IAG Notes MRO Pressures

The parent of British Airways, Iberia, Vueling and Aer Lingus suffered a record €7.4 billion operating loss for the year.
Credit: British Airways

Airline group IAG has noted a big drop in sales for subsidiary Iberia Maintenance.

The parent of British Airways, Iberia, Vueling and Aer Lingus suffered a €7.4 billion ($8.9 billion) operating loss for the year, and although it did not provide specific reporting for Iberia Maintenance, it did note that ‘other’ revenue – of which the MRO provider is one of the largest components – had fallen by almost half to €988 million.

“These revenues were affected by reduced demand following lower flight schedules and significant fleet reductions across the airline industry and hence lower maintenance requirements, although the reductions were less than the reduction in the level of passenger capacity,” stated IAG.

Across the group’s maintenance operations, which also include British Airways Engineering, staff numbers were reduced by more than 1,000, to roughly 6,400, through 2020.

This was necessary as the group made plans to phase out more than 80, mostly older, aircraft.  Group spending on MRO, meanwhile, declined €744 million, or 36%, although this was offset slightly by an exceptional €108 million charge due to Covid-19-related action.

Specifically, this included an inventory write-down of €71 million related to expendable parts for aircraft being phased out, and €37 million for the additional cost to fulfil return conditions for leased aircraft exiting the fleet.

In addition, the airline group recorded roughly $1 billion of impairments on 82 aircraft, their associated engines and rotable inventories that were stood down permanently. These included, but were not limited to, 32 Boeing 747s, 15 Airbus A340s and more than 20 A320-family aircraft.

“The Group anticipates that as a result of COVID-19, demand will continue to be supressed for several years and will not reach levels seen in 2019 until at least 2023. The Group, therefore, took steps to reduce its aircraft fleet and the associated cost of maintenance,” said IAG.