British Airways owner IAG sees profits take off as it soars above choppy conditions in the airline sector
- IAG said profits and sales rose last year, despite a hit from higher fuel costs
- The airline giant was also stung by unfavourable foreign exchange rates
- Boss Willie Walsh is bullish about Brexit, but says there are ‘issues’ to address
British Airways and Iberia owner International Consolidated Airlines Group (IAG) has seemingly overcome a triad of challenges in the airline sector to report rising profits and sales.
Despite significantly higher fuel costs, currency headwinds and air traffic control strikes last year, the firm chalked up a near 10 per cent rise in profits to £2.6billion.
Meanwhile, sales advanced 6.7 per cent to £20.88billion.
British Airways owner IAG has had an eventful 12 months but profits rose by nearly 10 per cent
The company said it was knocked by unfavourable exchange rates to the tune of £110.35million last year, and added that its fuel costs climbed 30 per cent.
With the currency impact stripped out, the profitability of each passenger seat – a key industry metric – jumped 2.4 per cent.
IAG boss Willie Walsh said: ‘It demonstrates the fantastic work that’s gone in in the past number of years where we’ve been strengthening the cost base of the business, the efficiency of the business, extending our network.’
The firm said it expects 2019 profits to be broadly flat.
Speaking about Brexit on BBC Radio 4’s Today programme, Walsh said: ‘There are issues from Brexit that we need to address, but these are issues that the industry at large – and certainly IAG – can address without too much concern.’
He added: ‘We remain confident that there will be a comprehensive air transport agreement between the EU and the UK. If you go back a year, people were saying ‘will we be able to fly at all?’ I dismissed all of that and I think I’ve been proven correct.’
The profitability of each passenger seat – a key industry metric – jumped 2.4 per cent in 2018
Separately, and underlining a confident outlook, IAG has placed an order for 18 Boeing 777-9 aircraft as it refreshes its British Airways fleet.
Each plane costs around £333million, but the group said it had secured a good discount for the planes, which are 30 per cent more fuel efficient than the 747 model.
Neil Wilson, chief market analyst at Markets.com dubbed it a ‘strong performance against a tough backdrop’, but said ‘questions remain’.
‘It’s been a tough time in the last few days after being dropped by MSCI from its global indices after changing foreign ownership rules to meet EU rules ahead of Brexit. Passive funds have been forced to sell IAG shares and the stock has suffered,’ he said.
‘It’s also in a spat with the Civil Aviation Authority over a deal with Heathrow. And the entire European short haul sector still has big question marks over demand and supply in 2019, not least because of Brexit.
Wilson added: ‘But having walked away from Norwegian, highlighting management’s capital discipline, investors should remain on side.’
Shares jumped 3.6 per cent in early trading, with investors shrugging off the slightly uncertain outlook and embracing the special dividend of €700million.