Friday 23 August 2019

Profits at British Airways owner IAG hit by higher fuel costs

Foreign exchange rates also affected the bottom line.

The airline group has been hit by higher fuel prices (PA)
The airline group has been hit by higher fuel prices (PA)

By Alys Key, Press Association City Reporter

British Airways owner International Consolidated Airlines Group (IAG) was hit by rocketing fuel costs and foreign exchange headwinds in the first quarter.

The company reported a 60.3% slump in operating profit before exceptional items to 135 million euros (£116.55 million), compared to 340 million euros in the same period last year.

Profit after tax and exceptional items was 91.2% lower at 70 million euros.

This was despite a 5.9% increased in total revenue to 5.3 billion euros (£4.58 billion).

Passenger revenue per available seat kilometre, a key industry metric for profitability, was down 0.8% to 6.16 euro cents, versus 6.21 cents last year.

Chief executive Willie Walsh said: “In a quarter when European airlines were significantly affected by fuel and foreign exchange headwinds, market capacity impacting yield and the timing of Easter, we remained profitable and are reporting an operating profit of 135 million euros.”

In an update on trading outlook, IAG said it expects 2019 operating profit to be in line with 2018, given current fuel prices and exchange rates.

However Mr Walsh said in March that Brexit was likely to affect consumer confidence, as he attacked the Government for its “shocking” lack of progress on a deal.

“That is likely to damage consumer confidence and act as a further drag on business investment,” he said. “We need to remain very agile in the months ahead.”

His comments came ahead of the Brexit deadline extension, which gave a stock market boost to travel companies by removing uncertainty during the busy summer period.

The group also provided its passenger numbers for April on Friday, revealing a 7.3% increase to 9.85 million people during the month. In the year to date, passenger numbers were up 6.5%.

Shares were up over 3.5% in morning trade at 507p.

David Madden, analyst at CMC Markets, said: “Given the surge in fuel prices in 2019, it’s no surprise that profit was hit, but that is likely to impact the whole sector.

“Ryanair and easyJet have had their own problems in recent months, and it seems that IAG are in a better position to weather the storm of higher fuel costs.

“IAG have proved to be more reliable than the likes of Ryanair in terms of flights actually taking-off, and that will stand to the airline.”

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