IAG flies to profit as demand boosts revenues

British Airways owner IAG on Friday said it had swung to a third-quarter profit as airline travel continued to recover, despite the chaos at London’s Heathrow last summer and continued restrictions in Asia.

The company posted an operating profit of €1.2bn compared with a loss of €452m a year ago. It said it now expected an annual profit of €1.1bn.

Revenue rose €0.9% to €7.33bn with passenger capacity at 81.1% of pre-pandemic levels. IAG, which also operates Aer Lingus, Iberia and VielingNonetheless, the group said it expected to operate 95% of its 2019 equivalent capacity during the first quarter of 2023.

“All our airlines were significantly profitable and we are continuing to see strong passenger demand, while capacity and load factors recover,” said chief executive Louis Gallego.

"Leisure demand is particularly healthy and leisure revenue has recovered to pre-pandemic levels. Business travel continues to recover steadily.”

"While demand remains strong, we are conscious of the uncertainties in the economic outlook and the ongoing pressures on households."

BA was forced to slash schedules this year when labour shortages, particularly among ground handlers, led to widespread cancellations and disruption. Things were made worse when Heathrow airport, it's key hub, imposed a daily passenger cap, but not before widespread scenes of chaos and images of baggage mountains appearing at terminals.

That limit was due to be lifted lifted this weekend. However, Heathrow this week said it was looking at a renewed cap to cope with expected Christmas demand.

"After the disastrous impact of the pandemic, 2022 was meant to be the comeback year for airlines with the resumption of international travel and the release of pent-up demand," said Victoria Scholar, head of investments at Interactive Investor.

"While demand has certainly rebounded, particularly for leisure trips, IAG is still facing pressures from the squeezed consumer, the ongoing lull in business travel with Zoom meetings the new normal, the chaos at airports over the summer with passenger restrictions at Heathrow still in place, and many routes in Asia still closed because of Covid."

"On top of that the war in Ukraine and the inflationary consequences with rising energy, wage and food costs are adding to these pressures. As a result, IAG shares haven’t enjoyed the rebound they hoped for this year, trading down around 25% since the start of January.”

Reporting by Frank Prenesti for Sharecast.com