International Airlines Group reports profit growth
Feb. 29, 2012, London, U.K. - International Consolidated Airlines Group, the company formed from the merger of British Airways and Iberia, said Wednesday that its profit grew more than five-fold in its first year of combined operations.
February 29, 2012 By Carey Fredericks
The company reported a net profit of C555 million ($746.7 million) compared to C100 million in 2010.
Passenger revenue was up 11 per cent to C13.7 billion. Fuel costs rose 30 per cent to C5.1 billion.
IAG shares were up 3.6 per cent at 169 pence on the London Stock Exchange.
Keith Bowman, analyst at Hargreaves Lansdown Securities, said IAG faces challenges from fuel costs, higher taxes, security costs and economic problems in some markets. However, "for now, given ongoing cost savings and the extension of the group's reach into Latin America and other geographical growth arenas, analysts are focusing on the positives,'' he added.
In the three months ending in December, IAG said net profit was up 141 per cent to C217 million and passenger revenue was 7.3 per cent higher at C3.4 billion.
Chief Executive Willie Walsh said operating results are likely to be lower in the first half of this year because of higher fuel costs, weaker European markets and labour issues, but he expects the outlook to improve in the second half.
Walsh said British Airways benefited from a strong North Atlantic market in 2011 but added that Iberia was struggling.
"Iberia's challenge is its exposure to financial uncertainty in the Eurozone in a highly competitive marketplace with no-frills airlines, high-speed rail and growing competition from more efficient long haul airlines,'' Walsh said.
"Its management has been focused in addressing this, however, the challenge remains for Iberia to become more competitive especially as it has a high cost base and outdated workplace practices.''
IAG is launching a low-cost carrier, Iberia Express, in March.
The company is also seeking regulatory clearance to buy British airline bmi from Lufthansa, a deal which would give IAG additional slots at London Heathrow airport to launch new long-haul services.
Yearly comparisons include the first 21 days of 2011 before the merger, and combined British Airways and Iberia results for 2010.