International Airlines Group has reported a second quarter loss of €2.2 billion, as Covid-19 continues to weigh heavy on the group’s finances.

The figure includes exceptional items relating to the early retirement of British Airways’ Boeing 747s and Iberia’s Airbus A340s.

BA’s parent company has confirmed plans to press ahead with a proposed capital increase of up to €2.75 billion, with its largest shareholder Qatar Airways supporting the move and set to take up its pro rata entitlement. The Gulf carrier currently owns just over 25 per cent of IAG.

Announcing the results, the group’s outgoing CEO Willie Walsh said:

“All IAG airlines made substantial losses. As a result of government travel restrictions, quarter 2 passenger traffic fell by 98.4 per cent on a capacity reduction in the quarter of 95.3 per cent.

“We have seen evidence that demand recovers when government restrictions are lifted. Our airlines have put in place measures to provide additional reassurance to their customers and employees on board and at the airport.

“We continue to expect that it will take until at least 2023 for passenger demand to recover to 2019 levels. Each airline has taken actions to adjust their business and reduce their cost base to reflect forecast demand in their markets not just to get through this crisis but to ensure they remain competitive in a structurally changed industry.

“IAG continues to take action to strengthen its balance sheet and liquidity position including more than halving its operating cash costs and significantly reducing its capital spending. At the end of June liquidity stood at €8.1 billion. Based on our current capacity planning scenario, we would reach breakeven in terms of Net cash flows from operating activities during quarter 4 2020.

“Subject to shareholder approval at our AGM on September 8, IAG will undertake a capital increase of up to €2.75 billion which will enhance the Group’s resilience, balance sheet and liquidity position. We’re delighted that our largest shareholder, Qatar Airways, has already committed to support the proposed capital raising.

“This will best position IAG to continue executing its strategic objectives and capitalise on its existing market leading position and future growth and consolidation opportunities.”

The group said that its current capacity planning scenario sees an increase through the remainder of 2020, albeit still down 74 per cent in the third quarter and 46 per cent in the fourth quarter, compared to 2019.

IAG also confirmed that active discussion are ongoing with Globalia “regarding a potential restructuring of the Air Europa acquisition, taking into account the impact of the COVID-19 pandemic”.

Prior to Covid-19 the group had announced plans to acquire Spain’s second largest carrier for €1 billion.

IAG to buy Air Europa