Profits take off for airlines as cancellations and booming demand push fares higher

Profits take off for airlines as cancellations and booming demand push fares higher

Aer Lingus's parent company IAG, which also owns British Airways and Ibera, returned to the black as demand soared and supply shrank. Stock picture

The summer travel chaos has boosted the fortunes of European airlines such as Aer Lingus’s parent, as they have been able to tap into the widespread cancellations and booming demand with higher fares.

IAG, which also owns British Airways, Vueling, and Iberia, returned to the black according to its latest earnings report, as cancellations cut capacity but bolstered fares.

IAG chief executive Luis Gallego confirmed fares have been exceptionally strong across its operations. 

We see a very strong yield, and we see demand recovering and load factor increasing,” Mr Gallego said. 

Aer Lingus posted a profit of €15m in the latest quarter, its first for two and a half years, although losses for the full six months came to €95m.

The airline had earlier this year tapped an additional €200m loan on top of an existing €150m facility from the Government’s Ireland Strategic Investment Fund.

Aer Lingus CEO Lynne Embleton said demand in recent months has been led in particular by its Southern European or leisure routes.

She said cancellations in recent days have been caused by mandates at Heathrow and Amsterdam as well as congestion in the likes of Paris and Frankfurt, but that Aer Lingus has no planned cancellations over the Bank Holiday weekend.

Travel expert and author Eoghan Corry said that although profits for some airlines have come “roaring back”, they have major pandemic losses to recoup from, and the future is still uncertain.

“The airlines hope for a good run in July, August, September,” he said. 

It’s quite clear they’re going to be much more profitable next quarter. 

"We can tell that by looking at the internet. Look for flights to Lanzarote or Malaga in August and see the price of them.

“They’re certainly chasing the margins to make the profits back but they’re probably going to be back into loss-making into the winter. They’re all very worried about things like another virus strain or new measures, or fuel prices.

“Come October, November, December, we’re either going to see the profitability shrink back or the choice of routes shrink back.”

When schools reopen and passenger numbers fall, airlines will also be left more sensitive to instability in the fuel market, he said.

Mr Corry also said the passenger experience has been “atrocious” as airlines and airports scaled down massively during Covid, shedding many staff and then miscalculating how much they would have to scale back up again, he said.

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