Wednesday 23 January 2019

British Airways owner IAG books rising profit

IAG said operating profit before exceptional items rose 20.7% to 1.45 billion euro (£1.28 billion) in the three months to September 30.

BA pension arrangements
BA pension arrangements

By Ravender Sembhy, Press Association City Editor

British Airways owner IAG has posted rising third-quarter profits as the group overcame extreme weather and terrorism which has impacted the sector.

International Airlines Group (IAG), which owns BA, Iberia and Vueling, said operating profit before exceptional items rose 20.7% to 1.45 billion euro (£1.28 billion) in the three months to September 30.

Revenue rose 2% to 6.6 billion euro as boss Willie Walsh hailed a “strong quarter”.

He added: “All our companies performed well.

“Passenger unit revenue was up 2.2% at constant currency boosted by improvements in the Spanish and Latin American markets.

“Our commercial performance was good despite underlying disruption from severe weather and terrorism.”

Pre-tax profit rose 22.5% to 1.43 billion euro as the group was also helped by falling fuel costs.

BA IT problem

However, shares tumbled 5% in morning trading as investors focused on IAG’s revenue growth per available seat, which fell to 0.7% from 1.5% in the second quarter.

George Salmon, equity analyst at Hargreaves Lansdown, said: “While IAG is flying with a tailwind just now, its more premium brands are at greater risk if the economy takes a turn for the worse.

“In a downturn, business class sales tend to dry up faster than demand for cheap holidays, while the group’s significant fixed costs have to be paid whether the planes are full or not.

“With this in mind, it would be nice to see the group get a firmer grip on non-fuel costs, which have again ticked up on an underlying basis.”

Over the year, shares have risen from around 449p to 636p as it has reaped the benefits of the collapse of Monarch in the UK and troubles at rivals Alitalia and Air Berlin on the continent.

IAG also re-confirmed a 65 million euro hit as it paid out compensation for a power failure that led to severe disruption at British Airways over the May bank holiday weekend.

The major IT failure caused travel chaos for tens of thousands of passengers and the compensation payouts are linked to fees and baggage claims.

IAG also booked a 271 million euro exceptional charge linked to restructuring costs.

This included 180 million euro in relation to transforming Iberia and a 91 million euro charge for restructuring British Airways.

Press Association

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