IAG reiterates Aer Lingus interest on profit showing

IAG has reiterated its intention to purchase Aer Lingus on the back of a 20% upgraded profit guidance for this year.

The British Airways owner upgraded its profit forecast yesterday, after reporting a slightly better than expected 81% increase in profits for last year. The company reported 2014 operating profits of €1.39bn, ahead of a company-supplied consensus forecast of €1.37bn. The airline said it now expected operating profit of €2.2bn in 2015, compared to the €1.8bn it had said it was targeting, helped by lower fuel costs and as it grows capacity.

The upgrade is the latest in a series of announcements from IAG, which raised this year’s forecast last October, buoyed by its exposure to strong demand for North Atlantic travel and the return of its Spanish arm Iberia to profitability.

IAG, which also owns low-cost Vueling in Spain as well as British Airways and Iberia, wants to add Aer Lingus to its portfolio but its €1.36bn approach is yet to get the backing from the Government, which owns a 25% stake.

“We remain very interested in acquiring Aer Lingus and at this stage we have nothing additional to add to what we’ve already said,” saidchief executive Willie Walsh.

IAG is also ahead of Europe’s other traditional airlines through its exposure to the continent’s budget travel sector, having acquired discount carrier Vueling in 2013, giving it the ability to compete with Ryanair and EasyJet.

“We expect Iberia to continue to improve its profitability given the trajectory that it’s on,” said Mr Walsh. “The performance to date for Iberia has been tremendous and we expect that to continue in 2015.”

Shares in IAG, which before Friday had already soared 56% over the last six months, hit their highest ever level before paring gains to trade up 3% at 577p yesterday afternoon.

“IAG remains our top pick amongst the European airlines,” said Liberum analyst Gerald Khoo. “It has positive earnings momentum with a better trading performance than its network carrier peers and it is showing clear benefits from its restructuring efforts.”

Reuters