British Airways owner IAG today revealed record third-quarter profits, despite a €50 million (£44 million) hit from ‘higher disruption’ in the period which included the August bank holiday air traffic control chaos.
The group, which also owns Aer Lingus and Spanish carrier Iberia, reported a profit of €1.23 billion as capacity was at almost 96% of pre-Covid levels.
IAG said that leisure demand was “very strong”, but business travel has been slower to recover.
British Airways alone made an operating profit of £617 million, as capacity grew by a quarter. That came despite the National Air Traffic Services shutdown on the August bank holiday, one of the biggest days of the year for BA. IAG estimates that “higher disruption” across the business added around €50 million to its non-fuel costs, with the majority coming from IAG. That was enough to ensure that those costs for the full year will be at the top end of IAG’s range.
British Airways’ rebound to pre-Covid capacity levels remains slower than the other airlines under the IAG umbrella, due to the retirement of its larger Boeing 747-400 planes and its larger number of flights to and from Asia. The airline resumed its flights from London to Beijing and Shanghai over the summer.
IAG said three quarters of its revenue for the fourth quarter is already booked, but “wider macroeconomic and geopolitical uncertainties” could still affect the business this year.
It comes amid a global rebound in leisure travel as customers to prioritise holidays even as the cost-of-living crisis leads to cutbacks elsewhere. Yesterday, Heathrow Airport revealed it was on the brink of returning to profitability as it upped its forecasts for the number of passengers set to fly through the west London hub.
Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said: “The British Airways owner is seeing profits climb up, up and away. Record levels of profitability were seen in the third quarter, helped by better-than-expected leisure demand, as consumers continue to prioritise spending on experiences.
“The optimism hasn’t reached the end of the runway yet either, with continued recovery expected next year. A pivot has taken place in the travel sector since the pandemic, in terms of its importance to consumers, but that doesn’t mean we aren’t going to see knocks to performance – especially for the long-haul carriers like IAG.
“Further information on how next year’s summer bookings are shaping up will be the most important barometer in understanding how far the current round of consumer confidence can carry this aviation giant.”
CEO Luis Gallego said: “This quarter represents a record third quarter performance for IAG. This is allowing us to invest in the business and reduce a significant amount of our debt.”
The shares dipped by 1.5p to 141.4p, valuing the business at just under £7 billion. They have lost 30p over the last three months, but remain up 10% for the year.
