The owner of British Airways has placed its hopes for a return to profitability on strong demand for transatlantic travel after posting a loss for its key summer season.
International Airlines Group (IAG) said the gradual lifting of COVID-19 travel restrictions in key markets – culminating in the full reopening of the US travel corridor due on Monday – should enable a return to the black in 2022 after the worst run of losses in its history.
The company reported that passenger numbers improved significantly during the three months to the end of September – its third quarter – helping pre-tax losses ease to £611m from the £1.7bn sum in the same period last year.
But group passenger capacity across its brands, which also include Iberia and Aer Lingus, remained at just 43% of pre-pandemic levels, IAG said.
It added that it was planning for a figure of 60% for the current quarter, which includes Christmas and 90% for summer 2022.
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Shares rose by almost 2% at the market open.
The performance mirrors an improving picture for a sector that was among those worst hit by the pandemic, resulting in thousands of job losses last year including 13,000 at BA alone as international travel went in to hibernation.
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IAG chief executive Luis Gallego said of the recovery: “All our airlines have shown improvements with the group’s operating loss more than halved compared to previous quarters.”
He said of the end of US restrictions: “The full reopening of the transatlantic travel corridor from Monday is a pivotal moment for our industry.
“British Airways is serving more US destinations than any transatlantic carrier and we’re delighted that we can get our customers flying again.
“Long-haul traffic has been a significant driver of revenue, with bookings recovering faster than short-haul as we head into the winter.
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“Premium leisure is performing strongly at both Iberia and British Airways and there are early signs of a recovery in business travel.”
But Julie Palmer, partner at Begbies Traynor, said of the results statement: “The British Airways owner is being risk-averse by securing loans and revising its hedging policy to respond to the reduction in travel and drastic changes in fuel costs, but there are other issues right around the corner which might see the company dipping into the pot sooner than planned.
“Attention has been on COP26 with talks focussing on renewable energy and sustainability.
“The airline company not only has to make sure future plans fall in line with net-zero plans, but also has to ensure it is prepared to handle losing loyal business customers that no longer need to catch a flight to attend business meetings.
“There are big changes on the horizon and the airline group will need to make sure its future plans are well thought out if the company wants to continue flying high.”
Burberry is kicking off a formal search for a new chairman nearly a year after installing the latest in a string of chief executives charged with reviving the luxury fashion brand.
Sky News understands that Burberry is working with headhunters on a hunt for Gerry Murphy’s successor.
Mr Murphy, who also chairs Tesco, is not expected to step down this year, although the precise timing has yet to be formally determined, according to insiders.
Last summer, Sky News reported that Burberry had commenced a search for a non-executive director capable of taking over from Mr Murphy in due course.
That mandate is now said to have evolved into a more straightforward hunt for a new chair, sources suggested.
Planning for his departure comes as Burberry and other luxury goods manufacturers grapple with the uncertainty of swingeing tariffs amid an escalating international trade war.
The company is now being run by Joshua Schulman, the former Jimmy Choo boss, who was drafted in last July to arrest its decline.
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Mr Schulman replaced Jonathan Akeroyd, who left in the wake of a string of profit warnings.
Shares in Burberry closed on Tuesday at 738.8p, giving it a market value of about £2.6bn.
The stock is down by more than a third over the last year.
A spokesperson for Burberry said: “In the normal course of business, we look at succession planning for board roles as they reach term.”
Food inflation has hit its highest level in almost a year and could continue to go up, according to an industry body.
The British Retail Consortium (BRC) reported a 2.6% annual lift in food costs during April – the highest level since May last year and up from a 2.4% rate the previous month.
The body said there was a clear risk of further increases ahead due to rising costs, with the sector facing £7bn of tax increases this year due to the budget last October.
It warned that shoppers risked paying a higher price – but separate industry figures suggested any immediate blows were being cushioned by the effects of a continuing supermarket price war.
Kantar Worldpanel, which tracks trends and prices, said spending on promotions reached its highest level this year at almost 30% of total sales over the four weeks to 20 April.
It said that price cuts, mainly through loyalty cards, helped people to make the most of the Easter holiday with almost 20% of items sold at respective market leaders Tesco and Sainsbury’s on a price match.
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Its measure of wider grocery inflation rose to 3.8%, however.
Wider BRC data showed overall shop price inflation at -0.1% over the 12 months to April, with discounting largely responsible for weaker non-food goods.
But its chief executive, Helen Dickinson, said retailers were “unable to absorb” the surge in costs they were facing.
“The days of shop price deflation look numbered,” she said, as food inflation rose to its highest in 11 months, and non-food deflation eased significantly.
“Everyday essentials including bread, meat, and fish, all increased prices on the month. This comes in the same month retailers face a mountain of new employment costs in the form of higher employer National Insurance Contributions and increased NLW [national living wage],” she added.
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While retail sales growth has proved somewhat resilient this year, it is believed big rises to household bills in April – from things like inflation-busting water, energy and council tax bills – will bite and continue to keep a lid on major purchases.
Also pressing on both consumer and business sentiment is Donald Trump’s trade war – threatening further costs and hits to economic growth ahead.
A further BRC survey, also published on Tuesday, showed more than half of human resources directors expect to reduce hiring due to the government’s planned Employment Rights Bill.
The bill, which proposes protections for millions of workers including guaranteed minimum hours, greater hurdles for sacking new staff and increased sick pay, is currently being debated in parliament.
The BRC said one of the biggest concerns was that guaranteed minimum hours rules would hit part-time roles.
On the outskirts of Ho Chi Minh City, factory workers at Dony Garment have been working overtime for weeks.
Ever since Donald Trump announced a whopping 46% trade tariff on Vietnam, they’ve been preparing for the worst.
They’re rushing through orders to clients in three separate states in America.
Sewing machines buzz with the sound of frantic efforts to do whatever they can before Mr Trump’s big decision day. He may have put his “Liberation Day” tariffs on pause for 90 days, but no one in this factory is taking anything for granted.
Image: Staff have been working overtime
Workers like Do Thi Anh are feeling the pressure.
“I have two children to raise. If the tariffs are too high, the US will buy fewer things. I’ll earn less money and I won’t be able to support my children either. Luckily here our boss has a good vision,” she tells me.
Image: Do Thi Anh
That vision was crafted back in 2021. When COVID struck, they started to look at diversifying their market.
Previously they used to export 40% of their garments to America. Now it’s closer to 20%.
The cheery-looking owner of the firm, Pham Quang Anh, tells me with a resilient smile: “We see it as dangerous to depend on one or two markets. So, we had to lose profit and spend on marketing for other markets.”
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That foresight could pay off in the months to come. But others are in a far more vulnerable state.
Some of Mr Pham’s colleagues in the industry export all their garments to America. If the 46% tariff is enforced, it could destroy their businesses.
Down by the Saigon River, young couples watch on as sunset falls between the glimmering skyscrapers that stand as a testament to Vietnam’s miracle growth.
Image: Cuong works in finance
Cuong, an affluent-looking man who works in finance, questions the logic and likelihood that America will start making what Vietnam has spent years developing the labour, skills and supply chains to reliably deliver.
“The United States’ GDP is so high. It’s the largest in the world right now. What’s the point in trying to get jobs from developing countries like Vietnam and other Asian nations? It’s unnecessary,” he tells me.
But the Trump administration claims China is using Vietnam to illegally circumvent tariffs, putting “Made in Vietnam” labels on Chinese products.
There’s no easy way to assess that claim. But market watchers believe Vietnam does need to signal its willingness to crack down on so-called “trans-shipments” if it wants to cut a deal with Washington.
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The US may also demand a major cutback in Chinese manufacturing in Vietnam.
That will be a much harder deal to strike. Vietnam can’t afford to alienate its big brother.
Image: Luke Treloar, head of strategy at KPMG in Vietnam
Luke Treloar, head of strategy at KPMG in Vietnam, is however cautiously optimistic.
“If Vietnam goes into these trade talks saying we will be a reliable manufacturer of the core products you need and the core products America wants to sell, the outcome could be good,” he says.
But the key question is just how much influence China will have on Vietnamese negotiators.
Anything above 10-20% tariffs would be intensively challenging
This moment is a huge test of Vietnam’s resilience.
Anything like 46% tariffs would be ruinous. Analysts say 10-20% would be survivable. Anything above, intensely challenging.
But this looming threat is also an opportunity for Vietnam to negotiate and grow. Not, though, without some very testing concessions.