Wednesday 22 November 2017

IAG on track to meet annual target, Aer Lingus almost in the bag

Aer Lingus blamed fluctuations in foreign exchange rates and high fuel prices for its drop in profits
Aer Lingus blamed fluctuations in foreign exchange rates and high fuel prices for its drop in profits

British Airways-owner IAG reported a forecast-beating 40 percent rise in quarterly profit on Friday, putting it on track to hit annual targets and confirming its position as one of the strongest airlines operating in Europe.

The group, which reiterated its full-year profit forecast, also signalled it was close to sealing its takeover of Aer Lingus, an acquisition that is designed to expand capacity on lucrative transatlantic routes by using Dublin Airport.

IAG on Friday declared its offer for Aer Lingus unconditional, after it waived a 90 percent acceptance condition. But the group is still waiting for Ryanair to formally accept its bid, which it has said it will do in mid-August.

IAG's 1.3 billion euro takeover of Aer Lingus is now close to being finalised after an eight month process, having been approved by European competition regulators and having won the backing of the two biggest Aer Lingus shareholders, the Irish government and Ryanair (RYA.I).

It will be added to IAG's portfolio of airlines - British Airways, Iberia and Spanish budget carrier Vueling.

The airline group on Friday posted operating profit of 530 million euros (372 million pounds) in the three months ended June 30, ahead of a company-supplied consensus forecast of 494 million euros.

Airlines operating in Europe are braced for a price war, led by the continent's biggest carrier, budget airline Ryanair (RYA.I), which is slashing ticket costs to reflect lower fuel prices, heaping pressure on airlines with higher cost bases.

IAG is better-placed to compete than Lufthansa and Air France-KLM because it focused on cost cutting years before them, agreeing deals with staff unions.

"We continue to take cost out of the business, with both employee and supplier unit costs down at constant currency, and improvements in productivity levels," chief executive Willie Walsh said in a statement.

For 2015, it reiterated a forecast operating profit in excess of 2.2 billion euros, guidance which it raised in February, the latest in a series of upgrades.

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