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What is the British Airways plan for flying post-coronavirus? We listen in on the IAG investor call

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On Thursday IAG, parent company of British Airways, Iberia, Aer Lingus and Vueling, gave its 1st Quarter results presentation.  This was obviously more significant than usual given the current grounding of the fleet.

Whilst Rob has already covered the published highlights, including IAG’s £300 million loan from the UK Government’s Coronavirus Corporate Finance Facility, there were a few more interesting tidbits from the presentation which followed.

Current flying is cash positive, impressively

Whilst capacity is currently 10% of 2019 levels, British Airways is still operating some flights, including around 15 long haul routes, on a daily basis.

These are not loss-making. According to Willie Walsh, ALL currently operated flights are cash positive due to the cargo being carried.  British Airways is able to keep core passenger routes open even if there are only a handful of travellers.

From July, IAG expects to fly ‘meaningful’ capacity

IAG will operate ‘meaningful’ capacity from July onward, subject to travel restrictions being lifted, although it may take until 2023 to see levels return to previous highs.

‘Meaningful’ refers to the number of seats in the air.  There was no guidance on how many would be filled with paying passengers. Currently, IAG thinks that 50% of previous capacity will operate in Q3.

This is not entirely unreasonable.  China’s domestic capacity rebounded to 70% of its previous average by the end of April according to aviation analytics company Cirium.

What will BA’s future fleet look like?

Whilst carriers such as Virgin Atlantic and Lufthansa have been making firm aircraft retirements and therefore permanent capacity reductions, British Airways is allowing itself a greater degree of flexibility.

IAG currently has approximately 440 aircraft grounded at airports around Europe. Whilst these are currently on modified maintenance schedules because they are not flying, it would only cost a modest €10 million to return the entire fleet to active duty.

British Airways will be accelerating the retirement of two Boeing 747s already due to retire this year and returning a potential 20 additional aircraft back to lessors.  IAG will also be deferring future deliveries across all its airlines:

IAG investor call

As you can see from the slide above, three fewer long haul aircraft will be delivered this year compared to previous forecasts, as well as eight fewer in 2022.  These deferrals are relatively limited because many future deliveries are already paid, in part or in full.

British Airways is keeping relatively tight-lipped about further reductions to the existing fleet although it says it is assessing the permanent retirement of further 747s.

There are also 96 aircraft across IAG coming off lease in 2021 and 2022 which could be returned without penalty.

This is a sensible strategy. Nobody currently knows how the travel demand will respond once travel restrictions lift.  At this stage, it makes sense to keep the majority of aircraft parked for potential future use.

If demand returns at a faster rate than expected, all British Airways has to do is pull a few more aircraft from being parked (assuming it has retained enough staff to fly them …..). If demand returns at a reduced rate, those aircraft can be permanently retired later.

The most likely scenario is that new fuel-efficient aircraft such as Boeing 787s, Airbus A350s and A320neos will be re-activated first, with older aircraft such as Boeing 747s and 777s activated later or not at all.

British Airways is currently undergoing a large fleet renewal and refurbishment program which gives it additional flexibility.  Whilst BA has historically had very premium-heavy configurations, this could change as it tries to match demand and supply. This could affect future Boing 787, 777, 777X and Airbus A350 and A380 deliveries and refurbishments.

The Letter of Intent signed with Boeing for 200 x 737MAX aircraft is still valid, although a Letter of Intent is not a legally binding order.

In-flight social distancing?

IAG does not anticipate social distancing to be a workable solution at airports or inside aircraft, and does not see itself leaving middle seats empty.

On most aircraft doing so only adds an additional 18″ of space between passengers, far less than the 2 metres recommended for social distancing. It believes that requiring face masks or coverings as well as additional aircraft cleaning procedures are a more effective way of containing the spread of the virus.

Will British Airways offer aggressive pricing to stimulate demand?

Whilst in previous crises airlines have used low prices to encourage passengers to return, Willie Walsh is uncertain that such a stimulus would work.  Demand will depend on passenger confidence that flying is safe, irrespective of cost and does not excessively increase transmission of the virus.

That suggests that British Airways will not use price as a lever, and may prefer to fly emptier planes at higher prices.  This has the added benefit of making the in-flight experience easier to manage.

What about the Air Europa acquisition?

IAG’s acquisition of Spanish airline Air Europa is still ongoing.  Willie Walsh said that the deal “still makes sense” although it has yet to get competition clearance.  With Air Europa giving IAG 73% of the Spanish domestic market, substantial changes will be required.

The original contract has a price adjustment mechanism that may mean IAG can acquire the airline for less than it previously expected, although it is debatable if Air Europa has much value at all as a stand-alone business at the moment.

What is happening with the transatlantic joint venture?

We discussed the current Competition & Markets Authority investigation into the BA / American Airlines transatlantic joint venture a few days ago.  What was meant to be a routine review has now gone on for 18 months which is not a good sign for the airline.

Whilst not published prior to IAG’s Q1 results, the review was finally published yesterday afternoon. You can read our article on what will change for the British Airways transatlantic joint venture here.

The full presentation is available as a PDF here although some of the points above were only covered verbally.


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Comments (57)

This article is closed to new comments. Feel free to ask your question in the HfP forums.

  • Ken says:

    I presume cash positive means covering fuel (at current super low prices – they’ve already took hit on hedges) plus cockpit crew plus airport & handling fees.

    Sounds more like spin for shareholders than anything meaningful.

    • The Savage Squirrel says:

      To be fair that’s not spin; it does mean the airline is in a better financial position than if they hadn’t run the flight (quite apart from +ve effects on reputation and maintaining relationships with regular cargo customers).

    • Daftboy says:

      What else would it mean? Fail to see how “We’re not losing money on the flights we’re operating” is spin.

    • Lady London says:

      It will mean operating costs. Which is about the closest thing to effect on cash. I’m guessing that to be able to say that they took into account only marginal costs of operating the flight. Which revenue they counted could also be interesting to know as their contracts for carrying cargo could be interestingly structured.

  • mradey says:


    I’m not due to fly long haul to Q3 and have tickets with both BA and VS. Watching with interest.

    Happy VE day everyone. Raise a glass at 15:00

    • Chrisasaurus says:

      My LH travel will restart as soon as it can though as with my companies that’s a combination of a availability of flights and loosening of cost control measures in place during the unpleasantness.

      I’ve booked VS flights for the end of the year, as much as a punt on in the applicability of s75 protection as much as anything else, since the conference an I’m heading to and the NYC marathon each feel like long shots from where I’m sitting

    • Lady London says:

      Respect. My uncle died as a soldier in Italy about a week before the war ended. I remembered him today and wondered if he would believe that due to cheap flights I’ve been able to stop by where he’s buried several times without onerous cost which would have unthinkable in his time and it’s only 75 years ago.

  • NigelthePensioner says:

    Sadly, LHR/BNA will not be getting the 781 on 3rd September as our seats have been changed for the flight later that week. LAX has already lost the A380 for later in the year. Couple that with the cancellation of the LGW/KGS at the end of June (already) and its not been an impressive week for BA in my eyes……..
    One World is becoming less of My World unless there is a substantial revaluation and usefulness for Avios in terms of premium seat availability.
    Interestingly, Rob’s previous comments about having to spend more than £10k on the BAPP AmEx to get a 241 due to refunds from previous years cancelled travel spending, does not seem to have been applied to my card…….

    • Rhys says:

      There’s a global pandemic going on, I’m not quite sure what you want them to do?!

      • Mr(s) Entitled says:

        This made me smile.

      • Jonty says:

        Show a little respect for Nigel The Pensioner. He was telling us (again and again) about his Centurion card when you still had milk teeth*
        *This statement will not stand up to fact checking

    • Doug M says:

      If you drop One World what’s your alternate strategy?

    • Blenz101 says:

      Anybody else find it irritating when commenters use obscure airport codes. Fine for LHR/JFK etc. but seriously KGS and BNA? Having looked KSG up so even translate the post why not just say Kos, same number of letters!!

      Would be great is the site was smart enough to just translate these. Unless you are working in the industry there really is no need to speak in code on a website very much focused at the consumer rather than industry.

      And if the software could ever do this it could auto convert Brighton to Amex and Ernies to Premium Bonds. Silly cliques below the line also do nothing for the sites average reader.

      • Rob says:

        We deliberately do not use codes in our articles. Speaking personally, I will often use them in the comments, partly because it is a more aviation-focused readership and partly because it is easier if typing on a phone as is often the case.

        • Blenz101 says:

          Thanks Rob for the reply, I did say for common airport codes this is fine LHR/DXB/JFK/MAN/IAD/YYZ etc. but it does jolt when these codes are used for something obscure and forces you over to Google to translate.

          I just think if you are going to take the time to write your opinion and share it with a wider audience then a bit of consideration before pressing submit would go a long way.

          Appreciate also you never do this in the main articles which are always readable! And in the case of Kos it certainly didn’t take less time to use the airport code than the country!

          • Nick says:

            But who decides which codes are acceptable and which aren’t? Is it based on passenger volume per year? In which case no thanks, I can’t be bothered to look that up any more than you can be bothered to look up the codes. Is it only ones you’ve heard of? Sorry, I’m not inside your head. Like many of us here, I DO know BNA and KGS. Not my fault you don’t. It’s an aviation blog after all.

            Now if you want to rant about users writing the *wrong* codes, now that’s an entirely different matter…

          • ADS says:

            i like an airport code as much as the next Avgeek … but i can never remember the Canadian ones !

            too many damn “YY”s

        • Secret Squirrel says:

          Good idea not to use airport codes in main articles. If a newbie finds this site, they are probably not going to be familiar with codes so a chance of confusion sets in and not good for first time user experience.

  • mr_jetlag says:

    747s retiring sooner but WW staying on till September. Wish it were the other way round…

    What are your thoughts on IAG shareholders surviving this crisis without being wiped out? Very slim I would have thought.

    • Mr(s) Entitled says:

      Why wiped out? UK Govt hasn’t been taking equity elsewhere. BA will survive.

    • Bazza says:

      If things get worse rather than better then yes.

  • Marcw says:

    The way I understand is that, overall, IAG expects 50% capacity reduction 20 vs 19.

    • Rhys says:

      Yes. Q3 operating at 50% and Q4 at 70% capacity.

      • Secret Squirrel says:

        Is it true Qatar have been limiting the use of their refund vouchers so can’t use on cheap / sale fares?

        • Optimus Prime says:

          Yeah I read that elsewhere… yet another reason to tell airlines to shove their vouchers up….

        • Lady London says:

          They do that with lots of their discount codes too.

  • Nick_C says:

    “China’s domestic capacity rebounded to 70% of its previous average by the end of April”

    But of course China successfully dealt with the outbreak. The UK had not.

    Face masks an effective way to control the spread of the virus? With up to 30 people sitting within 2 metres of you? Good luck with that.

    And no food and drink served? No point in the face masks if there is.

    • Chrisasaurus says:

      Masks are useful in stopping carriers from infecting others, even if you take the mask off toy eat for example that’s still 90% of the fleet you’re making a difference on.

      In terms of protecting yourself, you’re absolutely right there’s no point at all and frankly little point anyway since people still have this idea that they can protect themselves with gloves which tells you about how little people understand about infections. People with gloves don’t wash their hands but time and time again you see them touching their faces with their gloves which harbour the virus as well or better than skin and you don’t wash, in contrast to having bare hands and a safe amount of OCD

      • Lady London says:

        It’s 5% or so protection for others from you apparently from a nonprofessional mask and 0% for you.

      • Lady London says:

        That’s “security theatre”.

        I’m unsure whether to call the mask thing “health theatre” or “sanitary theatre” “infection theatre” etc. But theatre it is.

  • Alex M says:

    2 meters isn’t a sharp boundary for a virus spread, is it? Further you are away from someone, less are your chances of catching something. Plus, now it turns out, it’s only 1 meter, that is required, it’s just great British public were told to keep 2 m as it was not trusted to keep 1 m. Go figure…

    • Chrisasaurus says:

      Indoors it’s closer to 6 metres, there is a animated model of droplet transmission resulting from a cough in a supermarket- the virus reaches the next aisle .

      You might be safe 2m away from transmission by regular exhalation but since the people you want to worry about are by definition likely to be coughing I’d think that statement through a bit if I were you

    • BrightonReader says:

      No its not a sharp boundary (just look at the extent of a vape cloud before it dissipate that’s the minimum a virus would spread) but the farther you keep apart the longer you can be that distance from the other person

      At 1m away the time you can be exposed reduces massively from the exposure time at 2m


      • SWWT says:

        And then there’s the issue of wind. Upwind or downwind? A hugely significant factor..

        • davvero says:

          In Italy the distance is 1m and they have it all under control now.

          • Chrisasaurus says:

            This is a hugely unhelpful post. Your statement, intentionally or not draws a correlation between the 1m rule and successful reductions in infections and deaths but ignores the 30k dead people and implies that the most strict lockdown in Europe wasn’t the reason for them getting it under control…

          • Lee says:

            Italy is 2m and during phase 2 you must wear a face mask. Clients living there say must be minimum 2m. WHO says 1 minimum, therefor probably a good idea to double it as the virus spreads too quickly at 1m

        • Secret Squirrel says:

          You been eating fish on the plane?😅

    • Lee says:

      Who has 1m? It’s either 1.5m or 2 dependent on which country your in. 1m is too close.

      • davvero says:

        Italy, as I mentioned before.Signs generally say a minimum of 1 metre of separation

        • Alex Sm says:

          They can’t survive 2m – too far away from each other, can provoke agoraphobia… but on a more serious note, the international standard is at least 1m

      • Dubious says:

        Singapore is also 1m.

  • Alex Sm says:

    Is BA using this pause at all to refit its aircraft with new Club seats/suites? Previously it would require elaborate plans with withdrawal of aircraft from service while now they are all available

    • Rhys says:

      No, because the bottleneck was always the production of the seats, and I doubt that has improved!

      • Fred says:

        The manufacturer has continued to work at normal capacity.

        • Rhys says:

          …in which case they are still the bottle neck and there is no opportunity to speed up the refits.

          • Mr(s) Entitled says:

            Not necessarily. Other orders might have been cancelled or delayed. It is possible that they can both work at normal capacity and increase deliverables.

          • Rhys says:

            Fair point, but I wouldn’t be optimistic about it given supply chain disruption etc etc

          • Spaghetti Town says:

            I believe the 777’s are getting it first as they’ll be the first to leave the fleet, so to get the maximum return out of the refit, they’re being done first.

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