palmer, partner at corporate restructuring specialist Begbies Traynor, said: “The scale of the post-pandemic recovery for airlines is spelled out in IAG’s results, with revenues bouncing back to levels seen before Covid grounded flights.
“However, the story was not the same for profits. Although IAG did return to the black, the cost of running airlines has soared; despite hedging contracts to protect IAG, the fuel bill was almost a third higher and other costs rose by a quarter compared to 2019.
“Management say they want to return to previous profit levels within a few years. However, that’s going to need oil prices dropping to levels not seen for a long time, something unlikely in an increasingly unstable world, management squeezing efficiencies out of the business, a task they’ve battled with previously, or ticket prices going up.
“In an increasingly uncertain world and the highly regulated aviation industry, I’d expect it will be passengers who pay the price of bringing profits back to where the once were.
“IAG boss Luis Gallego did inject a note of caution into the results though, saying he was ‘conscious of global macro-economic uncertainties’ but he did point to strong forward bookings, showing that people are desperate to travel.
“But perhaps the biggest signal of his confidence was the €400 million bid to take full control of Spain’s Air Europa, strengthening IAG’s access to Latin America, and adding to a portfolio that already includes BA, Iberia, Aer Lingus, as well as no-frills carriers Level and Vueling.”