BA owner IAG report soaring profits

Buoyant demand for British Airways transatlantic flights and the continued overhaul of Spanish carrier Iberia helped their owner to soaring quarterly profits.

International Airlines Group (IAG) hailed “strong” July to September results as pre-tax profits leapt to €606m from €244m a year earlier.

BA saw a €100m sales “bounceback” from last year’s London Olympic Games, which slashed demand for business flights from the capital.

Passenger numbers across the group leapt 35.2% to 21.3 million during the quarter from 15.8 million a year earlier, boosted by its acquisition of Spanish airline Vueling.

Falling costs and 6.9% growth in revenues to €5.4bn helped drive the profits boom.

IAG, formed from a merger of BA and Iberia in 2011, said its revenue growth next year will be driven by rising passenger volumes rather than yield, as it launches new BA routes and sees strong growth from Vueling.

The update lifted IAG’s shares more than 3%, helping boost sentiment after the industry was hit by budget carrier Ryanair’s recent profits warning – its second in as many months. The Irish airline is being forced to slash fares to stimulate demand.

Quarterly operating profits at BA surged to €477m from €268m a year earlier, driven by the strong London market, transatlantic flights and the recovery from the Olympics.

IAG is forcing through painful changes at Iberia, including cutting capacity by 15%, slashing pay and axing 3,100 Iberia jobs.

Profits at Iberia hit €74mm from just one million euros a year earlier.

Chief executive Willie Walsh said the group results were “strong”, with an “improved” performance by Iberia.

But he added: “The airline must continue to implement its restructuring plan and reach agreement on productivity changes to bring about long-term sustainable profits and growth.”

Vueling profits hit €139m, helped by a tourism boost at Barcelona where it has a strong presence.

IAG added trading is in line with expectations, and expects operating profits of around €740m for the year.