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IAG financial results: €10.8bn of liquidity, 340 BA flights per day in August, BP joins Avios

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IAG, the Spanish parent company of Iberia, Aer Lingus, Vueling and British Airways, published its half year financial results this morning.

There are some interesting bits and pieces, including hints of future Avios tie-ups.

IAG half year results

BPme Rewards will partner with Avios

The biggest news from a loyalty perspective is the announcement of further Avios collection partnerships in the UK and Spain.

IAG has announced that Avios will be partnering with BPme Rewards in the UK, which means you will once again be able to earn Avios from petrol purchases.

Avios earning opportunities from petrol have changed a lot in the past five years. Up to a few years ago you could earn Avios at Shell, Esso and Tesco-branded filling stations. Of these three, only Esso is left via its low earning rate for Nectar points, transferable to Avios as of February this year. You also have the small network of Sainsbury’s petrol stations of course.

BP left Nectar in 2019 to start its own loyalty program. At the time, it suggested that it would not pursue partnerships for transferable points.

It now seems like BP has changed its mind. An announcement must be imminent, given IAG’s decision to mention it in its results.

We will take a closer look at BPme Rewards, BP’s loyalty scheme, on Monday.

BPMe Rewards joins Avios

Turning to the real business of flying ….

British Airways flew just 14.1% of capacity in Q2

Despite optimism about travel restrictions easing early on in the quarter, the combined IAG airlines operated just 21.9% of 2019 capacity.

At British Airways this was even lower, with just 14.1% of 2019 capacity flown – just 0.7% higher than in the first quarter this year.

This was, clearly, not the spring that British Airways or IAG were hoping for. The announcement of the traffic light system sparked hopes of an accelerated recovery, with IAG expecting capacity to increase to 25% across all airlines.

Government ministers had different plans, however. Despite introducing the traffic light system in early May, a number of last-minute changes meant led to a roller-coaster of travel restrictions including for popular destinations such as Portugal, which came off the Green list just three weeks after it was put on.

The good news is that restrictions have now settled into a slightly more predictable pattern. More countries continue to become accessible every three weeks, particularly now that Amber list countries have effectively gone Green for those who are double vaccinated.

Overall, IAG expects to more than double its group-wide capacity in the third quarter to approximately 45% this Summer.

In many cases, British Airways will offer as much as 40% more capacity on shorthaul Summer holiday routes than in 2019, with up to 340 daily flights in late August (versus 150 in early June).

This should help to make up for the slower recovery of long-haul travel.

Maximum capacity this year is 75%

Even with a strong summer and late summer season, IAG will still only be able to fly a maximum 75% of 2019 capacity in the fourth quarter this year.

This is largely due to the retirement of aircraft last year as well as staff restructuring, which means that all IAG airlines are significantly smaller than they were in 2019. For British Airways, this means that there are:

  • 18% fewer aircraft than in 2019, with the remaining long haul aircraft significantly smaller in terms of seats
  • 15% fewer pilots than in 2019
  • 30% fewer cabin crew than in 2019

British Airways will not be able to return to 2019 capacity for some time yet and will need to drive recruitment across all roles. Even with the most optimistic travel rebound forecasts British Airways is likely to operate at reduced capacity well into 2022 and 2023.

Aircraft capacity will continue to be a significant bottleneck with IAG expecting just 10 more aircraft deliveries this year across all its airlines. This is – clearly – not enough to replace even the 31 747s retired by British Airways last year.

Cash is not a problem

The good news is that IAG is, financially, in a strong position. Perhaps more accurately, it is not about to run out of money.

Liquidity at 30th June was €10.8 billion across the group. ‘Liquidity’ means cash in the bank plus bank loans and other financing facilities which have been agreed but not drawn yet. This is up from €8.1 billion at the end of 2020.

The cash loss from operations was €1.3 billion for the last six months. Whilst IAG retains substantial amounts of debt – an astounding €20 billion – no major facilities are due for repayment until November 2022. There is no real ‘crunch’ until 2026 when almost €3 billion becomes due.

That said, there is no guarantee that the cash burn will now reduce. On current capacity plans, IAG’s operating costs will jump from €190 million per week to €270 million per week in Quarter 3 as it brings back aircraft and staff. If ticket sales do not rise in parallel, losses will obviously increase.

Other bits and pieces

  • The Aer Lingus launch of US flights from Manchester is still scheduled for September, with on-going plans to join the transatlantic joint venture with AA, Finnair, BA and Iberia
  • British Airways expects to return to Heathrow Terminal 3 at the end of Q3 (ie September)
  • Vueling is flying more Spanish domestic routes than it did in 2019
How to earn Avios from UK credit cards

How to earn Avios from UK credit cards (April 2024)

As a reminder, there are various ways of earning Avios points from UK credit cards.  Many cards also have generous sign-up bonuses!

In February 2022, Barclaycard launched two exciting new Barclaycard Avios Mastercard cards with a bonus of up to 25,000 Avios. You can apply here.

You qualify for the bonus on these cards even if you have a British Airways American Express card:

Barclaycard Avios Plus card

Barclaycard Avios Plus Mastercard

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Barclaycard Avios card

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There are two official British Airways American Express cards with attractive sign-up bonuses:

British Airways American Express Premium Plus

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British Airways American Express

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You can also get generous sign-up bonuses by applying for American Express cards which earn Membership Rewards points. These points convert at 1:1 into Avios.

American Express Preferred Rewards Gold

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The Platinum Card from American Express

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You should also consider the British Airways Accelerating Business credit card. This is open to sole traders as well as limited companies and has a 30,000 Avios sign-up bonus.

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There are also generous bonuses on the two American Express Business cards, with the points converting at 1:1 into Avios. These cards are open to sole traders as well as limited companies.

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Click here to read our detailed summary of all UK credit cards which earn Avios. This includes both personal and small business cards.

Category

Aer Lingus and AerClub, British Airways and Avios, Iberia and Iberia Plus, Vueling and Vueling Club

Comments (76)

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

  • Nick says:
    30 Jul30 July 11:15

    “program” … tut tut, Rhys, you’re not in the US now!

    • Rhys says:
      30 Jul30 July 11:18

      Gets a bit repetitive if I keep saying scheme!

    • TimM says:
      30 Jul30 July 14:50

      I have mentioned the use of American English by Rhys and Rob in the past. I regard them both as ‘mid-Atlantic’.

      It is not just that I am a pedant but rather than alien spelling is distracting from the meaning of the words. I have to read the whole paragraph again and imagine the intention.

      • Lord Doncaster says:
        30 Jul30 July 16:38

        I often do PR for a well known card provider looking to expand in Asia. They stipulate that all spelling on their releases etc should be in British English, except for ‘programme’, which must be spelt as ‘program’ in all instances 😂

        • Alex Sm says:
          30 Jul30 July 18:22

          -me is simply redundant in this case: it is not pronounced and takes 2 extra characters for nothing

      • Doug M says:
        30 Jul30 July 19:23

        I think the problem is with you rather than Rhys.

        • Anti Grammar nazi says:
          31 Jul31 July 09:25

          Couldn’t agree more. The article can be read and makes sense. People who point out differences in spelling always tend to have a deeper underlying in-Secuirty about their own intelligence. So use this spelling/grammar correction as a ego boost for themselves. Just my opinion but from my time in offices across the world no one tends to like these people in the office.

      • Magneto says:
        31 Jul31 July 12:10

        You need to read a whole paragraph again because someone has dropped a u from a word, or replaced an s with a z? Come on now.

        • C says:
          31 Jul31 July 23:37

          I work in a field where it has been known to organize multi-party conference calls on which spelling and punctuation convention should appear in a document. Fortunately those occurrences are less and less frequent, and most now just settle for logical consistency.

          • Alex Sm says:
            8 Aug8 August 06:32

            What did the party manifestos say on this? Tories favoured “gaol” and Labour advocated for “jail”?

    • Fenny says:
      31 Jul31 July 15:47

      Programme = something you watch on the telly or a bit of paper you get at the theatre.
      Program = what computers follow.

      Re “scheme”, pretty sure nobody cares any more.

      But if we’re doing pet peeves, I’ll nominate “invite” as a noun rather than a verb. It’s not incorrect per se, but it makes my teeth grate, like the modern prevelence of “uni”. As my mum says, when she was a student, at least they could spell university!

  • David D says:
    30 Jul30 July 11:19

    This explains the 6% drop in the IAG share price this morning :-O Looking forward to the BP and Avios partnership.

    • Jon says:
      30 Jul30 July 12:59

      I still see IAG as a long term growth opportunity. Give it 5 years and I would expect they’ll be back to normal. Loads of cash and a decent likelihood of government loans if things get even worse as I don’t think even Boris would want to see BA fail

      • Ken says:
        30 Jul30 July 13:37

        “Loads of cash”

        But even more debt. Where’s the growth going to come from ?
        Almost all pre pandemic competition are still in the game. Even Virgin
        US airlines will always be propped up, as will European ones, and the Middle East ones will continue to offer far better service.

      • Rob says:
        30 Jul30 July 13:52

        Your two points have zero to do with each other.

        If IAG gets into serious trouble, there are two options:
        1 – the Government throws a huge amount of money at a Spanish company in order to save it, the equivalent (as the press will point out) of building about 5 brand new hospitals, or
        2 – the Government lets IAG go bust and then nationalises BA for nothing to protect its assets, staff and slots

        Take a wild guess as to which is most likely.

        • Andrew says:
          30 Jul30 July 14:39

          Doubt you’d see number 2 happening. More likely would be similar to what happened to Lloyds and RBS during the financial crisis. IAG would be forced to spin off BA whilst maintaining a minority shareholding with the government owning the rest. Over time the government gradually sell off their holding hopefully leading to a profit to the exchequer.

          • Rob says:
            30 Jul30 July 15:15

            You can’t spin off a bankrupt business.

            You do know that the Government nationalised Sheffield Forgemasters last week for the same reasons?

          • ChrisC says:
            30 Jul30 July 16:24

            Big difference between what they did for the banks and why they did and the effects of them crashing would have had an immediate effect on a huge number of people and businesses not being able to access their cash and pay their bills and a company that is essentially based on discretionary spending.

          • Paul Pogba says:
            30 Jul30 July 21:19

            If I was bullish on aviation I’d be buying a national champion/flag carrier without the complications of BA/Iberia. Qantas or Air Canada are both in countries where the domestic market might limit the need for government intervention and should it come to it they have a similar strategic importance and the government balance sheet is strong enough to intervene. Just at face value I can’t see whats unique about IAG as a long term buy.

          • Bagoly says:
            31 Jul31 July 15:13

            “You can’t spin off a bankrupt business”.
            Well, not on a stock market, but one could to a friendly government.
            Administrators do it all the time – not just profitable subsidiaries, but also loss-making ones which are worth more than the sum of the parts to a particular buyer.

        • Jon says:
          30 Jul30 July 19:19

          Neither the Spanish nor the UK government is going to let IAG fold. Virgin for sure, but not IAG. As for the question about growth, the airlines do not need to grow market share; they just need to recover to the same level of profitability for growth in the share price. I still think the market rout on IAG is overplayed

      • David D says:
        30 Jul30 July 15:46

        Agreed – I’m HODL

  • Will says:
    30 Jul30 July 11:26

    EUR20bn debt and rising is certainly a large number, presumably that’s net debt?

    Even in the good times that’s 10 years of profit.

    Should interest rates on that debt rise it represents a very significant problem to the long term survival of IAG, let’s face it that number could easily be EUR25-30bn before things have returned to some sort of normality.

    • Will says:
      30 Jul30 July 11:29

      Net debt actually 12bn, not as bad as first glance but still huge numbers.

      • TGLoyalty says:
        30 Jul30 July 16:43

        I haven’t seen the accounts but won’t a proportion be for leased assets (which are all on balance sheet these days)

    • Lady London says:
      31 Jul31 July 12:58

      Debt can be good though.

  • CarpalTravel says:
    30 Jul30 July 11:28

    After the recent Amex offer I ventured to my local BP garage for the first time in years – 9p a litre more expensive than the Shell garage that is 1mile in the other direction. Shell regularly give me ££ discounts via their app too. I cannot imagine their scheme will ever offset their exorbitant prices.

    • Sam says:
      30 Jul30 July 11:41

      BPme is a cash-rebate based programme itself as well. Instead of Esso/Shell’s per litre discount I actually think BP’s off the bill discount is much more measurable and attractive.

    • Andrew says:
      30 Jul30 July 11:49

      When it comes to fuel prices, it’s location, location, location.

      Whenever I visited a mate in Bootle, I always filled right to the top as it was significantly cheaper than anywhere else. Likewise I’m in Reading at least once a month, so always get a full tank there. In Scotland, It’s a tankful at Grangemouth or The Gyle.

      • Red Flyer says:
        30 Jul30 July 14:12

        Might be cheaper in Bootle but are you sure it is petrol?! 😜

    • Paul Pogba says:
      30 Jul30 July 11:54

      PetrolPrices.com is great for checking prices at nearby garages without driving around (not even I can be bothered with that). Its fuel card data + crowd sourced additions.

      • Fenny says:
        31 Jul31 July 15:51

        It was useful to me when I drove between Rugby and Leamington for work. These days, I walk to work and tend to bank on Asda in Rugby being the cheapest in a 15 mile radius and the Sainsburys next to Pa’s flat in Sheffield when I’m back home.

  • Paul Pogba says:
    30 Jul30 July 11:57

    BPme in Australia has been offering some interesting Qantas FF promotions, (5 fill ups for 50 status credits) so it would be interesting if they offer something similar for BAEC.

    • Paul Pogba says:
      30 Jul30 July 12:00

      I hope if we ever get a forum it has a 5 min edit button.

    • Tariq says:
      30 Jul30 July 12:33

      Doubt there will be anything as exciting as that in the UK but we can always hope! Good news in general though, I have over £10 of BPme points that I have no idea what to do with.

      • TGLoyalty says:
        30 Jul30 July 12:36

        Same here.

        • TGLoyalty says:
          30 Jul30 July 12:37

          Before anyone says spend it on fuel I now drive an EV.

          • Memesweeper says:
            30 Jul30 July 14:38

            One day BPme will be integrated with EV charging… but don’t hold your breath

          • Alan says:
            30 Jul30 July 20:54

            Same here for 2 years – all this chat about dinojuice is passing me by 😂😆

          • Alan says:
            31 Jul31 July 12:31

            Over 5yrs of Tesla EV driving 15,000m pa now. I cannot imagine going back to the faff and expense of petrol stations. Previous car was a 12mpg BMW M5 so I was doing a lot of that.

            My wife bought a VW ID3 last year great around town and for return journeys up to about 200m but after that charging becomes a problem, slow chargers, broken chargers, queues, rip off prices. We are still years away from having a proper charging network for non Tesla drivers.

      • Lister says:
        30 Jul30 July 12:49

        Covert to M&S or Amazon e-Gift cards via the BP app. 1000 points for £5.

        • TGLoyalty says:
          30 Jul30 July 16:44

          Spends what the rate is but £5 off isn’t as enticing as 600 Avios closer to an F flight.

      • BertPO says:
        31 Jul31 July 13:21

        I redeemed mine for an Amazon gift card. There are other partner rewards as well.

    • Max says:
      30 Jul30 July 17:00

      UK should copy Germany. Gas stations there are required by the market authority to provide fuel prices in real time.

  • marcw says:
    30 Jul30 July 13:26

    LEVEL, despite flying some sporadic Buenos Aires flights, it´s flying regularly BCN to JFK (3x weekly), SFO (2x weekly, and CUN (1x weekly).

  • PJJ says:
    30 Jul30 July 14:54

    Question for those UP NORTH
    The 2 brothers that own petrol stations and have just bought Asda
    Do they have any incentive scheme that might perhaps be extended to Asda ?
    T.I.A.

    • Ian_H says:
      30 Jul30 July 15:49

      Most of their sites are Esso from experience but they dont have a “EuroGarages” loyalty scheme as all the sites are branded – You might see a loyalty scheme at Asda but they have resisted so far ….

    • Lord Doncaster says:
      30 Jul30 July 16:41

      Asda has always tried to shy away from loyalty cards except for the fuel scheme they ran decades ago

      • Nick says:
        30 Jul30 July 16:55

        They also did a trial of a ‘proper’ supermarket loyalty scheme. Must have been about 20 years ago now. Was only in a small number of stores, and didn’t last long.

      • Paul Pogba says:
        30 Jul30 July 17:47

        You mean Fill n Save is no longer running? I’ll have to bin my card.

    • Fenny says:
      31 Jul31 July 15:57

      Asda petrol is usually cheaper than anywhere else, even if it’s only 0.2p/l. If I don’t have a double points voucher for Sains, it’s not worth the detour on the way back from the cinema.

  • LEWIS says:
    30 Jul30 July 17:20

    Is there somewhere BA announces when routes are relaunched? Probably going to be our best chance to get redemption flights

    • Rob says:
      30 Jul30 July 17:31

      Sometimes yes, sometimes no. An announcement came out today about increased US and European flights but it had little detail and the routes may not necessarily be on sale.

      There is a Twitter feed called theaeronetwork which covers a lot of new routes, spotted when they are added to the booking systems.

      You can also sign up for BA press releases as major announcements get their own release.

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