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International Airlines Group has reported a second summer of record profits, with sustained demand for transatlantic travel helping the owner of British Airways outperform its European rivals.
The Anglo-Spanish company reported an operating profit before exceptional items of €2.01bn for the three months to the end of September, 15 per cent higher than a year earlier and a record quarter for the company.
IAG, which owns five airlines including BA, also announced a €350mn share buyback programme, reflecting “our confidence in the strategy and business model, as well as the long-term prospects for the business”.
“Demand remains strong across our airlines and we expect a good final quarter of 2024 financially . . . we don’t see any weakness in the future,” said chief executive Luis Gallego.
AIG shares rose 6 per cent in morning trading on Friday in London as the results beat analysts’ expectations.
The strong results and bullish outlook contrast buck the gloom among the group’s competitors in Europe, which have struggled to match last summer’s record-breaking profits.
They also come despite BA facing major operational problems. Flight delays and cancellations have risen significantly at the UK-based carrier since the Covid-19 pandemic, even though the company put extra resources into this summer’s operations at Heathrow, which suffers from congestion and air traffic delays
Industry executives believe BA will have to do more, even at the expense of future financial returns, and the airline has trimmed back its winter flying schedule.
“I think we have got to reflect on what next summer will be like,” said BA chief executive Sean Doyle. “We will want to be more resilient and better next summer, on the basis that I don’t think that external environment may improve too much.”
IAG cut its forecast for annual capacity growth from 7 per cent to 6 per cent, citing “the impact of disruption and aircraft availability”.
Its direct rivals Lufthansa Group and Air France-KLM both reported a drop in third-quarter earnings amid higher costs and operational problems. Europe’s two major low-cost airlines, Ryanair and Wizz Air, also both reported substantial falls in quarterly profits.
IAG is not immune to the wider trends facing the industry but its particular exposure to the transatlantic market and high-spending holidaymakers travelling in business and first class have left it well-placed, analysts said.
Its strong quarterly performance was built on its two core markets: flying passengers across the Atlantic and on shorter regional trips in Europe.
IAG said passenger unit revenue, a rough proxy for ticket prices, rose 1.2 per cent, “despite an exceptionally strong comparative quarter in 2023”, again bucking a trend seen at many other airlines that have been unable to keep raising fares.
BA’s unit revenue across the Atlantic was “particularly strong”, helping IAG’s overall profit margin rise 1.4 percentage points to 21.6 per cent. But Ireland’s Aer Lingus, which it also owns, suffered from a pilots’ strike and more competition in its Dublin base.