IAG 2020 results show strong cash position and reduced cash burn
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IAG, the Spanish parent company of Iberia, Aer Lingus and British Airways, published its 2020 financial results this morning.
The key takeaway is that the group is not short of cash and, with aggressive cost cutting, has reduced its cash burn sharply.
It is also not short of debt, of course, but much of that debt is not due for repayment for some years.

There seems to be little danger to its survival in the next 12-18 months. A slow return to long term profitability would lead it unable to repay its debts in the medium term, however, as loans come up for repayment.
There is no point looking at the stated profit and loss numbers because they are distorted by intangible write-offs and one-off charges. Here are some headline figures:
- passenger km flown were down 87% in the March-December period vs 2019
- Aer Lingus was the worst performer in terms of passenger revenue, down 81% – BA was 3rd best out of the four core brands with ‘only’ a 75% reduction
- IAG operated over 4,000 ‘cargo only’ flights between March and December
- €10.3 billion is currently available, either as cash in the bank or as bank loans which have been agreed but not yet drawn
- the €10.3 billion includes €3.6 billion of Government grants and loan guarantees (as HfP predicted, the latest €2 billion UK facility is 80% guaranteed by the Government)
- net debt (debt minus cash) was €9.8 billion at the year-end, with total debt of €15.7 billion
- net debt ‘only’ rose by €2.2 billion during 2020 which, at just €40 million per week, appears to be a strong achievement
- cash burn across IAG is estimated to be €185 million per week in Q1 2021
- all contracted aircraft deliveries are fully funded – 15 planes will be delivered across IAG in 2021 including 10 long-haul aircraft
- 68 aircraft deliveries have been deferred
- Club Suite installed on 28 British Airways aircraft as of today
- 2023 is seen as the earliest date by which IAG will return to the level of demand seen in 2019
- the amount of Avios revenue expected to be used to fund future redemptions dropped from €844m to €361m, reflecting lower Avios issuance. This is NOT the same as the amount that IAG Loyalty receives for selling Avios as that sum includes a profit margin and ‘breakage’ costs.
- the documents stress – twice – that ‘cyber’ spending has not been cut. Investors are clearly nervous of another ICO fine ….

Most of the other news has already been covered on HfP:
- Aer Lingus approved to join the transatlantic joint venture, which will see Aer Lingus offering full Avios and Executive Club tier points
- the acquisition of Air Europa in Spain will proceed but payment will not be made until 2026 (!)
- 32 BA 747-400 and 15 Iberia A340-600 aircraft fully retired with a further 37 aircraft returned to lessors
- IAG lost €1.7 billion due to its fuel hedging strategy – this is a screw-up of astonishing proportions which could have been the difference between life and death for the group, but which has been swept under the carpet amongst the other numbers
You can read the slide presentation here and – strictly for finance professionals only – the 91-page small-print formal accounts are here.
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