British Airways owner IAG reports ‘continuing trend’ of high demand

High demand is being seen as a “continuing trend” as British Airways and Aer Lingus owner International Airlines Group reported being “well-positioned” for the summer peak.

The projection came as the airline combine reported a reduction in first quarter net losses to €4 million from €87 million in the same period last year.

IAG produced an improved operating profit of €68 million in the three months to March 31, against €9 million in the first quarter of 2023 as capacity grew by 7% year-on-year.

Total group revenue was up to €6.4 billion from €5.8 billion year-on-year.

The company, which also owns Iberia, Vueling and Level, said passenger revenue per available seat kilometre for the first quarter was 4.4% higher than in the first quarter of 2023, “through the benefit of the timing of Easter and a continued strong leisure traffic recovery, with business traffic recovering more slowly”.

British Airways saw first quarter operating profits rise year-on-year to €22 million from €14 million, while Iberia profits rose by €4 million to €70 million.

However, Aer Lingus suffered an operating loss of €82 million and Vueling of €25 million.

IAG said: “Typically, the first quarter of the year is the least profitable for the group’s airlines and the operating losses in Aer Lingus and Vueling reflect the nature of their businesses, with proportionately more focus on leisure segments, which are more seasonal.”

Overall passenger revenue rose by 11.7% or €591 million, ahead of the 7% increase in capacity, driven by higher yields and higher load factors.

“The growth in passenger revenue was linked to the increase in capacity, strong leisure demand and the earlier timing of Easter than in the previous year,” IAG said. 

“Leisure travel demand remains strong and corporate travel continues to recover.”

IAG voiced confidence in completing a long-running aspiration to acquire  Spanish-based Latin American specialist carrier Air Europa.

“We continue to make progress through the Air Europa acquisition process and have presented a package of remedies to the European Commission. Our expectation remains for the process to complete later this year,” the group said.

IAG chief executive Luis Gallego said: “Our transformation initiatives and increased demand, including over the Easter holidays, have delivered another very good set of results with improvements to both revenue and operating profit.

“Our group benefits from the strength of our core markets – North Atlantic, South Atlantic and intra-Europe – and the performance of our brands. 

“Investment across the group in transformation is delivering encouraging improvements in punctuality and customer experience at our airlines. IAG Loyalty continues to perform very well.

“We are well-positioned for the summer. The high demand for travel is a continuing trend.”

Commenting on the results, Julie Palmer, partner at financial advisory and recovery firm Begbies Traynor, said: “The momentum for airlines shows no sign of slowing, with IAG’s Q1 results showing it has put the pandemic years firmly behind it and is ready to capitalise on improved conditions.

“The figures speak for themselves – with capacity levels significantly up in Europe across its Aer Lingus, British Airways and Iberia airlines, IAG is well-placed to take advantage of the trend for increased travel.

“CEO Luis Gallego’s assurance that there will be strong demand both over the summer and longer-term is hugely supportive of the IAG investment case, but it is also highly encouraging to see the airline perform so well over the winter months, having reported a significant boost in profitability over the same period last year.

“There are notable factors that could weigh on sentiment in the short-term. With geopolitical tensions on the rise, IAG is exposed to potentially higher global oil prices that will have to be passed through to customers in some way. For now though, confidence among IAG and other airlines leading the European travel market should be sky high.”

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