Cost-cutting aids IAG profit surge

All three airlines currently in the IAG group contributed to a huge surge in its profits in the first half of the year as the Willie Walsh-led company moved closer towards finalising its newest addition.

The International Airlines Group (IAG) more than doubled its profit for the opening six months of the year from €230m to €555m with British Airways, Iberia and Vueling all playing a role in the success.

It’s flagship carrier, British Airways led the way with profits of €453m which in itself represented a jump of 23%.

Spanish airline, Iberia contributed €51m in profit to the overall performance with Vueling turning a €24m profit, down slightly on the same period last year. Total revenue rose by almost 12% to €10.3bn. The group also continued to cut costs with employee and supplier costs both falling.

On a quarterly basis, revenue climbed by just over 11% to €5.6bn which contributed to an operating profit of €530m from €380m in the same quarter of 2014.

IAG increased capacity by 5.3% in the first six months of the year and traffic volumes rose 5.8%, increasing seat factor to 79.3% with the rise in capacity reflecting growth at Vueling and restoration of routes at Iberia among other factors.

Benefits felt from falling fuel prices impacted positively on the group but were partially offset by adverse exchange rate movement.

The improvement in sterling against the euro delivered a boost but it was diminished by US dollar strength.

Welcoming the mid-year results, IAG chief executive Willie Walsh said: “We made an operating profit of €530m in the quarter, up from €380m operating profit last year… We said previously that profit improvement would be slower in the second quarter and we are on track to reach our full year targets.

“We continue to take costs out of the business, with both employee and supplier unit costs down at constant currency, and improvements in productivity levels. In the half-year, we made an operating profit of €555m which is up from a €230m operating profit last year.”

Meanwhile, IAG moved closer to completing its takeover of Aer Lingus, announcing that it has received valid acceptances of the offer from 62.5% of shareholders.

IAG has also extended the acceptance period for more than a fortnight to August 18.

Despite indicating that it will offload its 30% shareholding to IAG, Ryanair will not do so until September.

Having previously said 90% acceptance was required, IAG and Aer Lingus have now waived that requirement to make the offer unconditional to acceptances.