Renta 4 | This year we will see a deterioration in the airline business never before seen in the sector. We expect IAG to cut air traffic capacity by 48% compared to 2019, and by quarters (-10.5% annually already confirmed in Q1/-90% estimated in Q2/ and between -55%/-30% estimated in Q3).
We are discounting EBIT losses of almost 2.1 billion euros and cash consumption of almost 1.5 billion. The main factor in assessing the evolution of the sector is the capacity to fly, which is determined, in turn, by the evolution of the health crisis. In 2021 we expect a strong increase in traffic of up to 42%, along with a recovery in results. However, we do not expect traffic to recover to 2019 levels until 2024.
Dramatic changes in the sector and major divergences
The current serious situation will lead to a general deterioration which some airlines will not be able to overcome. Others will have to resort to highly dilutive capital hikes and operational restrictions in order to recover. Air traffic developments will be key in determining the capital requirements of individual carriers. So we do not rule out the need for the whole industry to have recourse to new funding should the situation become more difficult. We expect a reduction in capacity in the coming years, with fewer companies and further rationalisation within the sector.
IAG, one of the big winners after the crisis
IAG is one of the companies with the highest liquidity (10 billion euros), the best operating margins and the lowest debt. In our opinion, it will be one of the big winners in the sector after the crisis thanks to its financial strength, strategy and management capacity. The acquisition of Air Europa, with a possible improvement of the conditions, is an additional advantage.