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IAG, parent company of British Airways, reduces its summer ramp-up to avoid disruptions

IAG, the parent company of British Airways, has scaled back plans to increase short-haul flights to prevent Heathrow airport disruptions this summer, sending its stock down 8% on Friday after admitting it lacks the necessary manpower.


Crew absenteeism due by the Omicron-variant of COVID-19 and a ground personnel shortage have plagued the firm, which also owns Iberia, Vueling, and Aer Lingus. Compounded by IT problems, flights had to be cancelled throughout the first quarter.


Chief Executive Luis Gallego said the flaws resulted in a first-quarter operating loss of 754 million euros ($798 million), underperforming average analyst projections of a 510 million euro loss by a wide margin.


In morning trade, the company’s shares were down 7% at 133 pence, the poorest performing FTSE 100 stock and on track for their worst day since November.


IAG stated that it expects to report operating profits in the second quarter and for the entire year.


The issues it was encountering, according to Gallego, were felt across the sector.


To prevent upsetting consumer demand for travel, the International Air Transport Association (IATA) stated on Wednesday that insufficient resources at airports to manage expanding numbers of passengers needed to be addressed.


IAG cut its full-year group capacity target to about 80 percent of 2019 levels, down from 85 percent in February, ‘to provide additional stability for the summer,’ according to Gallego.


BA is IAG’s largest revenue generator, according to Morning Star analysts, and its issues have slowed its comeback.


‘Issues are being addressed urgently, but resolution could take a few months,’ they stated.


Gallego said IAG was having trouble recruiting workers for ‘below the wing’ positions like ground handling, and that getting security clearance took around 20% longer.


The majority of BA’s schedule adjustments would be short-haul to protect the airline’s long-haul network, he added, adding that the group’s other airlines are not experiencing the same issues.


According to him, the lifting of government-imposed travel restrictions, particularly in the United Kingdom, resulted in increased travel demand, with no discernible impact from the Ukraine conflict.


‘Demand is returning strongly, in accordance with our previous predictions,’ he added, adding that business travel, driven by the United Kingdom and the United States, was on the rise.


Small and medium-sized businesses, he added, were leading the rebound ahead of huge corporations, which, in some cases, had new sustainability regulations that were affecting flying.


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