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IAG’s profit beats targets
July 30, 2017
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LONDON: International Consolidated Airlines Group’s (IAG) profit has beaten analysts’ estimates in the second quarter. Owner of British Airways (BA) broke ranks with some of its rivals, when it forecast rising airfares would boost annual operating profit, contrasting with their warnings of pressure on prices.

IAG Chief Executive Willie Walsh said that June was a record month for bookings on British Airways, showing that an IT meltdown at the end of May had no immediate impact on demand.

The company said that it estimated that the cost from the outage, which left 75,000 passengers stranded and led to heavy media criticism, would total 65 million euros ($76 million).

IAG, which also owns the Iberia, Aer Lingus and Vueling airlines, now expects at least a 10 per cent improvement in operating profit year-on-year having previously predicted only a rise.

Walsh struck a different tone to competitors such as Lufthansa, EasyJet and Ryanair. While all of them either stuck to or raised their profit targets this month, their updates were overshadowed by caution on fares over the summer.

“All we can say is what we see. Clearly what we see in terms of our performance does appear to be somewhat different to what others are saying,” Walsh told reporters.

“It may not be different to what they’re seeing, but it’s certainly different to what they’ve said. But we’re calling it as we see it, and our first half performance was very strong.”

Air France-KLM also offered more optimism on pricing when it announced results on Friday.

Walsh said that a pact between Delta, Air France-KLM and Virgin, which was announced on Thursday, was unlikely to change much in the industry, but that consolidation was generally positive.

He said that IAG was not among the 10 parties to submit a non-binding offer for Alitalia last Friday, but he did not rule out taking part in M&A in the German market.

“There may be things that are interesting to us (in Germany). We will look at what happens with Air Berlin AB1. There’s nothing that we’re actively particpating in,” Walsh told analysts. “We are more closely looking at Air Berlin, we are not looking at Alitalia.”

Operating profit for the six months to June 30 before exceptional items was 975 million euros, up 37.3 per cent compared to the previous year, while the quarterly number was 805 million euros.

The quarterly figures beat consensus estimates by 9 per cent, analysts at RBC said, adding that guidance of a double-digit improvement in operating profits supported their view that summer 2017 would be strong.

Meanwhile, BT suffered a 42 per cent drop in quarterly profit after taking a fresh charge to avoid legal claims from two major investors over an Italian accounting scandal.

Reuters

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