The owner of British Airways overcame turbulence from terrorism and bad weather to post a 22% rise in profits in the third quarter – and said it was ready to seize opportunities as rivals fall away.
International Airlines Group (IAG) said pre-tax profits climbed 22% to €1.44bn in the three months to the end of September thanks to strong travel demand and lower costs.
Revenues rose 2% to €6.6bn and the group, which also owns Aer Lingus, Iberia and Vueling, pencilled in an 18% rise in underlying operating profit for the full year.
But shares fell 7% – having reached a record high earlier this week – as a key measure, revenue growth per seat, slowed to 0.7%, down from 1.5% in the second quarter.
IAG’s stock has already risen by nearly 50% this year.
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Chief executive Willie Walsh said all IAG’s businesses performed well, with passenger revenue growth buoyed by upturns in Spanish and Latin American markets.
“Our commercial performance was good despite underlying disruption from severe weather and terrorism,” he said.
The results come during a tough time for the airline sector – following the collapse of Monarch, Air Berlin and Alitalia amid tough competition.
But Mr Walsh said consolidation was good for the industry and consumers and left opportunities for more efficient players such as IAG.
He said: “IAG will continue to grow organically, and we’ve demonstrated we can do that efficiently.”
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Mr Walsh flagged growth opportunities that Vueling might now have in Italy and Germany.
He also confirmed IAG’s interest in acquiring Monarch’s airport slots at Gatwick.
IAG re-confirmed a €65m hit as it paid out compensation following a power failure that caused severe disruption at British Airways over the May bank holiday weekend.
George Salmon, equity analyst at Hargreaves Lansdown stockbrokers, said the whole industry was benefiting from cheap fuel prices but for the budget end of the market this was being cancelled out by tough competition.
“However, the BA and Iberia operator is not too concerned with the dogfight below them,” he added.
“Rather than being forced into slashing fares, IAG has been able to hold pricing up so far this year, meaning the shares have been soaring.”
But Mr Salmon cautioned that if the economy takes a turn for the worse it will be the premium brands that face a greater risk.