Strong summer for British Airways helps offset Aer Lingus strike headwinds
James ChappleBritish Airways delivered a more than €300 million financial boost for parent IAG this summer, offsetting challenges for Irish stablemate Aer Lingus and helping the group record a 15.4% increase in operating profit.
IAG’s total operating profit for the three months to the end of September 2024, its third quarter, surpassed €2 billion. This came off the back of a 7.9% increase in group revenue to €24 billion, which was aided by a 1.4 percentage point increase in operating margin.
The group said demand remained strong in all its core markets, highlighting its transatlantic network as a particular area of strength following a 3.9% year-on-year capacity hike and a 3.5% increase in passenger unit revenue.
It said BA’s unit revenue performance was "particularly strong" and made up for some of the headwinds Aer Lingus negotiated during the summer, namely a lengthy period of industrial action and "increased competitor capacity to Dublin".
BA’s Q3 operating profit came in at just shy of €1.4 billion, up €310 million from €1.075 billion a year earlier. By comparison, Aer Lingus’s operating profit fell by €88 million from €236 million to €148 million.
Luis Gallego, IAG chief executive, said: “We achieved a very strong financial performance in Q3 2024, with a 15.4% increase in operating profit compared with the same period last year and improving our margin to 21.6%. This is due to the effectiveness of our strategy and group-wide transformation."
Gallego added demand "remained strong" across its airlines, which also include Iberia, Level and Vueling, and that he expected the group to achieve "a good final quarter of 2024 financially".
Planned fourth-quarter capacity growth across IAG’s network is around 5%, and will bring total capacity growth for the full year to around 6%. It also expects to record around a 2% increase in non-fuel costs for the year owing to limitations on capacity growth, named disruption and aircraft availability.
Fuel costs for the year are estimated to run to €7.7 billion, and capital expenditure to exceed €3 billion – this includes delivery of 20 new aircraft, including four in Q4. "We expect our strong financial performance to continue for the rest of the year," IAG added.
Begbies Traynor partner Julie Palmer said IAG appeared to be "in rude health". “In contrast to its peers, heavily affected by Boeing delivery delays and falling ticket prices, the British Airways owner was able to materially increase passenger revenues leading to a near 8% uptick in overall revenues. This is all the more impressive given it has also been able to sustain some solid capacity growth."
Palmer added IAG’s "strong European network" had helped make up for Aer Lingus’s strike woes, hailing the group for its efforts to capitalise on "strong customer demand".
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