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British Airways owner IAG lags UK competitors due to reliance on long-haul flights

Europe-focused airlines such as Ryanair, easyJet and Wizz Air are experiencing higher demand

easyJet plc - British Airways owner IAG lags UK competitors due to reliance on long-haul flights

British Airways owner International Consolidated Airlines Group (LSE:IAG) is behind its competitors in terms of capacity for the summer as a big chunk of its operations has traditionally been long-haul flights.

The FTSE 100 group said it will fly at 45% of 2019 capacity in the summer months, while Wizz Air Holdings (AIM:WIZZ) Plc and easyJet PLC forecast to reach 90-100% and 60% respectively.

READ: British Airways owner IAG to fly at 45% of 2019 capacity in summer months

Ryanair Holdings PLC (LSE:RYA), instead, didn’t give a specific figure but said it will pick up from the collapse of some of its European competitors, such as Flybe and Germanwings, as it eyes a strong rebound in travel as most people get vaccinated against COVID-19.

“IAG’s in the business of flying people around the world, a tricky place to be in a global pandemic,” said Laura Hoy, analyst at Hargreaves Lansdown.

“Long-haul traffic will be last to recover, and IAG’s position within Europe means it’s at the mercy of many of different government restrictions. The group doesn’t expect passenger demand to return to pre-pandemic levels until 2023 at the earliest, leaving no choice but to continue paring down operations. This will undoubtedly leave scars that will follow the group well into the future.”

IAG had €10.2bn of liquidity at the end of June after completing a series of financing deals and bond issues, while it continues to focus on cost savings to adjust to lower demand. British Airways even agreed to defer monthly pension deficit contributions for £450mln.

“Prospects for business travel, a key arena for British Airways, also remains clouded, with virtual meetings during the pandemic potentially making the costs and time of physical travel harder to justify in the future,” said Keith Bowman, analyst at interactive investor.

“More favourably, IAG has taken considerable action since the start of the pandemic to conserve cash, bolster its finances and wait out the worst crisis in the industry’s history. Vaccination rates across much of the world continue to rise and governments such as those in the UK and US remain eager to ease restrictions.”

Shares tumbled 7% to 169.02p on Friday morning.

Quick facts: International Consolidated Airlines Group

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Price: 147.26 GBX

Market Cap: £7.31 billion

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