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(Alliance News) - International Consolidated Airlines Group SA on Tuesday reported a double-digit revenue fall in its first quarter, said it took a EUR1.3 billion profit hit due to fuel and foreign currency hedges and added there could be 12,000 redundancies at British Airways.
The travel sector has been battered by lockdowns being implemented globally as governments grapple to halt the spread of Covid-19.
IAG, which owns BA, warned it will take several years for passenger demand to return to pre-virus crisis levels, and in turn, the UK flag carrier is "formally notifying its trade unions about a proposed restructuring and redundancy programme".
"The proposals remain subject to consultation but it is likely that they will affect most of British Airways' employees and may result in the redundancy of up to 12,000 of them. As previously announced, British Airways has availed itself of the UK's Covid-19 job retention scheme and furloughed 22,626 employees in April."
In a brief update ahead of a larger first quarter statement in May, the British Airways owner said revenue in the period to March 31 fell 13% to EUR4.6 billion from EUR5.3 billion a year ago.
IAG said it swung to a loss. Its operating result before exceptional items was a EUR535 million loss from a profit of EUR135 million.
"IAG's pretax profit was impacted by an exceptional charge of EUR1.3 billion resulting from the ineffectiveness of its fuel and foreign currency hedges for the rest of 2020 due to over-hedging," the FTSE 100 firm said.
"The operating result in the first two months of 2020 was similar to that of last year, despite the suspension of flights to China due to Covid-19 from the end of January. All of the reduction in the operating result in the quarter compared to last year came in March. The majority of the reduction in IAG's operating result was incurred by British Airways, followed by Iberia and Aer Lingus, while Vueling experienced a modest increase in operating loss."
Passenger capacity, measures in available seat kilometres, slipped by 11% in the quarter, while traffic, in terms of revenue passenger kilometres, fell by 15%.
The company added: "IAG has reduced passenger capacity in April and May by 94% compared to last year, only operating flights for essential travel and repatriation.
"Passenger capacity from June will depend on the timing of the easing of lockdowns and travel restrictions by governments around the world."
IAG will release a more detailed first quarter update on May 7.
Shares in IAG closed 1.0% lower at 217.90 pence each in London on Tuesday.
By Eric Cunha; ericcunha@alliancenews.com
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