British Airways owner IAG raises profit forecast

British Airways’ parent company has raised earnings expectations amid a strong recovery in holiday travel demand.

IAG now expects underlying profit for 2023 to surpass the upper limit of its previous guidance of €1.8bn to €2.3bn (£1.6bn to £2bn), supported by lower fuel costs, rising ticket prices and a greater demand on long and short haul flights.

The company bounced back to a small operating profit in the first quarter for the first time since before the pandemic, thanks to the continued recovery in leisure travel.

International Airlines Group (IAG), which also manages Aer Lingus, Vueling and Iberia, reported an operating profit of €9 million (£7.8 million) for the first three months of 2023.

In the same period last year, the Anglo-Spanish company suffered a loss of €718 million as governments reintroduced travel restrictions in response to the emergence of the Omicron variant of Covid-19.

Revenue increased 71.4 percent to €5.9 billion between January and March, driven by increased passenger numbers in all regions and better-than-expected performance across all IAG divisions.

The results of Aer Lingus and Vueling were supported by strong demand for flights to the United States, with the latter also benefiting from travel to Spain and Latin America and a faster recovery of business customers compared to other airlines.

The company expects full-year capacity to be 97 percent of 2019 volumes, aided by the resumption of British Airways services to Shanghai and Beijing this summer.

Chief executive Luis Gallego said: “We are seeing healthy forward bookings with leisure demand particularly strong, while business travel continues to recover at a slower pace.

“As we return to more normal operations, we continue to invest in sustainability, including more fuel-efficient aircraft, and in customer experience, by modernizing the business cabins for British Airways and Iberia.

“In the past year we have recruited thousands of new employees across the Group and strengthened our operations so that we are ready to serve our customers during the summer peak.”

IAG and other airlines were hit hard by delays and cancellations last year as they struggled to cope with the exceptional upturn in demand due to staff shortages.

The industry has also been hit by a wave of strikes, which have caused thousands more flights to be canceled across Europe.

Security officers at Heathrow Airport are currently staging the first of three planned strikes in a pay dispute, having just completed a 10-day strike that hit travelers over Easter.

Richard Hunter, head of markets at stockbroker Interactive Investor, said: “The headwinds that have plagued the industry are never far away, meaning airline stocks have long been a traditionally dangerous investment, impacted in various ways by virus outbreaks, industrial action , volcanic dust clouds and higher fuel costs.

“The pandemic has added another level of trouble, while current macroeconomic and geopolitical concerns add to a potentially dangerous mix.”

Shares International Airlines Group rose 2.7 percent to 151.5 pence in early trading, placing them among the top ten risers on the FTSE 350 Index.

However, they remain about two-thirds below their January 2020 value.