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Walsh expects BA/Iberia profits to grow despite oil

Tracy Rucinski

Published 07/05/2011 | 05:00

INTERNATIONAL Airlines Group (IAG), formed by the merger of BA and Iberia, said it expected "significant growth" in operating profit this year as a continuing recovery in travel helps unit revenue and costs.

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However, Europe's second biggest airline group by value warned yesterday that rising oil prices still posed a challenge for the year ahead.

"The trends we've been seeing, with good premiums and yields, particularly in long haul, will continue through the summer," IAG's chief executive Willie Walsh said after the company posted a smaller-than-expected operating loss for the first quarter

But he added that "fuel costs remain the big challenge facing the industry".

International oil prices hit a two-and-a-half-year high last month as unrest spread in North Africa and the Middle East, spurring concerns over supply. But they then fell below $100 per barrel after suffering the second biggest fall on record on Thursday.

Fuel costs account for about 30pc of overall expenses for IAG, which tacked €100m on to its estimated fuel bill for 2011, taking the expected total to €5.2bn. The fuel bill rose 31pc in the first quarter to €1.13bn.

IAG, which finalised its merger last November, also said it expected the recent events in Japan and North Africa to have a negative impact on results of between €90m and €100m.

"What's most worrying is the fuel bill. It's going to be very difficult to pass on the rise in ticket prices considering tough competition in the sector," Elena Fernandez, analyst for Spanish brokerage Ahorro Corporacion, said.

BA announced a third fuel surcharge hike on long-haul flights last month.

(Reuters)

Irish Independent

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