Quiver Quantitative - British Airways foresees a prolonged recovery period for its long-haul and business-class sectors, predicting a return to pre-Covid capacities by 2025 and 2026 respectively. The flagship UK carrier's recovery has been hampered by the retirement of major jetliners, including its entire fleet of 31 Boeing (NYSE:BA) 747s, during the pandemic. This decision, coupled with delays in receiving the 777X replacement aircraft from Boeing (BA), has left the airline grappling with a mismatch between rising travel demand and the number of available planes. Additionally, Chief Executive Officer Sean Doyle pointed out on Friday that corporate travel, upon which British Airways heavily relies, especially for its lucrative transatlantic routes, is lagging in its resurgence compared to other travel segments.
Historically, the North Atlantic routes have seen a higher proportion of business travelers than routes to South Atlantic or Asia Pacific regions. With British Airways having a significant market share in this segment, its recovery has understandably been more protracted. This trend is exacerbated by the airline's reduced business class capacity by around 11% this year. Doyle mentioned that British Airways has reduced its flights to Asia, resulting in shorter journey durations as the airline redirects its focus towards the Middle East and the North Atlantic. Currently, direct flights to Asian cities such as Bangkok and Osaka remain suspended.
Meanwhile, IAG (LON:ICAG) SA, the parent company of British Airways, reported its third-quarter results, revealing that BA operated at 89.6% of its 2019 capacity during the first nine months of the current year. This contrasts with other airlines under the IAG umbrella: Iberia operated at 100.9% capacity, Vueling at 106.2%, and Aer Lingus at 103.4%. The report also flagged a decline in the number of day trips originating from London, a sector that Doyle identified as experiencing slower recovery.
In light of these developments, shares of IAG witnessed a 0.6% dip as of 4:01 p.m. in London. Notably, Bloomberg has recently reported that IAG is engaged in talks with aviation giants Boeing and Airbus SE for potential widebody aircraft orders. Some of these aircraft are anticipated to replace the older 777s in BA's fleet.
This article was originally published on Quiver Quantitative