Is British Airways Boom on the Way?

IAG Group is the holding company for British Airways and Aer Lingus, who by all accounts had a tumultuous 2020. That’s hardly surprising given a global pandemic and lockdown infiltrating lives across the globe. But now there is a little glimmer of hope on the horizon, in the form of the UK Government, who have announced their latest roadmap out of lockdown, and what it may mean for overseas travel.

The UK Effect

The UK is still in the midst of lockdown, with some easing beginning from the 8th March with the return to school for the millions of children in the country. Travel within the UK and overseas is still limited, with only exceptional reasons permitted such as to get to work and to provide caring duties for a vulnerable person. This has left all of the non-essential services, such as hospitality and hotels and holiday lets with their doors firmly closed. For airlines such as British Airways, this has translated into substantial losses. Passenger revenue, for example, was down over 75% in 2020 based on 2019 results. Overall, IAG group experienced an operating loss of €7,426m ($8.859m) in 2020, compared to a profit of €2,613m ($3,118m) the previous year. The above makes for bleak reading. But let’s consider the factors that may affect their price going forward.

Should We Be Bullish?

In late 2020 vaccination rollouts began in the UK, starting with the most vulnerable in society and those aged over 75. While many may criticise the government for their handling of the pandemic, their grasp on vaccination policy seems to be going well. As of 05th March 2021, 21.9m doses of the COVID-19 vaccine have been given. This equates to around 31% of the UK population having one dose or more of the vaccination. We know that two are required for optimum immunity. With the target for vaccinations being met, the government has seen a decline in new cases of COVID-19 and have said that they expect the lockdown to be fully eased by July 2021, just in time for the children’s school holidays. As a result of their announcement, holiday bookings increased dramatically, with TUI Group reporting a 500% rise in overseas bookings. The signs look good.

This is without considering the human factor. Forbes compared the satisfaction level of those who commute or travel for leisure compared with those who spend prolonged periods of time in one location. The results were clear, those who travelled more had a better sense of wellbeing and better reactions to cortisol, the stress hormone in your body. After a stressful world event such as a global pandemic, with its long-lasting effects on the physical and mental wellbeing and restrictions of freedom, it is natural to want to travel and explore the world anew. Add in business travel, which has also been restricted over the past year and this could breathe life into the company.

The Financial Picture

After a terrible year, let’s look at IAG’s current picture. Here are the facts we know about IAG.

  • They have reported losses in 2020.
  • Avios Loyalty Points sold to American Express for £750m.
  • They got rid of 10,000 jobs to save 42% on their wage bill.
  • Investors have noticed a price rise (156p in January vs 212p in March).
  • BA has received a government-backed loan of £2bn to increase liquidity.
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