The UK quarantine on arrivals from Spain is not hitting UK demand for travel elsewhere in Europe, according to Willie Walsh, chief executive of British Airways parent IAG.

Walsh reported a half-year loss of €3.8 billion at IAG, owner of BA, Iberia, Vueling and Aer Lingus, today.

But he said: “We’re encouraged by the booking profile we see in the UK. We were concerned when the UK government reintroduced quarantine [on arrivals from Spain] it would have an impact on demand to travel elsewhere.

“We are not seeing that. We’re adding capacity to Greece because we see good demand.”

The UK reintroduced 14-day quarantine restrictions on arrivals from Spain from July 26.

Walsh insisted: “There is clear evidence of strong demand for travel.” However, he said: “Covid has caused substantial damage and losses. It will take probably until 2023 or 2034 until passenger demand recovers to the level of 2019.”

Luis Gallego, who will succeed Walsh as IAG chief executive at the end of September, reported: “Domestic Spanish bookings have [seen] the strongest recovery at 50% of last year. International short-haul is about 30%.”

But he acknowledged: “There has been a decrease in the last two weeks given the rise in Covid cases in Spain and the UK imposition of 14-day quarantine restrictions on passengers from Spain.”

Gallego insisted: “The biggest challenge is to get people booking and flying again.

“Customers need to be confident they can get their money back if they book and the flight is cancelled, and to be confident they will be safe on the ground and in the air.

“We are allowing changes to bookings without penalty and discussing with insurance companies to provide cover in case you fall ill with Covid while travelling.”

Gallego said: “When markets are open, we see a recovery of demand very fast. We see that in Spain, in the Balearic Islands.

“Now we have a delay because of quarantine, but we see leisure demand recover very quickly when there are no restrictions.”

He reported IAG’s capacity for the three months to September would be about 25% of that in 2019, but would rise monthly over the course of the quarter from 15% in June to 38% in September and to about 54% in the fourth quarter.

Walsh suggested the group could “reach net break even on operations by the fourth quarter of this year”, but conceded this forecast assumes “some transatlantic operations” by the final months of the year.

Traffic between Europe and the US is currently stalled by restrictions on both sides of the Atlantic.

However, Walsh said: “Our view is we will see a gradual re-opening [to the US] with some restrictions in some markets being lifted, with certain cities being open.”

Yet he added: “Anyone thinking this is a temporary crisis that can be resolved by temporary measures is mistaken. We are focused on liquidity and on restructuring

“We are looking at cash break even on flights and looking at it down to the euro. That is very different to normal. We don’t expect normal load factors for some time.

“Demand is not recovering quickly and premium demand will lag leisure demand

“We don’t expect passenger demand to recover for a number of years. We expect a structural change in the business.”

Walsh defended the redundancies at British Airways, now expected to total up to 13,000, but said: “There is no reason we can’t reach agreement [with BA unions].”

Trade union Unite had “entered into this, thinking it was a short term crisis, completely out of touch with the reality of the situation” he said.

“We need to remind people of what happened after 2001 and what happened after 2008-09. This is many times worse than anything we have seen previously.”

But despite the crisis, Walsh and Gallego made clear their intention to complete IAG’s acquisition of Spanish carrier Air Europa.

Walsh announced the €1 billion deal to buy Air Europa in November last year. Now IAG is reported to be seeking to renegotiate the purchase price.

Gallego said: “We believe in the strategic rationale of this deal. We are in the middle of a negotiation. We have not closed any price. We are sure this deal will provide value so we need to find a price we are willing to pay.”

Walsh added: “The strategic case remains very strong and the synergies very promising.”