IAG shares takeoff as British Airways owner forecasts bumper profits

British Airways owner IAG expects record profit for the third quarter after a solid period for bookings.

The London-headquartered company told investors Thursday afternoon that it expects operating income for the period to be close to £1 billion (€1.2 billion).

The unexpected announcement sent IAG’s stock price up a whopping 10 percent, trading at a high of 110.53p just after noon on Thursday, before higher-than-expected US inflation data halved earnings.

Looking ahead, BA said in a statement: “Forward bookings remain at expected levels for the time of year, with no indication of weakness, and accordingly our expectations for the fourth quarter from today remain unchanged.”

The company will announce its consolidated results for the nine months to September 30, 2022 on October 28.

Sophie Lund-Yates, an equity analyst at Hargreaves Lansdown, commenting on IAG’s impending third quarter results, said: “Despite the rampant cost of living pressures that consumers face, British Airways’ ticket counter seems to be to be very busy.

“IAG is one of the worst affected airlines since the pandemic, with long-haul and business trips taking much longer to bounce back to pre-covid levels than its short-haul counterparts.

Despite the buoyant numbers, Lund-Yates warned that the cost of living crisis could affect the overall outlook.

She said, “There’s still a long way to go before champagne can be popped. Consumer behavior has yet to fully adapt to a world of higher inflation and higher costs.

“If spending begins to curb, the strong order book for the future could come under pressure. Then there’s the issue of IAG’s dazzling debt pile, after huge commitments made to weather the worst of the pandemic storm.

“Ultimately, this upgrade of expectations is a very welcome surprise, but whether the whip-like mood music can be preserved is another question.”

The owner of British Airways International Consolidated Airlines Group (IAG) saw a 1.12 percent increase in its share price, to 102.88p

IAG Shares received a new boost earlier in the week when Heathrow regained its status as Europe’s busiest airport.

West London airport said on Tuesday it was used by more passengers than rivals in cities such as Paris, Amsterdam, Frankfurt and Madrid between July and September.

The news boosted the share price for a number of airlines operating out of the UK.

A year ago, Heathrow blamed the UK’s relatively strict travel rules for the coronavirus as it had fallen in the rankings to become Europe’s 10th busiest airport, after being number one in 2019.

Heathrow has seen an increase in use since UK travel restrictions were lifted in March.

Some 5.8 million passengers traveled through Heathrow in September. But last month, in September 2019, demand was still 15 percent below pre-virus level.

The airport stressed that the outlook for future demand “remains uncertain”.

This is due to ‘growing economic headwinds, a new wave of Covid and the escalating situation in Ukraine’.

It added: “However, we expect the peak Christmas days to be very busy.”

Heathrow said the “vast majority” of passengers traveling through the airport this summer “had a very good experience” as limiting the number of departing travelers “has managed to balance supply and demand”.

This followed long queues and problems with baggage handling in early July due to staff shortages.

The cap will be lifted on October 29.