British Airways owner IAG back in profit amid resurgence in leisure and business travel

IAG reported an operating income of $1.19 billion in the third quarter

A British Airways Boeing 747 flies over Heathrow airport in London. The airline has been adversely affected by exchange rate fluctuations. Reuters
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British Airways’ owner has returned to profit after the resurgence of leisure travel and steady recovery of business trips boosted sales.

The FTSE 100-listed International Consolidated Airlines Group (IAG) reported an operating profit of £1.04 billion ($1.19bn) in the three months to September 30, after it swung to a loss of £390m last year.

The company, which also owns Iberia, took a heavy hit during the coronavirus pandemic and was still loss-making earlier this year.

In the first quarter it reported pre-tax losses of £916m after the Omicron variant drastically reduced the number of passengers.

But the group reported strong passenger demand in its latest results as its revenue exceeded pre-pandemic levels by 0.9 per cent.

However, passenger capacity was still only 81 per cent this year, compared to the period before the onset of Covid-19.

The group said that average spot prices of jet fuel almost doubled this year compared with last.

Prices shot up from March, days after Russia's war in Ukraine began, driving up the cost of most commodities around the world.

Furthermore, BA reported that it had been adversely affected by fluctuations in exchange rates, with the dollar strengthening by 10 per cent against the euro and by 7 per cent against the pound in the first nine months of 2022, compared with last year.

Considering the current higher fuel prices and exchange rates, the IAG said it expects its full-year operating profits, before exceptional items, to be about £95m.

"All our airlines were significantly profitable and we are continuing to see strong passenger demand while capacity and load factors recover," said Luis Gallego, IAG's chief executive.

A line of British Airways planes. PA

"Leisure demand is particularly healthy and leisure revenue has recovered to pre-pandemic levels. Business travel continues to recover steadily.

"While demand remains strong, we are conscious of the uncertainties in the economic outlook and the ongoing pressures on households.

"Against this backdrop, we are focused on adapting our operations to meet demand, strengthening our balance sheet by rebuilding our profitability and cash flows, and capitalising on our high level of liquidity."

Earlier this week, it emerged that Heathrow's losses had widened despite an improvement in passenger numbers. The London airport warned demand may not recover “for a number of years”.

About 18 million people passed through Heathrow, BA's base in the UK, this summer, making it the busiest hub in Europe over the period.

The airport projects passenger numbers for this year at 60 million to 62 million, about 25 per cent less than in 2019.

“Headwinds of a global economic crisis, war in Ukraine and the impact of Covid-19 mean we are unlikely to return to pre-pandemic demand for a number of years, except at peak times,” it said.

Updated: October 28, 2022, 12:02 PM
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