Sunday 20 October 2019

British Airways owner navigates higher costs as cyber fallout continues

The figures come as fuel unit costs for the quarter rose.

IAG said third-quarter profits were hit by higher fuel costs (Tim Ockenden/PA)
IAG said third-quarter profits were hit by higher fuel costs (Tim Ockenden/PA)

By Ravender Sembhy, Press Association City Editor

British Airways owner International Airlines Group (IAG) has said profits were hit by higher fuel costs in the third quarter as it continues to grapple with the fallout from a major cyber attack.

On a pre-tax basis, profits fell 0.4% to 1.42 billion euros (£1.26 billion) in the three months to September.

Operating profit, meanwhile, grew 0.7% to 1.46 billion euros (£1.29 billion) in the period, while total revenue rose 8.5% to 7.14 billion euros (£6.32 billion).

The figures come as fuel unit costs for the third quarter rose 14.3%, or 15% at constant currency.

Airline profits have come under pressure from the increase in oil prices this year, with the price of a barrel of Brent crude rising from around 67 US dollars to 76 US dollars today.

Profit was also dragged down by 111 million euros (£98.3 million) in foreign exchange impact, IAG said.

IAG chief executive Willie Walsh (Niall Carson/PA)

IAG boss Willie Walsh said: “We’re reporting a good quarter-three performance.

“These were strong results despite significant fuel cost and foreign exchange headwinds. At constant currency, our passenger unit revenue increased by 2.4% while non-fuel unit costs went down 0.7%.

“We’re pleased to announce an interim dividend of 14.5 euro cents (12.8p) per share and this week we completed our second 500 million euro (£442.8 million) share buy-back programme.”

The company, which also owns Aer Lingus, Vueling and Iberia, expects underlying operating profit for the full year to increase by 200 million euros (£177.1 million).

Shares in IAG rose by 3% in morning trade to 604.8p.

George Salmon, equity analyst at Hargreaves Lansdown, said: “There are a few encouraging points in IAG’s results. Not only is the group adding more flights, it’s managing to fill more seats on its planes while also getting a benefit from pricing. That’s helping the top line grow smoothly.

“Take out the impact of higher fuel prices and unfavourable currency moves, and it becomes clear IAG is doing some pretty impressive work.

“Nonetheless, it shouldn’t be forgotten business and leisure travel are both sensitive to the fortunes of the wider economy. IAG remains vulnerable to any economic downturn on the back of a disorderly Brexit.”

The results come a day after IAG said that 185,000 further customers may had their personal details compromised during a cyber attack.

The group said in a stock exchange announcement on Thursday that,as part of an investigation into a cyber breach that took place earlier this year, it is contacting two groups of customers not previously notified.

In September, thousands of BA customers had to cancel their credit cards after the airline admitted that a 15-day data hack had compromised 380,000 payments, prompting a criminal inquiry led by specialist cyber officers from the National Crime Agency (NCA).

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