International Consolidated Airlines Group (LSE:IAG) (IAG) predicted a return to profit this year as it reported narrowing losses for 2021 with travel demand improving following the lifting of pandemic-related restrictions.
The British Airways owner posted operating losses before exceptional items for the year to 31 December 2021 of €2.97bn compared with losses of €4.39bn in the previous year. Fourth-quarter losses before exceptionals shrank to €305mln from €1.17bn in the same period the year before.
It predicted a significant quarterly operating loss for the first quarter of 2022, when bookings were impacted by the omicron variant of coronavirus, but expects to be profitable at the operating level from the second quarter and in the year as a whole, assuming no further pandemic-related setbacks or material impact from recent geopolitical developments.
The closure of airspace in Ukraine, Moldova, Belarus and in southern Russia following Russia’s invasion of Ukraine could impact airlines’ flight routes.
The easing of travel restrictions, particularly the reopening of transatlantic routes to the US in early November, boosted travel demand, although the emergence of the omicron variant of coronavirus had a short-term negative impact on bookings and cancellations.
Passenger capacity in the fourth quarter of 2021 was 58% of pre-pandemic 2019 capacity, up from 43% in the third quarter, while for the full year capacity was 36% of 2019 levels.
The group expects passenger capacity in 2022 of around 65% of 2019 levels in the first quarter and 85% of 2019 capacity for the full year.
It noted that although omicron affected bookings in January and February 2022, it has had a minimal impact on bookings for Easter and summer this year.
"We are confident that a strong recovery is underway,” said Luis Gallego, IAG's chief executive officer.
"All our airlines continued to show improvements in the fourth quarter, optimising their performance and further improving their operating results. Our diversified business model enabled us to make the most of the recovery as individual markets were affected at different times and in different ways.”
IAG shares climbed 1.63% to 149.80p in early trade.