Passenger numbers at one of the world’s leading airline groups are still only a fifth of pre-pandemic levels.

British Airways owner IAG said the small number of countries on the UK’s travel green list had “severely limited” its recovery.

The company reported losses of €967 million ($1.15bn) in the second quarter of 2021 and €2.04bn for the year so far.

In a six-monthly update, it predicted passenger numbers would rise in the late summer and autumn but remain well below 2019 levels.

It welcomed news that Britain will ease restrictions for vaccinated travellers from the US and EU, although this has yet to be fully reciprocated.

Luis Gallego, the chief executive of IAG, said there was “widespread pent-up demand” for travel when Covid-19 restrictions were lifted.

He said the company’s focus was on ensuring it had the flexibility to pounce when travel restrictions were lifted.

“We know that recovery will be uneven, but we're ready to take advantage of a surge in air travel demand in line with increasing vaccination rates,” he said.

“All our airlines continue to take significant actions to preserve their strength through the current pandemic and to position them for recovery.”

The airline industry has been battered by the pandemic, with much of Europe bringing in restrictions and transatlantic flights severely limited since March 2020.

Foreign travel from England was re-opened in May, but most countries were on the amber list, which meant people had to quarantine on their return.

Portugal, the only major holiday destination on the quarantine-free green list when it was unveiled, was struck off less than a month later.

Rules were eased this month when vaccinated travellers were exempted from amber list quarantine requirements, opening up destinations such as Spain.

But there was uproar after France was dropped from this category because of fears over the Beta variant, which is mainly prevalent in an overseas territory thousands of miles from Paris.

Amber list travellers must still take a test before arriving in England and another one on their second day after landing.

People entering from red list countries must quarantine in a government-approved hotel. There is no exemption from this for vaccinated travellers.

“The restricted nature of the green list severely limited the recovery in capacity expected on the lifting of restrictions ,” IAG said.

Recovery forecast

IAG’s losses were less severe than in 2020, when it shed more than €4bn in the first few months of the pandemic.

It said that some of its airlines, including Spanish carrier Iberia, had reported better results after restrictions were lifted.

The company’s overall passenger numbers in Q2 were at 21.9 per cent of 2019, only slightly up on the first three months of the year.

This is expected to rise to about 45 per cent of pre-pandemic levels in Q3 as restrictions continue to be eased.

But IAG expects it will take until at least 2023 for passenger numbers to reach where they were before the pandemic.

Britain this week opened up to people vaccinated abroad for the first time, with those from the EU and US allowed to skip quarantine.

Willie Walsh, a former head of IAG and now the head of the International Air Transport Association, said this month that proof of vaccination should not become a requirement for foreign travel.

But IAG described the opening up to the US as “an important first step in fully reopening the transatlantic travel corridor”.

The new policy takes effect on Monday morning and is intended to boost the economy and allow for family reunions.

France continues to be under separate rules, which Foreign Secretary Dominic Raab said were justified because people from the territory of La Reunion where the Beta variant is prevalent could carry it to mainland France.

“It’s not the distance that matters, it’s the ease of travel between different component parts of any individual country,” he told the Today programme.

First identified in South Africa, the Beta variant is feared to reduce the effectiveness of existing vaccines.

Critics pointed out that La Reunion itself is on the regular amber list, meaning vaccinated people could travel directly to Britain from the island.

“Arrivals in UK direct from Reunion are not subject to quarantine. Struggling to find coherence here,” said Peter Ricketts, a former British ambassador to France.