UK: British Airways’ Spanish owner IAG hails ‘solid progress’

Willie Walsh, Chief Executive of British Airways. Willie Walsh, Chief Executive of British Airways.

Friday, August 1, 2014
8:57 AM

British Airways owner International Airlines Group (IAG) said its carriers had beaten a stay-at-home World Cup effect to enjoy their best quarter since the financial crisis.

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But the Spanish company, which was formed in January 2011 and is the parent company of British Airways, Iberia and Vueling, also said it was cutting capacity this winter to maintain a “disciplined approach” amid signs of turbulence in the aviation sector. Shares climbed 3%.

BA’s operating profit rose 34% to 332 million euros (£263 million) in the second quarter while Iberia’s earnings improved to 16 million euros (£13 million) after a 35 million euros (£28 million) loss the year before.

The growth came despite a World Cup effect that had created a slight decrease in demand as football fans opted to stay at home to watch the tournament.

IAG, which also operates Spanish low-cost carrier Vueling, said its half-year operating profits rose to 230 million euros (£182 million) from a 33 million euro (£26 million) loss in the same period last year.

But the group also said a key measure of how full its aeroplanes are had weakened as it announced that it would shave 3% off planned capacity this winter.

The reduction will mean that, in the fourth quarter, growth is being trimmed from 8.7% to 5.8% due to market conditions. It comes in the wake of profit warnings from rivals Lufthansa and Air France-KLM.

Chief executive Willie Walsh said IAG was making “further solid progress”.

He added: “Our disciplined approach to capacity continues and we will make reductions where it makes sense as we go through the year.

“We are, therefore, trimming planned IAG capacity by around three percentage points for the winter 2014 season.

“All of our airlines had their highest second quarter operating result since 2007.”

Mr Walsh said continued restructuring at Spain’s Iberia was having a positive impact. Last week it signed an agreement that could see a further 1,427 job cuts, which he said could help enhance profitability over the next two to three years.

He said that Iberia was adding 16 new Airbus aircraft to its long-haul fleet.

IAG made a second-quarter profit of 380 million euros (£301 million), 55% ahead of last year. The first quarter of this year saw a loss of 150 million euros (£119 million), though this was narrower than the year before.

The group said it expects to improve full-year operating profit by at least 500 million euros (£397 million) from the 770 million euros (£611 million) result last year.

IAG said passenger revenue for the half-year increased 9.1% to £8.18 billion while capacity grew by 11.3%. But its aeroplanes were less full, with “seat factor” down by 0.6% to 78.9%.

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