The new boss of Aer Lingus and British Airways-owner IAG has warned he may have to strip even more costs from the business as a second wave of Covid-19 leaves its airlines staring at a bleak winter with very little travel. 

IAG today forecasted fourth-quarter capacity at just 30% of 2019 levels.

It also stepped up its demand for governments to adopt pre-departure testing to allow quarantine-free travel as Europe locks down once again. 

"Talking about my priorities, I think first of all we need to continue with the restructuring process that we have in place, we need to continue reducing our cost base," Luis Gallego said as he presented his first quarterly results. 

IAG said it had cut cash operating costs by 54% from original plans to €205m a week during the three months from July to September, a vital move ahead of a winter with very low travel. 

Gallego said he was looking to make more of IAG's costs variable, rather than fixed, which could mean, for example, more flexible working contracts for staff. 

He is being forced to act after France and Germany imposed new blanket lockdown measures. Any similar moves in Britain and Spain, IAG's key markets, would spell further trouble for the group's prospects. 

"What we see is where we have lockdown, we have a direct impact in the number of bookings and revenue intake," Gallego said. 

Air France-KLM also warned of a further collapse in traffic due to the lockdowns as it reported a €1.05 billion loss today. 

Shares in IAG, which have lost 78% of their value this year, were up 1% this morning. 

IAG CEO Luis Gallego

Gallego said that where routes opened IAG saw pent up demand for travel and it continued to work with UK and US authorities on a plan to allow testing to replace quarantine between London and New York. 

The CEO took over from Willie Walsh in September after the company secured shareholder backing for a €2.74 billion capital hike to boost its finances. 

Bernstein analyst Daniel Roeska said more action on costs was needed. "Management will need to significantly lower monthly cash burn to avoid significantly depleting resources by next summer," he said. 

IAG, which also owns Iberia and Vueling, today published further details on its third quarter after it announced a worse than expected quarterly loss of €1.3 billion last week. 

It said the total operating loss for the quarter was €1.9 billion, including exceptional items relating to fuel hedges and restructuring costs at British Airways and Aer Lingus. 

Staff numbers have already been cut by 10,000 at the two airlines, with most of the reductions at BA.